Govt raises tax litigation bar for officials

Tightening expected to lead to 25% fewer case filings a month.

Litigation in the revenue department is set to fall by about 25 per cent, as the finance ministry has raised the monetary limits for tax officials to approach courts for dispute resolution.

At present, around 2,000 cases are filed every month. The move could bring the number to 1,500 a month.

The new limits for filing appeals by the Income Tax department before the Income Tax Appellate Tribunal (ITAT), high courts and the Supreme Court have been revised to Rs 3 lakh, Rs 10 lakh and Rs 25 lakh, respectively, from Rs 2 lakh, Rs 4 lakh and Rs 10 lakh.

The limits for the Central Board of Excise and Customs (CBEC) have been set at Rs 1 lakh for the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Rs 2 lakh for high courts and Rs 5 lakh for the Supreme Court.

This means if the verdict goes against the revenue department, it will not be able to approach a judicial body unless the tax or the total revenue involved, including fine and penalty, is more than these limits. The assessee if, of course, free to move higher courts in case of an adverse verdict. The measures are expected to cut litigation by 13 per cent in the case of ITAT and 25-30 per cent each in the case of high courts and the Supreme Court.

The reduction in litigation for CBEC would be 20 per cent, said a finance ministry official. He said the limits were revised on the finance minister’s direction to bring in a zero-delay regime in resolution of tax disputes.

At present, a little over 60,000 cases are pending before ITAT, high courts and the Supreme Court. Of these, about 50,000 were filed by the I-T department.

At the end of June 2010, the department had filed 20,270 cases in ITAT, 28,457 cases in high courts and 3,916 cases in the Supreme Court. Income tax assesses have filed 11,218 cases in these fora.
 

LITIGATION LIMITS
Limits   for CBDT	Tax   effect (Rs lakh)	Reduction in litigation (%)	Limits  for CBEC	Tax  effect (Rs lakh)	Reduction  in litigation (%)
ITAT	3	13	CESTAT	1	20
HC	10	25-30	HC	2	20
SC	25	25-30	SC	5	20
Source: Finance ministry

Finance Minister Pranab Mukherjee had asked the revenue department to set up standing committees in CBDT and CBEC to suggest ways to check unmindful litigation.

It was felt the department was filing appeals in a routine manner, without careful examination, getting the distinction of being the biggest litigant in the government.

Both standing committees have four members each, comprising members from the board, a representative from the law ministry and a litigation officer. The committees suggest short-term and long-term measures to restrain the revenue department from unnecessary litigation.