Tax authorities to file special appeal even for small cases

I-T Dept. detects evasions specifically designed to fall below threshold for appeals

Off the mark: The review to raise the limits, in early August, created some problems, says an official. K. MURALI_KUMAR

The Income Tax Department’s decision last month to increase the monetary limit for the cases below which it could not appeal the court’s decision has somewhat backfired — it is now detecting a lot of organised tax evasions, specifically designed to fall below that threshold.

The Department has issued a circular saying it would file special appeals in cases falling below the threshold, if it feels there is evidence of deliberate tax avoidance, an official in the Finance Ministry told The Hindu .

“The Income Tax Department periodically reviews the monetary limits for the filing of its appeals before the Income Tax Appellate Tribunal (ITAT), the High Courts, and the Supreme Court,” the official said. “The last review was to increase these limits, in early August. But maybe this increase has created some problems.”

The August increase in the limits was a drastic one, doubling them for some cases, and more than doubling them for others. The floor for filing appeals in the ITAT was increased from ₹20 lakh to ₹50 lakh. The limit for appealing against a High Court order was increased to ₹1 crore from ₹50 lakh. Similarly, the limit for appealing against a Supreme Court order was increased to ₹2 crore from ₹1 crore.

“The Income Tax Department has noticed that there are a large number of cases where there has been organised tax evasion using bogus long-term capital gains and short-term capital gains on penny stocks,” the official added. “In some cases, the judicial authority has ruled in favour of the department, but in others, we feel that not enough due consideration was given to the provisions of the law or the facts of the case.”

In such cases, the tax authorities have no recourse, since the cases fall below the threshold for appeals.

“In this context, it was decided that we would issue a circular that would allow us to file a special appeal to the ITAT, High Courts, and Supreme Court, even if the case was smaller than the prescribed thresholds, for cases involving suspected organised tax evasion,” the official added. The Income Tax Department has since issued that circular and has sent it to all tax officials.