A big question before the Government – How to reduce the overburdened judiciary. A tax issue may take 5 to 7 years to settle at ITAT level and another 5 to 7 years, if matter moves to courts. The rapidly growing number of tax litigation not only adding to chaos but also pressurizing the available resources with the tax office. Every litigation has its own cost, which at times overruns the opportunity cost to both side – tax office and taxpayer. Tax office may have used those scarce resources in other high value tax cases whereas the taxpayer might have concentrate more on business.
The solution – either augmentation of the overall infrastructure in terms of “efficiency”, “capability” and “resources” or to increase its tolerance limit in term of small value case or combination of both alternative. The first option requires constant efforts and takes its own time and that’s why Govt has chosen the later one – increase its tolerance limit, instruction to tax office not to file appeal against adverse decision in small value tax cases – an immediate relief. This is third time, in last four years, when the threshold limit is being increased – July 2014, Dec 2015 and now further increased in July 2018.
CBDT and CBIC have issued circulars increasing the threshold limit that to be critically taken care by tax authorities while deciding whether to litigate the issue before tax tribunals/High Courts/Supreme Court. These threshold limits are in terms of tax effect i.e. the underlying quantum of tax amount involved (without including interest), unless pertaining to certain specified type of matters, should be more than the threshold limit to file appeal by tax authorities against adverse decision.
The revised limits are as under:
|Appellate Authority before whom appeal to be filed||Current threshold (INR)||Revised threshold (INR)|
|ITAT/CESTAT||1 Mn0 Lakh||2 Mn|
|High Courts||2 Mn||5 Mn|
|Supreme Court||2.5 Mn||10 Mn|
These limits will apply to existing litigation as well. As per news reports, there would be substantial reduction in the number of tax cases.
Number of appeals expected to be withdrawn:
|Appellate Authority||Direct Tax||Indirect Tax|
Key features of the latest circular
1. Tax effect (tax including surcharge & cess but not including interest) = A- B
Tax effect = (A-B) + (C-D), where A & B are as mentioned above
C= Tax on assessed book profit
D= Tax on book profit after reducing profits pertaining to disputed issues
2. The limit to be applied for each assessment year and for each tax payer separately. Only in the cases of composite order by High court or appellate authority, all the assessment years of a particular taxpayer may be clubbed.
3. Cases not litigated due to these threshold limits, should not be treated as “accepted positions” and not to have any precedent value. Pr. CIT/CIT need to specifically record that the fact that although the decision is not acceptable but due to threshold limit, not being further litigated.
4. Threshold limit is not to be apply in following cases:
5. The threshold limit is applicable on all pending litigation as well – Pending appeal below the specified threshold limit, may be withdrawn/not pressed.
6. Threshold limit is applicable not only on appeals but also on cross objections.
7. The threshold limit is applicable on the appeals to be filed by tax authorities only. Tax payers are free to litigate as per their wisdom.
Govt is showing generosity and seems keen to reduce the litigation not only by controlling new appeals that to be filed but also by withdrawing/not pressing the existing appeal. One apprehension is “Whether CIT(A) will adopt pro-revenue approach, particularly when matter is within the threshold limit, as DRP did?” It is just like a “surgery” for the overburdened judiciary system and as every surgery requires safeguards from infections, this current generosity, also, need to be safeguarded and should be followed by tax office in spirit – a big relief to tax payer.
 Source – Economics Times -12th July 2018