The finance ministry has decided to raise the threshold monetary limit for tax department to file appeals in tribunals and courts from Rs 10 lakh to Rs 20 lakh.
Union Finance Minister Piyush Goyal said that hike in the threshold would result in withdrawal of 41 per cent of cases from Income Tax tribunals and various courts.
But these cases involve litigation over recovery of Rs 5,600 crore.
The decision means a loss to Income tax department but is likely to benefit small tax payers facing litigations in tribunals and courts.
The higher limit would mean that 34 per cent of the tax cases filed in Income Tax Appellate Tribunal (ITAT) will be withdrawn.
About 48 per cent of the cases in High Courts would be withdrawn.
Similarly, 54 per cent of cases in the Supreme Court will be withdrawn.
Economists say this as Election oriented move whereas recently taken charge Finance Minster Piyush Goyal said that the move would lead to an environment of trust between tax departments and tax payers.
Besides, the decision is also based on the premise that the cost of litigation is sometimes more than the recovery sought, he added.
Piyush Goyal said that the tax department could file appeals in ITAT/CESTAT only if the tax amount involved is Rs 20 lakh or more, up from Rs 10 lakh at present.
Appeals would be filed in High Courts if the tax amount involved in litigation is Rs 50 lakh, up from Rs 20 lakh at present.
For appeals in Supreme Court, the threshold limit has been hiked to Rs 1 crore, from Rs 25 lakh at present.