In order to significantly decrease the taxpayer greivances and litigation burden on courts across the country, the finance ministry on Wednesday hiked the threshold limit for tax departments to file appeals in tribunals and courts.
Now, the tax departments — Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes and Customs (CBIC) — will only file appeals at the tribunal level if the tax amount involved is Rs 20 lakh or more. Till date, the threshold was set at Rs 10 lakh for filing appeals in tribunals. CBDT files appeals in ITAT (Income Tax Appellate Tribunal) while the CBIC files appeals in CESTAT (Customs, Excise and Service Tax Appellate Tribunal).
The Indian Express reported in November last year that finance ministry’s revenue department had told the department of justice that “they have conducted a litigation conference and are also trying to increase the money limit further” for filing the appeals. On Wednesday, the finance ministry stated that the CBDT and CBIC will file appeals in High Courts only if the tax amount involved in litigation is Rs 50 lakh, up from Rs 20 lakh at present. For the Supreme Court, the threshold limit has been hiked to Rs 1 crore, from Rs 25 lakh at present.
On January 30 this year, the Economic Survey 2017-18 stated that even though the success rate of the tax department at all three levels of appeal — Appellate Tribunals, High Courts, and the Supreme Court — is under 30 per cent for both direct and indirect tax litigation, it remains “undeterred” and “persists in pursuing litigation at every level of the judicial hierarchy”, making it the largest litigant in India.
Due to new threshold limits, 34 per cent of cases filed by CBDT in ITAT would be withdrawn. “In case of High Courts, 48 per cent of cases will be withdrawn and in case of Supreme Court 54 per cent of cases will be withdrawn. The total percentage of reduction of litigation from CBDT’s side will get reduced by 41 per cent. However, this will not apply in such cases where substantial point of law is involved,” the finance ministry statement noted.
Similarly, in case of CBIC, out of total cases filed by the it in CESTAT, 16 per cent of cases will be withdrawn. “In case of High Courts, 22 per cent of cases will be withdrawn and in case of Supreme Court 21 per cent of cases will be withdrawn. The total percentage of reduction of litigation from Department’s side will get reduced by 18 per cent,” the fiannce ministry statement noted. Cases where substantial point of law is involved would not be withdrawn, it added.
“The tax department unambiguously loses 65 per cent of its cases. Over a period of time, the success rate of the department has only been declining, while that of the assessees has been increasing….The picture that emerges over a period of time is the following: even though the department’s strike rate has been falling considerably over a period of time, it is undeterred, and persists in pursuing litigation at every level of the judicial hierarchy,” the Economic Survey 2017-18 stated.