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Income Tax Relief: Court Appeal by Authorities Only for Rs 10 Lakh and Above
December, 14th 2015

In order to cut down on frivolous litigation and taxpayers' grievances, the Central Board of Direct Taxes (CBDT), which formulates policies for the Income Tax Department, has issued fresh directions revising the monetary threshold for the taxman to appeal at two important legal forums - ITAT (Income Tax Appellate Tribunal) and High Court.

CBDT has issued a fresh directive asking the Income Tax Department to go into appeal at ITAT only when the "tax effect" in question is Rs 10 lakh (from earlier Rs 4 lakh) and Rs 20 lakh (from earlier Rs 10 lakh) if the appeal is to be filed in a High Court.

The monetary limit for filing appeals or Special Leave Petitions in the Supreme Court has been kept unchanged at Rs 25 lakh.

There are four essential forums under law which a taxpayer can approach against an I-T assessment order - beginning from the Commissioner of I-T (Appeals), ITAT, High Court and finally the Supreme Court.

These limits were last revised in the middle of last year and official sources said the exercise has been conducted again and fresh directions issued for better management of litigation in the department, for which it has received a lot of flak in the past from different quarters including parliamentary committees and national auditor CAG (Comptroller and Auditor General).

The board has also directed that the new notified threshold should not be the only guiding light while tackling revenue cases but the "merit" of a case should be the most important aspect to be followed.

"It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case," the CBDT directives issued on December 10 said.

The limits, the instructions specified, will not be applicable in a few exceptional instances where either "the Constitutional validity of the provisions of an Act or Rule are under challenge or where Board's order, notification, instruction or circular has been held to be illegal or ultra vires or where Revenue Audit objection in the case has been accepted by the department".

The cases of undisclosed foreign assets or bank accounts or to say black money cases and those dealing with tax exemption or charitable institutions will also not be strictly governed by these new set of instructions, it said.

The interest of the department has also been kept in mind under the new instructions.

"The Income Tax department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits," it said.

To impress upon the priority that the government and CBDT attach to the new directives, the board has made it clear that these will apply with a retrospective effect.

"This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/Tribunals. Pending appeals below the specified tax limits mentioned above may be withdrawn/ not pressed," it said.

Appeals in case of legal representation in the apex court "will be governed by the instructions on this subject, operative at the time when such appeal was filed".

In the past, the Income Tax Department has faced criticism for filing appeals without due application of mind - the end result is that the taxpayer often wins the case after prolonged litigation. Litigation entails cost not just for the taxpayer but also the tax department.

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