By Surya Prakash B. S.
‘Tis the times of rallying calls. And courts. And judges.
But everybody in India knows that the windmills of Courts and appeals grind slowly. As the number of cases pending disposal swell and as the Court halls burst at the seams with litigants, there is no running away from the fact that a fix is required. And therein lies a tale.
One of the ways to solve the tax litigation pile up is also to prevent fresh cases from being filed.
Let us take a look at a recent move by the Central Board of Direct Taxes (CBDT) on disposals by Commissioners of Income Tax- Appeals (CIT-A).
When a taxpayer faced with an order by his Assessing Officer does not agree with its conclusions, the recourse available to him is to approach the CIT-A (ignoring for a moment the option of the Dispute Resolution Panel available to a select few taxpayers). If the ruling of the CIT-A is not agreeable, either to the Tax Payer or to the CBDT, then an appeal is filed with Income Tax Appellate Tribunal (ITAT), then to High Court and then finally to the Supreme Court.
Disclosures by the Finance Ministry in its Annual Reports clearly show that the number of cases pending disposal are increasing at all levels. Of course this is not unique only to tax matters. The topic of disposal rate of Courts is the subject matter of extensive study in the Law Commission’s latest report – Report No. 245. The solution therein, albeit very formulaic and mathematical, is to increase exponentially the number of judges so as to increase the disposal rate – after all, isn’t justice delayed justice denied?
In this background, CBDT’s move to dramatically increase the number of posts of CIT-A from 360 to around 600 to dispose of around 90,000 cases (about 40 percent of the pending cases) before March 2015 may seem logical.
Along with these quantitative targets, could the CBDT also not have set some qualitative targets? Data from the Taxation Administration Reforms Committee’s (TARC) first report (page 229) show that CIT-As rule in favour of taxpayers in only around twenty to thirty percent of the cases. However, the success rate for taxpayers increases substantially at ITAT (around 45 percent) and High Court (about 60 percent).
CBDT needs to strictly implement a series of administrative measures to make this happen, like introducing a more scientific analysis for filing appeals rather than just tax-impact monetary thresholds, which are anyway low, or ensuring that rulings of higher courts are followed by its officers by strictly enforcing disciplinary action against those officers who do not so follow (as stated in a recent internal instruction).
And until such time a more systemic fix is implemented, a hoarse throat is imminent.
Surya Prakash B. S. is a student of Takshashila’s Graduate Certificate in Public Policy.