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Income Tax department focuses on reducing litigation

BY ET BUREAU | UPDATED: JUL 12, 2018, 08.28 AM IST Post a Comment

NEW DELHI: India’s tax department wants to shed the tag of compulsive litigant and focus
only on select high value cases.

The Narendra Modi-led NDA government will sharply increase the monetary thresholds at
various levels – in the courts and appellate tribunals – to cut down on litigation, a measure
that will reduce the number of appeals against adverse rulings.

The threshold for cases in the Supreme Court will be increased to Rs 1 crore from Rs 25
lakh, while for the high courts, the level will more than double to Rs 50 lakh from Rs 20
lakh under the rationalisation exercise that will apply to both direct and indirect taxes.

In case of the Central Board of Direct Taxes (CBDT),

Under the new rules, 54% of the appeals filed by the Central Board of Direct Taxes will be out of total cases filed by the department in Income
withdrawn. The reduction of appeals by the Central Board of Indirect Taxes and Customs Tax Appellate Tribunal (ITAT), 34 per cent of cases
will be withdrawn.
in the Supreme Court will be 21%.

“The government is focussing on ease of doing business… A number of steps have Big Change:
The end of Five-Year Plans: All you need to know
already been taken to bring down litigation… The whole process has been reviewed and
there is a strong case to raise these thresholds to bring down litigation and to channelise the department’s energies in high-value
cases,” a senior government official told ET.

A detailed circular to this effect will be issued shortly, the official said. Tax experts said the move would benefit tax payers and the tax
administration.

“If the monetary threshold for filing appeals is increased and a more pragmatic approach is adopted in picking up cases to be further
litigated, it would go a long way in reducing litigation and save time and effort for both the tax payers and the tax administration,” said
 Vikas Vasal, national leader – tax, at Grant Thornton India. “Currently, tax tribunals and courts are burdened with pending tax cases and
there is a dire need to take some concrete action.”

“This is a major step in the direction of litigation management of both direct and indirect taxes as it will effectively reduce minor litigation
and help the department to focus on high-value litigation,” the finance ministry said in a statement.

“This step will also reduce future litigation flow from the department side.”

‘Tax terrorism’ had become a commonly used term to describe rampant harassment by the tax department under the previous United
Progressive Alliance regime. The Modi government had promised to provide a non-adversarial tax regime and unveiled a slew of steps
to shed this tag.

The CBDT has directed its field officials to refrain from high-pitched assessments and the move to increase the monetary thresholds for
filing appeals takes it forward.

In the Income Tax Appellate Tribunal, 34% of the cases will be withdrawn. The total reduction of litigation from the income tax
department’s side will be 41%. However, this will not apply in cases where a substantial point of law is involved, a finance ministry
statement said on Wednesday.

In the case of the Central Board of Indirect Taxes and Customs, of the total number of cases filed in the Central Excise and Service Tax
Appellate Tribunal, 16% will be withdrawn.

In the HCs, 22% of the cases will be withdrawn. The total reduction of litigation in indirect taxes will be 18%.

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