More power to taxpayers: Why Income Tax Dept should stop challenging CIT (A) orders? Top official explains

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Updated: November 11, 2019 2:33:11 PM

The Income Tax department should stop challenging orders of Commissioner of Income Tax (Appeals), which go in favour of the taxpayers, according to a top tax official.

incometax appealIncome Tax department should stop appealing against CIT(A) orders, writes top tax official.

The Income Tax department should stop challenging orders of Commissioner of Income Tax (Appeals), which go in favour of the taxpayers, according to a top tax official. “Once the case has been decided by Commissioner of Income tax in favour of a tax payer, there is no valid reason for filing further appeal by the Income Tax Department…” Krishna Krishna Mohan Prasad, Principal Director General of Income Tax (Legal & Research), writes in an in-house journal of the Income Tax department.

The top tax official has argued for amending Section 253(2) of the Income-tax Act, 1961, which provides power to Principal Commissioner of Income Tax to file appeal against the order of Commissioner of Income Tax (Appeals). The Commissioner is a senior official of the Department and, Prasad writes, “there is no valid reason for filing further appeal by the Revenue.”

Prasad says that amending this provision of the Income Tax Act will reduce the tax litigation by approximately in 80 per cent or more cases. Also, “the amendment will go a long way in overhauling the entire tax administration and increased collection of revenue, improvement of Indian Economy, reduction in administrative cost of the Income Tax Department & compliance cost of the tax payers, besides reducing frivolous litigation,” the tax official writes.

Till December 2018, as many as 86,853 cases, with total disputed amount worth Rs 5,68,707 crore, were pending in Income Tax Appellant Tribunal, High Court and Supreme Court. Prasad says that the success rate of Departmental Appeals at ITAT, High Court and the Supreme Court is “possibly less than 10 per cent.

The top tax official has cited several reasons for which the Department should stop appealing against orders that have gone in favour of the taxpayers. These are:

  • 99 per cent of Returns of Income are not scrutinized “as a matter of stated policy”. This means, that “decision of 99% of tax payers to pay taxes are accepted.”
  • Even as Administrative Commissioners can revise orders of AOs, decisions in 99 per cent assessment orders of Assessing Officers are accepted.
  • According to Prasad, several officials feel safe in filing appeal even as in over 90 per cent of cases, the ITAT has been agreeing with the orders of CIT(A). The officials file appeal because of complex legal positions on various issues and to avoid the perception of not filing appeals to ‘favour’ the taxpayers.
  • Prasad says that challenging the order of CIT(A) by much Junior officers looks “paradoxical” from the Department’s point of view.
  • Filing of appeal by against CIT(A) order is “paradoxical” from the taxpayers’ point of view as well. Prasad writes: “The entire situation looks paradoxical from the Taxpayer’s point of view, for whom the AOs, is an arm of Government and when he appeals to CIT(A), another arm of Government, and even if he gets relief at the level of CIT(A), another arm of Government, i.e. CIT, files appeal to ITAT.”

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