The staggering backlog of income tax appeals pending resolution with the Income Tax (IT) Department has been a persistent challenge, hindering the efficiency and effectiveness of the tax administration system in India. As of January 31, 2024, a total of 5,44,205 appeals awaited resolution at the commissioner (appeals) level, with an additional 63,246 cases pending at various Income Tax Appellate Tribunals (ITATs), High Courts, and the Supreme Court, according to reliable sources.
The Current Scenario
The breakdown of pending cases reveals the magnitude of the issue:
- ITATs: 20,266 cases
- High Courts: 37,436 cases
- Supreme Court: 5,544 cases
Despite the government’s emphasis on expediting the disposal of income tax appeals, as outlined in the Central Board of Direct Taxes (CBDT) 100-day action plan for FY25, the backlog continues to pose significant challenges. Each Commissioner of Income Tax (Appeals) has been tasked with disposing of at least 150 appeals by June 30, with internal targets set to accelerate the resolution process.
Challenges and Root Causes
Experts attribute the persistent backlog to several factors, including procedural delays and precedent-based assessments conducted by assessing officers. The lengthy process from filing an appeal to receiving the notice of first hearing often spans over a year, contributing to the accumulation of pending cases. Furthermore, assessing officers’ reliance on previous decisions during scrutiny leads to unnecessary tax additions and subsequent appeals.
Proposed Solutions
To address the backlog and streamline the appeals process, experts advocate for the following measures:
- Introduction of Time Limits: Implementing maximum time limits for deciding appeals by ITAT and CIT(A) to expedite the resolution process and prevent prolonged delays.
- Amnesty Scheme: Introduce a one-time settlement option for taxpayers through an amnesty scheme in the upcoming Budget. This would offer relief to taxpayers and reduce the burden of dealing with non-revenue-generating cases.
- Strengthening Judiciary: Increase the strength of the judiciary, particularly by filling vacant positions of Income Tax Commissioner (Appeals) and expanding the sanctioned strength of Commissioner (Appeals) to enhance the disposal rate.
- Digital Infrastructure: Invest in robust digital infrastructure and technology-enabled solutions to streamline case management and facilitate remote hearings, thus accelerating the appeals process.
Conclusion
The backlog of income tax appeals presents a significant challenge for the Indian tax administration system, necessitating urgent reforms and proactive measures. By addressing procedural inefficiencies, enhancing judicial capacity, and leveraging digital solutions, the government can streamline the appeals process, improve taxpayer experience, and promote greater compliance with tax regulations.
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