A third of decade-old tax cases in High Courts haven't had a single hearing

The government has signalled its intent on reducing tax litigation in steps. A two-part series examines the state of tax litigation. The first part looks at tax cases pending for over 10 years

A food product company in Andhra Pradesh, an infrastructure company in Maharashtra and a beverages firm in Punjab all have one thing in common: Tax cases that have been pending in the high court for over 10 years, without a single hearing having taken place. And they are not alone.

 

There were at least 4,000 cases pending for a decade or longer where a hearing had yet to take place, shows a Business Standard analysis of figures from the thinktank and research institution DAKSH, which has created a database with information from 23 out of 25 high courts on tax cases for the two decades from 2000 to 2021. An analysis of 320,000 unique cases showed that more than 12,000 tax cases were pending for a decade or more (33.7 per cent), without a hearing and that over 56,000 were pending overall.

 

Spectra Foods and Beverages, Ruchi Infrastructure and Pure Drinks did not respond to a request for comment.

 

Pendency hits smaller businesses harder because they lack the deep pockets or influence needed to push for a resolution, according to Surya Prakash BS, fellow and programme director at DAKSH. A more systematic way of scheduling hearings and case management practices can help bring in better access to justice, irrespective of the size of entities involved, but this can only happen through judicial initiative, he said. “The courts have to solve for it,” he said, pointing to the need for judicial reform. The tax department taking a more calibrated approach to deciding which litigations to pursue and which ones to let go may help reduce the number of cases which end up in courts every year, he added. 

 

To be sure, the government has been raising the threshold for appeals in a bid to bring down litigation, including doubling the high court cap from ₹1 crore to ₹2 crore.

 

Around 45.8 per cent of indirect tax cases pending in high courts for over a decade had not had a single hearing. The proportion for direct tax cases was 20.6 per cent. The higher figure for indirect tax cases may reflect the disruption that followed the introduction of the Goods and Services Tax (GST) in 2017 which revamped indirect taxation.

 

 There are instances where entities file cases but there is no follow-up from them, noted S R Patnaik, partner (head-taxation) at Cyril Amarchand Mangaldas. At the same time, capacity constraints mean that such cases do not come up in the regular course because of the overload that already exists. While some high courts are methodical, taking into account timelines, materiality and the importance of individual cases, others are less equipped to do so, said Patnaik. “Tax cases are technical in nature... Many high courts do not have a tax bench, which also contributes to the delay in their disposal,” he added. 

 

High courts disposed of 17 tax cases for every 100 filed in 2000. This proportion rose to 80-155 per 100 tax cases filed in the three years leading up to 2019 — before the pandemic disrupted proceedings. To be sure, some of the pre-pandemic improvement was also linked to fewer cases being filed. More than 20,000 cases were filed in 2009 for example, which dropped to just over 12,000 in 2019.

 

But more recent government data shows pending case numbers haven’t shrunk.

 

There has been a 36 per cent increase in the number of direct tax appeals pending at the high courts between 2021-22 and 2022-23, the Standing Committee on Finance said in a 2024-25 report tabled in the Lok Sabha in December 2024. And more than 60 per cent of pending indirect tax litigation at high courts have come in the last three years. Indirect tax claims pending in high court total ₹2 trillion as of 2023-24. The figure for direct tax litigation is around ₹5.6 trillion.

 

The lack of judges with specialist knowledge of tax law at the high courts and the constant rotation of judges can affect pendency, according to Rohinton Sidhwa, partner, Deloitte India. More tax benches at high courts can help expedite matters, he suggested, adding that the situation is more complex at levels below the high court. The Commissioner of Income Tax (Appeals) or CIT (A) work has been stymied by changes to bring in a faceless appeals process through the National Faceless Appeal Centre (NFAC).  

“Appeal resolution at this level has been significantly impacted,” he said. Teething issues related to the new system including technological challenges have been reported.

 

Surya Prakash BS of DAKSH suggested that the large number of tax appeals pending at the CIT (A) level provides an opportunity for the Income Tax department to work out a framework that would enable the CIT (A) to depart from established practice and deal with the problem of pendency in a meaningful way.  An email sent to the Ministry of Finance did not receive a reply. 

 

 

(Part 2 deals with disposal rates)