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Tax department should exercise self-restraint in filing appeals: Economic Survey

Dipak Mondal     January 30, 2018

It is no secret that pending tax disputes have been a big drag on the India Inc. The Economic Survey 2018 has highlighted the problem by pointing out the 'futility' of such litigations in the long run.

The survey pointed out that tax departments in India have gone in for contesting against in several tax disputes but also with a low success rate which is below 30%. About 66% of pending cases accounted for only 1.8% of value at stake, while 0.2% cases accounted for 56% value at stake.

The report pointed out that at the end of March 2017, there were about 1.37 lakh direct tax and 1.45 lakh indirect tax cases with cumulative amount involved of Rs 7.58 lakh crore, over 4.7 percent of GDP, were pending at commissioner, appellate tribunal, high court and Supreme Court level.

The survey pointed out that "the success rate of the department at all three levels of appeal-- Appellate Tribunals, High Courts, and Supreme Court-- and for both direct and indirect tax litigation is under 30%."

In some cases, the survey says, the success rate is as low as 12%. The Department unambiguously loses 65% of its cases. Over a period of time, the success rate of the Department has only been declining, while that of the assessees has been increasing.

The survey report, therefore, advises "the tax department to exercise greater self-restraint by limiting appeals, given its low success rate."

However, the report complimented the Supreme Court's recent efforts in reducing the backlog of tax cases. It observed that the apex court's recent experiment with constituting an exclusive bench for taxation produced impressive results, which may be replicated for other subject matters, and emulated by other High Courts that do not have special rosters for daily hearings.

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