Mr. T.V. Somanathan
The Finance Secretary
Ministry of Finance
Government of India
Representations to reduce pendency of direct tax litigation
Tax litigation is a matter of serious concern. As on March 2022, more than INR 10.4 lakh crores (INR 10.4 trillion) were blocked in direct tax disputes.
In terms of number of cases, 5.6 lakh (0.56 million) direct tax cases were pending at various levels as in FY 2020-21. More than 80% of pending cases are blocked at the Commissioner (Appeals) level. Based on statistics available from the Economic Survey 2017-18, appeals filed by Income Tax Department constituted 80%-85% of the appeals with its success rate being less than 30%. That means, of the tax demand stuck in litigation, only 30% (or lesser) can be collected by the Government.
As per information sourced through Right to Information Act, about 4.92 lakh cases are pending before CIT(Appeals) as at 31 March 2023 across the country.
The pendency at CIT(Appeals) has accumulated over last four years since the Government tried to implement Faceless Appeal Scheme on lines of Faceless Assessment Scheme. In the recent Budget 2023, an amendment was to create post of Joint CIT(Appeals) to expedite clearance of pendency before CIT(Appeals).
You will appreciate that pendency of litigation at various levels – more particularly at CIT(Appeals), adversely impacts the industry in terms of pending demands, coercive recovery by Tax Department, blockage of working capital, disclosures to stakeholders like shareholders, regulators, etc. It vitiates the “Ease of doing business” in India and sends out a wrong signal to foreign investors.
The Bombay Chamber is pleased to submit certain suggestions/recommendations in enclosed note to reduce the pendency of litigation, for kind consideration of the Government.
We request you to consider the above representations favourably in order to foster the government’s agenda of ‘Ease of Doing Business’. If any further details are needed, we will be happy to discuss and elaborate on our suggestions.