Tax disputes up to Rs 20 lakh to be dismissed

I-T department cannot go for an appeal in cases where the disputed amount is below this threshold

Income tax payers whose tax disputes are under litigation will get some relief if the amounts in question are less than Rs 20 lakh and are pending either in the Income Tax Appellate Tribunal (ITAT) or high court.

The Central Board of Direct Taxes (CBDT) recently increased the monetary limit for filing appeals by the income tax (I-T) department at the Tribunal to Rs 10 lakh from Rs 4 lakh; and to Rs 20 lakh from Rs 10 lakh at the high court. This means, the department cannot go for an appeal in cases where the disputed amount is below this threshold.

Since it is with retrospective effect, it  applies to existing appeals filed, but pending decision. This means, all such appeals will be immediately withdrawn. However,  CBDT has maintained the limit for appeals to be filed at the Supreme Court at Rs 25 lakh.

It is a welcome move as it will reduce the number of cases, facilitating the appellate authorities to concentrate on disposing of high-value litigated cases, says Kuldip Kumar, partner and leader (personal tax) at PwC India.

The primary reason behind increasing the limit is to reduce the number of cases that go for appeal and to reduce the burden on courts. “The government and its various agencies comprise the biggest proportion of litigants in courts and tribunals. The government has kept adding cases to the over-burdened courts, despite losing most of them. Much of this is avoidable. That is why CBDT has increased the amounts to minimise litigation and to concentrate on high value cases,” says Rakesh Nangia of Nangia and Co.

ITAT has already starting taking action in this direction. Appeals pending before the Tribunal where the monetary limit of tax effect is below the threshold, are being dismissed, Nangia adds.

However, there are exceptions. The limit will not apply to writ matters and direct tax matters other than income tax. Another exception is with regard to undisclosed foreign income.

“Those individuals who may have any matter pertaining to undisclosed foreign income or bank accounts will not benefit as the tax department can pursue those matters at ITAT and above level even where the tax impact is less than the threshold specified,” says Kumar of PwC. This also shows the government's seriousness about its intention to tackle the issue of black money.

In case of a dispute, tax-payers must take care of documentation and ensure all documents and information are presented to the lower authorities, says Amarpal Chadha of Ernst & Young. “Once the case goes to the Tribunal or High Court, if the court finds facts are missing, it can take a strong view and refer the case back to the lower authorities. That is why you must keep a track record of why you took a particular position. The court can reprimand both the I-T department and the tax payer,” he says.

The CBDT order also says if an appeal is not filed only because the amount in question is below the specified threshold, it does not mean the I-T department has agreed to the decision. In fact, the Commissioner will have to specifically record that the decision is not acceptable, but appeal is not being filed only because the amount is lower than the threshold. This does not mean the department cannot file an appeal against the same assessee for the same year or any other year if the disputed amount exceeds the threshold limit.