Income Tax Department increases thresholds for filing appeals in tax disputes

The Income Tax Department has raised the minimum threshold for filing appeals in tax disputes, streamlining the process for cases brought before the Income Tax Appellate Tribunal (ITAT), high courts, and the Supreme Court. According to a recent circular by the Central Board of Direct Taxes (CBDT), appeals can now be filed only if the disputed tax amount exceeds Rs 60 lakh for ITAT, Rs 2 crore for high courts, and Rs 5 crore for the Supreme Court.

Previously, in 2019, the thresholds were set at Rs 50 lakh for ITAT, Rs 1 crore for high courts, and Rs 2 crore for the Supreme Court. The revised limits are applicable to all cases, including those related to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). Additionally, the CBDT has directed the withdrawal of pending appeals in the Supreme Court, high courts, and tribunals that fall below these new thresholds.

This decision is part of the government’s ongoing efforts to manage litigation effectively. The CBDT emphasized that appeals should not be filed solely based on the tax amount involved; instead, they should be evaluated on the merit of each case. The objective is to reduce unnecessary litigation and offer taxpayers more certainty regarding their income tax assessments.

Finance Minister Nirmala Sitharaman, during her Budget speech on July 23, had announced this revision in monetary limits, underscoring the government’s intent to streamline tax litigation and reduce the caseload on judicial bodies. Experts in the field view this move as a step towards quicker resolution of disputes and a more balanced litigation environment.

Rajat Mohan, Executive Director at Moore Singhi, noted that these higher limits would lessen the likelihood of prolonged litigation, promoting more efficient resolutions. However, he added that the effectiveness of this policy would depend on the judicious use of discretion by tax authorities.

Sandeep Jhunjhunwala, Partner at Nangia Andersen LLP, mentioned that this revision is expected to ease the burden on judicial bodies, allowing them to focus on more significant disputes. He highlighted that the policy maintains exceptions for certain cases below the revised thresholds, particularly those involving TDS/TCS, undisclosed foreign income or assets, and instances where courts have provided specific directions.The CBDT circular also clarifies that the new monetary limits will not apply to cases where prosecution has been filed by the department and is either pending trial or has resulted in a conviction. With approximately 2.7 crore direct tax demands totaling around Rs 35 lakh crore currently in dispute, this move aims to reduce the number of cases in legal forums and expedite the resolution process.