Rein in tax terrorism

WE NEED A TRANSPARENT SYSTEM THAT CURBS LITIGATION AND A QUICK RESOLUTION PROCESS

- T.V. Mohandas Pai S Krishnan

The Union Finance ministry issued a press release on September 24, 2024, saying the Supreme Court (SC) had disposed of 573 direct tax cases with tax effect of less than ₹5 crore due to revised monetary limits for filing appeals. Budget 2024-25 increased the minimum monetary limit for appeals related to direct taxes, excise and service tax in Income Tax Appellate Tribunal (ITAT), high courts (HC), and the SC to ₹60 lakh, ₹2 crore and ₹5 crore. Consequently, the ministry estimated 843 income tax (I-T) cases to be withdrawn from the SC, 2,781 cases from HCs, and 717 from the ITAT – totalling 4,341 cases.

"This significant milestone aligns with the government's efforts to reduce tax litigation and promote ease of doing business," the release added. This is a good start in reducing the humungous tax litigation pending with various judicial forums.

The monetary impact of the withdrawal would be a maximum of ₹10,200 crore. According to the latest receipt Budget of July 2024, total I-T under dispute was ₹10.48 lakh crore as of 2022-23. The withdrawal would be less than 1% of the total I-T under dispute. Thus, high-pitch assessments beyond revised monetary limits are significant.

I-T under dispute more than doubled from ₹4.98 lakh crore in 2014-2015 to ₹10.48 lakh crore in 2022-23. So much for the promise of eliminating tax terrorism! Corporation tax (CT) disputes increased by 170% from ₹2.21 lakh crore in 2014-2015 to ₹5.98 lakh crore in 2022-23. CT in dispute for less than five years is ₹5.63 lakh crore, which is 94% of the total disputes. High-pitch assessments have continued over the past five years and litigation management has been very ineffective.