Govt raises threshold for filing tax appeals to cut down litigation

New Delhi: The government on Wednesday sharply increased the monetary threshold for filing appeals in tax disputes in various courts and decided to withdraw many pending appeals to cut down litigation and improve ease of doing business.

The monetary threshold for filing appeals in tribunals handling income tax as well as customs, excise and service tax disputes has been doubled from ₹ 0 lakh to ₹ 0 lakh, the finance ministry said. In the case of high courts, the monetary threshold is now ₹ 0 lakh instead of ₹ 0 lakh earlier. In the Supreme Court, the threshold has been increased from ₹ 5 lakh to ₹ 1 crore.

The raised threshold is expected to ensure that the resources of the revenue department will be utilised more selectively. The success rate of the government in these disputes has been very poor historically as officials routinely filed appeals without deviating from the precedent set by other officials in similar cases.

The ministry also said that as a result of the substantially raised threshold, a large number of appeals will be withdrawn from various courts. It said that 34% of the cases, out of the total out of the total number of direct tax appeals filed by the department in the Income Tax Appellate Tribunal (ITAT), will be withdrawn.

The ministry did not specify the exact number of cases. However, minister of state for finance Santosh Kumar Gangwar had informed the Parliament in April 2017 that more than 88,730 direct tax cases were pending in the tribunal, though some of the appeals may have been filed by the assessee.

In case of High Courts,

As many as 48% of cases in high courts and 54% of cases in the Supreme Court 54% of the cases will be withdrawn, said the ministry statement. Gangwar said 41,960 direct tax cases were pending in high courts and 5,272 in the Supreme Court.

Direct tax disputes from the tax department will be reduced by two fifth, but this will not apply in cases where a substantial point of law is involved, said the ministry.

Experts said the move makes monetary threshold for appeals realistic. “What remains is to also provide a framework for clarifications to be issued where substantial questions of law are involved, since different benches end up taking differing views and matters aren’t resolved until they reach the Supreme Court. A classic case in point is the matter related to software payments. Clarity and consistency in tax policy is the key and this is one step in that direction,” said tax expert Abhishek Goenka.

In the case of indirect taxes, out of the total cases filed by the revenue department in the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), 16% of cases will be withdrawn. In case of high courts, 22% of cases will be withdrawn and in case of Supreme Court 21% of cases will be withdrawn, said the ministry.

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