Taxpayers involved in disputes with the Income Tax Department may experience significant relief under new monetary limits set by the Central Board of Direct Taxes (CBDT). These changes come as a response to the government’s efforts to streamline the tax appeal process and reduce the number of cases reaching higher courts. If you’ve faced a tax dispute, here’s what you need to know about these changes.
Appeal Limits Raised to Prevent Overloading Courts
In many instances, taxpayers do not agree with the tax demand notices issued by the department and file appeals against them. When these appeals are decided in favor of the taxpayer, the Income Tax Department may also appeal to a higher authority or tribunal. However, to avoid unnecessary appeals and ease the burden on courts, the government has increased the monetary threshold for filing such appeals.
Finance Minister Nirmala Sitharaman, in the Union Budget presented on July 23, 2024, announced the government’s intent to raise the monetary limits for appeals to reduce the caseload in higher courts. This move ensures that cases involving smaller tax disputes will be handled at lower levels, leaving higher courts free to focus on more complex and higher-value cases.
New Appeal Limits: What You Should Know
As of September 17, 2024, CBDT issued a new circular (No. 09/2024), specifying the latest monetary limits for tax disputes. These limits will determine whether or not the Income Tax Department can file an appeal in a higher court. The new limits are as follows:
- Income Tax Appellate Tribunal (ITAT): The disputed tax amount must exceed Rs 60 lakh for the department to file an appeal.
- High Court: The tax amount in dispute should be more than Rs 2 crore for appeals to be filed.
- Supreme Court: For an appeal to reach the Supreme Court, the disputed tax amount must be over Rs 5 crore.
These changes apply to all types of cases under the Income Tax Act, 1961, including disputes related to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS).
Exceptions: When Can the Income Tax Department Appeal Below the Limit?
While the new limits are strict, there are some exceptions. The Income Tax Department retains the right to file appeals in certain cases even if the disputed tax amount is below the prescribed limits. This could occur if the case involves other agencies, such as intelligence or investigative agencies, or relates to significant rule violations, such as those uncovered by the GST Department.
Impact on Pending Cases: Withdrawal of Low-Value Appeals
The new limits will also affect ongoing tax disputes. If a case is already pending in a court or tribunal and the disputed tax amount falls below the new limits, the Income Tax Department can now withdraw such cases. This move is expected to reduce the backlog of tax disputes in courts, allowing them to focus on more critical cases.
Why the Change?
The aim behind these new limits is to improve the efficiency of the legal system by preventing minor tax disputes from crowding higher courts. By settling smaller disputes at lower levels, the system becomes more efficient, and the judiciary can prioritize cases with higher financial stakes.
The change is also seen as a step toward improving taxpayer confidence in the system. With fewer frivolous or low-value disputes reaching the courts, taxpayers may find it easier to resolve their issues without having to navigate lengthy legal processes.
For individuals and businesses, this update brings more clarity to how tax disputes will be handled in the future. Knowing that smaller cases will likely be settled at lower levels may encourage quicker resolutions, saving time and resources for both taxpayers and the Income Tax Department.
These new monetary limits are expected to streamline the dispute-resolution process while reducing the overall burden on India’s judicial system. Taxpayers should stay informed and consult with tax professionals to understand how these changes might impact ongoing or future disputes.
