Faced with litigation that has assumed "grave proportions", the Central Board of Direct Taxes (CBDT) has directed tax officials to dispose of appeals cases where the tax demand is above Rs 50 crore on priority by the year-end.
"Litigation is not only a cost on the credibility of a tax administration system but also an indicator of the robustness and fairness of a system of taxation. Litigation has been rising over the years and has now assumed grave proportions...," the policy-making body for the tax department said in a recently released blue print for the department.
The Central Action Plan or CAP for 2018-19 acts as the policy action vision document for the Income Tax Department and is unveiled by the CBDT annually.
In its latest issue, accessed by PTI, the CBDT said the demand "involved in appeal" before the first appellate authority of the department (Commissioner of Income Tax Appeals), as on April 1, 2018, is Rs 6.38 lakh crore.
Out of this amount, higher appellate bodies like the ITAT, high courts and the Supreme Court have stayed a demand of Rs 87,035 crore, till the same time period, it said.
"Such high volume of litigation has resulted in rendering a huge amount of tax as uncollectible. Besides, it is a major impediment towards creating an environment of tax certainty for taxpayers. It also involves infructuous costs on account of efforts to realise taxes blocked in these appeals," the Central Board of Direct Taxes (CBDT) said in the action plan.
It added that the "substantial progress" made last year on this subject is required to be continued with renewed vigour so as to bring down the quantum of litigation and un-block the revenue involved.
The Board directed the taxmen that 'category A appeals' involving demand of above Rs 50 crore and pending as on April 1, 2018 shall be disposed of by December this year.
The CBDT said these measures are required as there has been a reduction in overall litigation, particularly in cases involving very high quantum of demand, as also in cases with tax demand of less than Rs 10 lakh which have a wide-spread impact on taxpayers.
"It is, therefore, reasonable to continue with a similar action strategy for the current fiscal, to meet the core objectives of budget collection, reduction in outstanding demand and litigation management," the directive said.
The Board added in the CAP that each individual Commissioner (Appeals) "shall be expected to dispose of a minimum of 550 appeals" during the year.
It said 2 additional reward units will be granted to the Commissioner (Appeals) for passing a quality order.
With regard to the pending litigation in higher appellate forums like the Income Tax Appellate Tribunals (ITATs), high courts and the Supreme Court, the directive asked the sub-regional chiefs to identify top 30 cases where finality can be achieved faster.
The grounds to select such cases will be the revenue potential, recurring nature of the (taxation) issue and stay granted in appeals or cases, it said.
The new action plan also seeks renewed focus on filing strong prosecution complaints or charge sheets against tax evaders.
"It has been noticed that proper attention has not been paid to prosecution cases resulting in long drawn prosecution proceeding before the courts and award of punishment in very small number of cases. There is a need to address this problem in a concerted and focused manner," it said.
The Principal Commissioners of the ranges shall ensure drafting and filing of error-free prosecution complaints in consultation with standing counsel of the department and effective representation before courts by way of proper briefing to standing counsel, it said.
It said the regional departmental chiefs shall identify prosecution complaints pending for more than two years and that they will devise case-specific litigation strategy for effective representation to enable courts to take a final view on the matter at the earliest.