The government on Wednesday announced a series of measures that would give a huge relief to taxpayers who have tax disputes with the Government. The new policy measures are aimed at resolving tax disputes of up to Rs 20 lakh out of court against the earlier practice of going to courts. Henceforth, such cases will be resolved at the Income Tax Appellate Tribunal (ITAT).
Earlier only disputes of up to Rs 10 lakh could be resolved at the ITAT level and a large number of people had to move High Courts across the country for redressal.
The government has also announced an increase in the threshold monetary limits for filing Departmental Appeals at various levels, be it the Appellate Tribunals, High Courts or the Supreme Court. This move is expected to reduce the long pending grievances of taxpayers and to minimize litigations pertaining to tax matters and facilitate the Ease of Doing Business.
“In 2015 when the government increased the threshold monetary limit, the Income tax department had withdrawn 17,000 cases pending before various appellate courts, having tax effect less than the threshold monetary limit prescribed in that year….the move will reduce the pending cases significantly,” points Gopal Bohra, Partner, N.A Shah Associates LLP.
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 government is confident that this move will lead to a withdrawal of 34 per cent of the total cases filed by the Department in the ITAT.
In case of High Courts, 48 per cent of cases will be withdrawn and in case of the Supreme Court, 54 per cent of cases are likely to be withdrawn. As a whole, about 41 per cent of the litigation is likely to be reduced from the Department’s side.
“The revised limits should see elimination of about 30-40 per cent of tax litigation matters presently pending before the Tribunal/Courts and costing tax payers heavily. It will also help reducing the burden on the Courts where there is already a long pendency,” said Sanjay Sanghvi, Partner, Khaitan & Co.
In case of the Central Board of Indirect tax and Customs, out of total cases filed by the Department in Customs, Excise and Service Tax Appellate Tribunal, 16 per cent of cases will be withdrawn, the government has claimed.
While in High Courts, 22 per cent of cases will be withdrawn and in case of the Supreme Court, 21 per cent of cases will be withdrawn according to government.
“An overhaul of litigation and appeal system for taxes is long overdue. Such measures are likely to boost taxpayer confidence,” says Archit Gupta founder and CEO ClearTax.
However, this will not apply in such cases where substantial point of law is involved, according to an official statement.