Tax appeals pending, recovery halted
Ahmedabad, Nov 10, 2024
The Gujarat high court has halted the Income Tax (I-T) department from recovering outstanding dues from petitioner assessees while their appeals, pending for over four years, await decisions from the Commissioner of Income Tax (Appeals), under the faceless appeal system. The court's decision came after dissatisfaction with the I-T department's response to reduce the backlog of appeals from over 5 lakh aggrieved taxpayers.
This order applies to five petitioners with unresolved appeals.
These companies had contested the I-T department's tax assessments but faced pressure for dues recovery despite their appeals remaining undecided. The HC had previously allowed these companies to access their bank accounts in March 2020, but since then, no significant progress has been made on their appeals.
The I-T authorities informed the court that nearly 5.8 lakh appeals are pending: 3.9 lakh under the Faceless Commission of Income Tax (Appeals), 80,170 before non-faceless CIT (Appeals), and 1.09 lakh before Joint CIT (Appeals).
However, when the HC questioned top officials, including the chairman of the Central Board of Direct Taxes (CBDT), the finance secretary and the principal chief CIT (National Faceless Appeal Centre), no concrete plan was provided for resolving the backlog. The court was informed about how 279 commissioners work in a faceless manner, 64 commissioners in a non-faceless manner and 100 JCIT (Appeals) are allotted appeals for disposal. The HC noted a lack of data on the average lifespan of these appeals. The HC noted that there was no reply about steps devised for disposal of around 1,400 cases pending before faceless CIT (Appeals) and the duration in which disposal is expected.
Admitting the petitions, the bench of Justices Bhargav Karia and D N Ray said, "If the respondents are not interested in resolution of the issue of pendency of the appeals, the manner in which it ought to have been resolved by classifying the appeals as per the issues concerning the recurring issues, covered issues, etc., we are of the opinion that no recovery should be made from the assessees during the pendency of the appeals."
Expert opinion
Tax consultant Mukesh Patel lauded the Gujarat High Court's decision, calling it unprecedented in India's tax administration. "Drawing inspiration from the dictum ‘justice delayed is justice denied' the HC has granted a fair and just relief to taxpayers sparing them from the pressure of recovery of disputed taxes by the Income Tax department, more so when the tax administration is not equipped or geared to ensure timely disposal of tax appeals," he said.
He added, "Hope the verdict serves as a timely eye-opener for CBDT and ensures that effective measures are undertaken to check the mounting arrears of appeals under the faceless appeal regime."
Industry feedback
Ever since the Central Board of Direct Taxes (CBDT) introduced the faceless appeal scheme in 2021, there has been complaints regarding the efficacy of the system due to the increasing pendency of appeals. The Gujarat Chamber of Commerce & Industry (GCCI) also made a representation to the CBDT calling for the need to streamline the system to ensure a smooth process for the taxpayers.
[The Times of India]
