Tax litigation has a lot of impact in the economy of a nation. This is due to the fact that Income Tax Department is probably the biggest litigant but in reality loses 85% of its cases, according to the study reports of Economic Survey.
According to the survey, in the last fiscal year, there were about 1.37 lakh direct tax cases and 1.45 lakh indirect tax cases filed in the Income Tax Appellate Tribunal and different high courts and even the Supreme Court. In monetary value, these huge number of cases amounted to about nearly 4.7% of GDP.
Considering the rate of success of the income tax department at all three levels of courts of appeal, it is as low as 30% in both direct and indirect tax litigations. This rate remains undeterred at every level of judiciary hierarchy thereby making the tax department one of the highest litigants.
As for the outcomes of these cases, more than 65% of these cases were unambiguously lost resulting in a huge loss of revenue for the nation through direct income and through legal expenses and lawyers’ fees.
Highlights of the survey
The highlights of Economic Survey will make the importance of lawyers Representing for Tax Litigation in India somewhat clear.
The survey found that the persistence of the government with litigation in spite of the high rates of failure is increasing the workload of the judiciary systems. This means it is adding to the number of pending cases and delay in the outcomes.
The survey also found that several important government infrastructure projects are stalled due to the various orders passed by the three levels of courts.
It is also found that the Supreme Court has a tendency to entertain appeals made directly by any tribunal or court through Special Leave Petitions or SLPs. This rate increased from 25% to 40% within a span of eight years starting from 2008.
All these factors have affected and altered the nature of functioning of the court eventually resulting in high pendency. However, the survey points out that if the judiciary had dedicated courts for this subject matter it would have resulted in profound benefits and impressive results, thereby relieving the stress and shortage of the nation’s economy.
The issues for litigation
No matter how meticulously the top indirect tax firms in Delhi work, there are several issues that result in such frivolous litigation lying pending. These issues are:
The inability of the officer to take an informed decision not to file an appeal
Fear and apprehension of opposing administrative action
Lack of information
Inadequate knowledge on the judicial precedents
The existence of a large number of loopholes in the taxation policy.
All these have resulted in a large number of impairments to the economic growth of the nation.
The diverse implications
Thanks to the government’s stringent policies more and more people are now encouraged to Filing Corporate Tax returns in India on time, but it is the rising number of appeals that are having a diverse effect and impactions on the country’s economy. It leads to a large number of pendency and increased workload of the judiciary. Apart from that, other implications on the economy include:
Mounting legal costs
Reduced investments and
Contested tax revenues.
The mismatch between the verbal interpretation of the law and intent of the government is to blame for this. There is a lack of transparency, and due to the administrative incapability, the growth of industries is hampered. It also causes a delay in the collection of revenue through potential tax payable to the government and this ultimately impacts investment in diverse sectors of the nation’s economy.
Implications on industry
The high rate of pendency has also had an adverse effect in the sectors as well. The different issues faced by the industrial sector include:
Difficulty in corporate tax planning due to the unpredictable taxation rules and policies especially in retrospective taxes