Lok Sabha Question No. 254 (STARRED), answered on 2018-08-03
Subject: Threshold Limit for Tax Departments
Ministry: FINANCE
Asked by: K. ASHOK KUMAR, ANJU BALA

## Government of India Ministry of Finance Department of Revenue

## LOK SABHA STARRED QUESTIONS NO. *254

TO BE ANSWERED ON FRIDAY, AUGUST 03, 2018 SHRAVANA 12, 1940 (SAKA)

## THRESHOLD LIMIT FOR TAX DEPARTMENTS

## *254. SHRI K. ASHOK KUMAR: SHRIMATI ANJU BALA:

Will the Minister of Finance be pleased to State:

- (a)  whether  the  Government  has  hiked  the  threshold  limit  for  tax  departments  to  file appeals in tribunals, High Courts and Supreme Court to reduce tax litigations and improve ease  of  doing  business,  if  so,  the  details  thereof  along  with  the  number  of  direct  and indirect tax cases/appeals pending in Supreme Court, High Courts, Income Tax Appellate Tribunal (ITAT), the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) during each of the last three years and the current year;
- (b) whether tax litigation in the Central Board of Direct Taxes (CBDT) and Central Board of Indirect  Taxes  and  Customs  (CBIC)  will  get  reduced  significantly  by  hiking  the  above threshold limit and if so, the details thereof;
- (c) whether 34 per cent, 48 per cent and 54 per cent of the cases from ITAT, High Courts and Supreme Court respectively are likely to be withdrawn in light of the new threshold limit and if so, the details thereof;
- (d) whether the aforesaid change in monetary limit carried out by the Government is also applicable to the cases involving major violation of laws and if so, the details thereof; and
- (e) whether the Government has devised any mechanism for speedy disposal of appeals by identifying  cases  involving  huge  amounts  and  if  so,  the  details  thereof  along  with  the success achieved in this regard so far along with the further steps being taken to minimize tax litigations and facilitate the ease of doing business?

## ANSWER FINANCE MINISTER (SHRI PIYUSH GOYAL)

- (a) to (e):   A Statement is laid on the table of the House.

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Statement  as  referred  to  in  reply  to  Starred  Question  No.  *254  to  be  answered  on  03 rd August, 2018 in Lok Sabha on the subject of Threshold Limit for Tax Departments.

The reply to the subject Parliamentary Question is as under:

## (a): Yes Madam.

The  threshold  limits  of  filing  tax  appeals  by  the  Department  have  been  hiked. Henceforth, appeals/SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder:

| SLPs/Appeals in tax matters before:   | Earlier monetary limit for filing appeal (Rs)   | Revised monetary limit for filing appeal (Rs)   |
|---------------------------------------|-------------------------------------------------|-------------------------------------------------|
| ITAT/CESTAT                           | 10 lakhs                                        | 20 lakhs                                        |
| High Court                            | 20 lakhs                                        | 50 lakhs                                        |
| Supreme Court                         | 25 lakhs                                        | 1 crore                                         |

Further,  all  the  pending  SLPs/appeals  below  the  above  specified  tax  limits  will  be withdrawn/not pressed except where Constitutional validity of Acts/Rules is under challenge or a major question of law is involved or a case is under investigation by an investigating agency.

The  numbers  of  Direct  Tax  appeals  pending  before  Income  Tax Appellate  Tribunal (ITAT), High Court (HC) and Supreme Court (SC) in the last three years is as under:

| Financial Year   |   SC |    HC |   ITAT |
|------------------|------|-------|--------|
| 2015-16          | 5399 | 32138 |  91971 |
| 2016-17          | 6357 | 38481 |  92388 |
| 2017-18          | 6224 | 39066 |  92766 |

The number of indirect tax cases/appeals pending in Supreme Court (SC), High Court (HC) and Customs, Excise & Service Tax Appellate Tribunal (CESTAT) during each of the last three years and current year is as under: -

| Financial Year          |   SC |    HC |   CESTAT |
|-------------------------|------|-------|----------|
| 2015-16                 | 2925 | 14577 |    76688 |
| 2016-17                 | 2946 | 14114 |    83338 |
| 2017-18                 | 3080 | 14426 |    65146 |
| 2018-19 (Upto 30.06.18) | 3142 | 15314 |    63438 |

