To reduce litigation, the government has hiked the threshold limit for filing appeals in tribunals to Rs 20 lakh, while the same for High Courts and the Supreme Court has been raised to Rs 50 lakh and Rs 1 crore. Photo: iStock
To reduce litigation, the government has hiked the threshold limit for filing appeals in tribunals to Rs 20 lakh, while the same for High Courts and the Supreme Court has been raised to Rs 50 lakh and Rs 1 crore. Photo: iStock

Will increase in the monetary threshold limit for tax appeals will help taxpayers?

The government has increased the threshold monetary limits up to which the income tax department can't file cases against taxpayers. Ashwini Kumar Sharma asks experts what it means for you

Hitesh D. Gajaria, Partner and Head – Tax, KPMG India

India’s Economic Survey, 2018 (ESI 2018), acknowledged the huge problem of pending tax litigation in our country. The success rate for the tax department at all three levels of appeal – for both direct and indirect tax was under 30%. On the other hand, the petition rate was above 80%, at all three levels.

Given the grave backdrop, our Finance Ministry deserves to be congratulated. A week ago, in order to reduce litigation, the government hiked the threshold limit for filing appeals in tribunals to 20 lakh, while the same for High Courts and the Supreme Court has been raised to 50 lakh and 1 crore, respectively.

Following this decision, Central Board of Direct Taxes (CBDT) will withdraw 34% of cases stuck in tribunal, 48% of those stuck in High Courts and 54% in the Supreme Court. Central Board of Indirect Taxes and Customs (CBIC) will withdraw 18% cases from tribunal, 22% from High courts and 21% from the Supreme Court. 

One fervently hopes that this laudatory step will substantially reduce frustrating litigation.

Effective implementation of this good decision will be a positive boost to this government’ s efforts to ease business to grow our economy to pull out even more unfortunate citizens from the clutches of poverty and deprivation.

Nikhil Rohera, Partner- Corporate and International Tax, PwC 

It is a bold step by the ministry of finance. Out of total pending cases on direct taxes filed by the revenue department, 34% in tribunal, 48% in high courts and 54% in the Supreme Court will be withdrawn.

CBDT has further told its principal chief commissioners to ensure that the exercise of withdrawing or not pressing such appeals is concluded by 20 August. As a result, there will be a significant reduction in backlog of cases stuck in litigation.

This is bound to be beneficial for a large number of taxpayers who will not have to incur huge legal costs for continuing to litigate relatively smaller matters. This also means that going forward the litigation lifecycle in India which otherwise tends to be time-consuming and long-drawn will be cut short in many cases. More importantly, this has sent a positive signal to the taxpaying community that the government is indeed serious about ensuring that there is ease of doing business in the country. Certainly, a welcome move from the government on an important issue of dispute prevention and resolution.

S Vasudevan, Partner, Lakshmikumaran & Sridharan

The recent move by the government to increase the monetary limits for appeals to be filed in tax disputes by the department before tribunals and courts is definitely a welcome step and will go a long way in reducing pendency of cases.

While there is no doubt that this move will benefit a huge number of taxpayers, it will also be a great relief to the government’s litigation machinery as well as the judiciary. As per the Economic Survey of 2018, the tax department is the biggest litigator in the country with a success rate of not more than 27%. While it hardly costs anything to the department to fight these cases at higher forums, the taxpayer has to incur substantial legal costs. Moreover, these appeals take at least a decade in many cases and a sword of a potential demand keeps hanging over the taxpayer.

Apart from relief to the taxpayer in specific appeals, there may be other benefits. Today, many of the appeals get dismissed at the threshold itself as courts have become choosy. Once the courts get de-clogged, deserving cases may be entertained.

Abhishek A Rastogi, Partner, Khaitan & Co.

The importance and impact of pending tax litigation can hardly be exaggerated. The CBIC’s move to increase monetary thresholds will give relief to many beleaguered assessees for whom legal costs are prohibitive for business, especially when the cases drag for years with multiple hearings.

Importantly, the monetary limit is not applicable to cases of classification and refunds which are of legal or of recurring nature. Classification and refund issues form a considerable part of the pending litigation. Unless this exception is done away with, the impact of increased monetary limit will be limited.

Guidelines should be put in place so that adjudicating authorities strictly follow the principles of judicial discipline. Courts have often reprimanded officers for raising incorrect demands or denial of refunds disregarding judicial discipline. Such cases lead to avoidable litigation wasting time and resources of both the assessee and the revenue department and the change will allow revenue authority to withdraw many such cases.

Close