The Central Board of Direct Taxes (CBDT) has authorised income tax authorities to initiate appeals without regard to monetary thresholds in cases pertaining to Tax Deducted at Source (TDS)/Tax Collected at Source (TCS) undisclosed foreign income or information provided by investigating agencies such as the Enforcement Directorate (ED) and GST Intelligence.
Presently, tax authorities can initiate appeals before the Income Tax Appellate Tribunal (ITAT), High Court, and Supreme Court if the disputed tax demand exceeds Rs 50 lakh, Rs 1 crore, and Rs 2 crore, respectively. These thresholds were established in 2019.
In a circular issued on March 15, the CBDT announced that the prescribed monetary limits for filing appeals would not apply in certain scenarios. These scenarios include cases where the department has initiated prosecution proceedings and the trial is ongoing or where a conviction order has been issued and remains uncompounded.
Furthermore, appeals will be filed regardless of the tax demand on the assessee in cases where the assessment is based on information related to an alleged offence under any other law. Such information may be received from law enforcement or intelligence agencies such as the Central Bureau of Investigation (CBI), ED, Directorate of Revenue Intelligence (DRI), Serious Fraud Investigation Office (SFIO), National Investigation Agency (NIA), Narcotics Control Bureau (NCB), Directorate General of GST Intelligence (DGGI), and state law enforcement.
The specified threshold would not be applicable to litigation stemming from disagreements concerning TDS or TCS in both domestic and international taxation, as well as disputes pertaining to the applicability of provisions within the Double Taxation Avoidance Agreement.
Additionally, tax authorities will be required to initiate appeals regardless of the disputed tax demand in cases involving undisclosed foreign income, assets, or bank accounts. Currently, approximately 2.7 crore direct tax demands, amounting to around Rs 35 lakh crore, are under dispute across various forums.
Amit Maheshwari, Tax Partner at AKM Global, noted that the new circular has amalgamated various previous circulars addressing the issue of monetary thresholds for filing appeals.
"CBDT has broadened the scope of exceptions which are now outside the scope of monetary threshold and on which department may file the appeals / SLP irrespective of the amount involved. Such exceptions, although seem to be reasonable will add to the volume of appeals filed by the department in future," Maheshwari said.
The CBDT circular further elucidated that an appeal should not be initiated solely based on the tax impact surpassing the monetary thresholds set by the CBDT.
"Filing of appeals in such cases is to be decided on the merits of the case. The officers concerned should keep in mind the overall objective of reducing unnecessary litigation and providing certainty to taxpayers on their I-T assessments while taking a decision regarding filing an appeal," the CBDT said.