- (b) Yes Madam. The tax litigation percentage in respect of direct taxes and indirect taxes will get reduced significantly by hiking the threshold limit by 41% and 18% respectively.
- (c) The details of cases in respect of income tax likely to be withdrawn due to revised threshold limit as per impact analysis, provided they meet other conditions laid down, are as follows:

| Forum   | Appeals Pending   | Appeals likely to be Withdrawn along with percentage (approx.)   |
|---------|-------------------|------------------------------------------------------------------|
| ITAT    | 32,162            | 10,953 (34.05%)                                                  |
| HC      | 29,064            | 13,991 (48.13%)                                                  |
| SC      | 3,441             | 1,868 (54.28%)                                                   |
| Total   | 64,667            | 26,812 (41.46%)                                                  |

(d): No Madam, the above monetary limits shall not be applicable where:

-  the Constitutional validity of the provisions of an Act or Rule is under challenge, or
-  Boards'  Notification,  Instruction,  Order,  or  Circular  has  been  held  to  be  illegal  or  ultra vires, or
-  Revenue Audit objection in the case has been accepted by the Income Tax Department, or
-  the addition relates to undisclosed foreign assets/ bank accounts in cases pertaining to direct taxes, or
-  a case is being investigated by an investigating agency.

Cases falling in the above category will be contested on merits notwithstanding that the tax effect entailed is less than the prescribed monetary limits or there is no tax effect. Further, the said monetary limits shall not apply to writ matters and Direct tax matters other than Income tax matters or in cases where the tax effect is not quantifiable or not involved., It is pointed out that as per Section 35R of the Central Excise Act, 1944 made applicable to Service Tax vide Section 83 of the Finance Act, 1994 and Section 131BA of the Customs Act,  1962,  where  the  Department  has  not  filed  any  appeal  in  a  case  because  of  low monetary/threshold  limit,  the  Department  is  not  precluded  from  filing  appeal  in  any  other case involving the same or similar issues or questions of law.

## (e):      Direct Tax

Yes  Madam,  special  focus  was  given  to  the  disposal  of  pending  appeals  before CIT(A) having large tax effect. This resulted in disposal of 362 appeals involving tax effect of Rs.1.92 lakh crore in F.Y. 2016-17 and 1033 appeals involving tax effect of Rs. 3.03 lakh crore in F.Y. 2017-18.

To minimise the tax litigations and facilitate ease of doing business bunching of cases has been done for cases having similar or common issues before ITAT, HC and SC. Focus is being laid on disposal of appeals having tax effect of less than Rs. 2 lacs to reduce the number of appeals pending before CIT(A). Circular has been issued to withdraw/not press Departmental  appeals  on  issues  that  have  attained  finality  before  HC/SC.  Standard procedure has been laid for implementing provisions under sections 14A, 68 and 147 which are the most litigated sections.

## Indirect Tax

Interlocutory  Applications  are  being  filed  in  the  Supreme  Court  for  early  listing  and disposal  of  cases  involving  revenue  of  Rs.  10  Crores  and  above.  Till  date,  63  such Interlocutory Applications have been filed. Zonal Chief Commissioners have been empowered  to  redistribute  pending  appeals  among  other  Commissioner  (Appeals)  and equivalent  officers  within  its  jurisdiction.  Out  of  51,320  cases  pertaining  to  Central  Excise and Service Tax pending with Commissioner (Appeals) as on 30.06.2017, a total of 44, 980 cases have been decided.

To minimize tax litigations and facilitate ease of doing business, field formations have been sensitized to forward only those SLP proposals where in the issue involves substantial question of law to streamline the litigations in Supreme Court. Instruction has been issued that in cases where the Department has lost in two fora, the Departmental appeal proposal is to be accompanied with the certification of satisfaction of the Chief Commissioner that the Department has a strong case on merits. Instruction has also been issued that Department's appeals shall not be filed with the Commissioner (A) below monetary limit of Rs. 2.5 lakh.

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