Tax payers caught in legal battles with the income tax department may be in for a relief. The department, known to be the biggest litigant in the government, has decided to work towards “changing the mindset” of the officials responsible for the litigations.
In order to trim avoidable litigation and bring down the number of litigations filed, the central board of direct taxes (CBDT) has told its officials to dispense with “let the court decide” attitude and at all cost avoid resorting to litigation only for the sake of litigation.
Most importantly, the CBDT has told the officials that “defensive attitude should not over ride the thinking pattern in decision making process”.
An official told The Indian Express that in order to improve the success rate of litigation, the officials have been told that the “impugned order should be read between the lines at responsible level while the tax effect should not be the only basis for entering into litigation.
The official said that the field officials have been asked to understand the substantial question of law involved “in unambiguous terms” for litigation much before the appeal is framed and filed to mitigate the losses to the department.
The Income Tax Act provides for four stages of appeals starting from the commissioner (appeal), the Income Tax Appellate Tribunal (ITAT) and followed by the High Court and the Supreme Court.
The average life cycle of an appeal is approximately 15 years and the government envisages reducing this to three years. However, currently the success rate is very low while the pending tax disputes are proving to be a drain on the resources. On an average, the ITAT gets 20,865 new appeals annually. Similarly, number of new appeals filed with high courts is around 6,000 while those with the apex court are at round 1,300 in a year.
According to government data, Rs 97,611 crore is locked up in litigation in direct taxes while Rs 1,08,081.08 crore is in indirect taxes as of March 2013.
The CBDT has also said that the filing an appeal is not the end of the matter as the “real litigation starts after the filing”. The board has said that the frequent reasons for the delay in filing appeals, such as defect in the application, incomplete paper book, poor quality of representation, non filing of rejoinder in time and adjournments, should be avoided and eliminated.