The income tax department has withdrawn over 15,800 appeals from tax tribunals and various high courts during the last 12 months, including 400-odd appeals have been withdrawn from high courts on issues that have been settled in favour of the taxpayers, according to government data till November 2016.

The Centre is likely to cite this in the upcoming Budget as proof of its commitment towards a non-adversarial tax administration, officials involved in the exercise said. Currently, over 50 per cent of cases in the higher judiciary pertain to government appeals, including tax cases.

A March 2016 report prepared by the Central Board of Direct Taxes had concluded that in more than 30 per cent tax-related litigations pending in courts, appeals had been filed by the I-T department mechanically, “without appreciation of the maintainability of the issue involved”.

Officials said the department of revenue had subsequently directed its field units to file appeals on merits and not in a routine manner merely on the basis of high revenue effect. It had buttressed this order by way of circular No. 21/2015 dated December 10, 2015 issued where it had prescribed high monetary thresholds for filing appeals before ITAT, high courts and Supreme Court and these revised thresholds were applied retrospectively, resulting in withdrawal of appeals already filed.

In parallel, NDA government’s move to revive the UPA’s National Litigation Policy is aimed at nudging different arms of the administrative machinery to curb prolonged litigation and draw a line beyond which there will be no appeal in legal disputes could be central to the Centre’s efforts to make India a better place to do business in.

According to government data, till November, 2016, more than 15,800 appeals have been withdrawn by the income tax department from tribunals and High Courts. More than 400 appeals have been withdrawn from high courts on issues which have been settled in favour of the taxpayers. “Further filing of appeal has also been restricted only to cases which have the required merits and which have tax effect exceeding the revised monetary thresholds. In terms of National Litigation Policy, necessary directions have been issued to the field formations to desist from filing appeals in routine manner,” an official said.

A look at litigation on the tax side during the last few years bears out the tax department’s dismal success rate in appeals filed by it before various appellate authorities across both direct and indirect taxes. In fact, the department’s success rate of cases before the income tax appellate tribunal, high court, and Supreme Court, where it has filed appeals, is even more unfavourably tiled against the department, highlight the futility of needless litigation.

According to the data collated by the income tax department, of the appeals filed by the department in ITAT, 52 per cent were decided against it in 2011-12, rising to 58 per cent in 2014-15. Similarly, in the Supreme Court 39 per cent appeals were decided against the department in 2011-12, rising to 43 per cent in 2014-15. In high court, the number of appeals decided against the department stood at 59 per cent in the last fiscal vis-a-vis 63 per cent in 2011-12.

Earlier, terming it as the biggest litigant, the Bombay High Court in July 2014 had in rebuked the government and said that it ought to be aware of the pendency of cases in the high courts and should work towards reducing frivolous and speculative litigation, which involves public money that can not be wasted in such litigation. Acknowledging the criticism faced from various courts over the quality of appeals filed before the Income Tax Appellate Tribunal (ITAT), HC and SC, the income tax department had subsequently asked its officials to ensure that “frivolous appeals are not filed and where an appeal is filed, proper grounds of appeal or questions of law are framed”. It has also enhanced the monetary limit for filing appeals before ITAT from Rs 3 lakh to Rs 4 lakh to cut down on litigation.

However, the UPA government does get the credit for setting the ball rolling on this. As far back in April 2013, former Planning Commission deputy chairman Montek Singh Ahluwalia had indicated that the government had initiated discussions on constituting an internal mechanism for settling disputes with the private sector.

According to the World Bank Group’s comparative survey on doing business, India came in at the bottom of the heap when it comes to enforcing contracts to resolve a commercial dispute, with a rank of 188 among 189 countries. Making a case for a better regulatory environment in India, the NDA government has already pitched reforms such as doing away with the minimum paid-up capital for companies, single-step incorporation of companies, and reduced documentation for exports and imports, to a two-member team from the World bank collating data for the Doing Business Report, 2016. The World Bank defines ease of doing business around the rules and regulations that assist in creating a “dynamic private sector”.