The latest data, as revealed in Friday’s interim Budget, however, seem to suggest either a drop in new claims or withdrawal of cases made in the area of personal income tax (PIT).
While the government’s stated policy is to reduce tax disputes/litigation, this wasn’t percolated into the level of assessing officers, who continued to make high-pitched demands (direct tax disputes that are 1-2 years old saw an 18-fold jump to Rs 3,13,387 crore between FY08 and FY18). The latest data, as revealed in Friday’s interim Budget, however, seem to suggest either a drop in new claims or withdrawal of cases made in the area of personal income tax (PIT).
PIT disputes of 1-2 years old dropped a steep 48% from Rs 1,78,937 crore for reporting year 2016-17 to Rs 93,648 crore in 2017-18. The tax department in July last year announced a decision to revise thresholds for appeals to various forums (tribunals/courts), in a bid to reduce the mass of tax litigation. These revisions were expected to reduce the number of direct tax cases by 41% and indirect tax disputes by 18%.
There was also a deceleration in the growth in total amount under dispute — both direct and indirect taxes — in 2017-18 (the disputed amount stood at `8.99 lakh crore in 2017-18, just 3% more than in FY17, the year which saw a 12% increase).
While these could be early signs of the taxman becoming less aggressive, unless clear-cut guidelines are in place for tax officers at the field level and greater convergence among tribunal rulings is achieved, the proposed “technology-intensive” system, which will obviate without human interface, could have the unintended consequence of catalysing a surge in new disputes. This is because such systems relying on artificial intelligence will likely use each ruling to build a knowledge repository allowing them to be mindlessly replicated.
“The disputed amount in new personal income tax cases are relatively low, and the appellate forum in the direct tax department disposed of many such cases over FY17,” a tax official said on condition of anonymity. He added that a large reduction in corporate tax cases could be seen in the current fiscal after the government raised the revenue thresholds for appeals in higher judicial forums. Another official said that the litigation in other areas of taxes wasn’t seeing the same level of reduction because the amounts involved were much larger.
“The government has taken multiple steps to cut down on disputes and litigation in the recent past. These include increasing the threshold limits for filing appeals by the tax department, creating more awareness about timely compliance and various disclosures in the tax returns, etc,” Vikas Vasal, national leader tax, Grant Thornton in India, said.