The need of the hour

The efficiency of a tax administration system depends to a great extent upon the credibility of its dispute resolution mechanism, which in turn is influenced by the degree to which avoidable disputes do not occur or are not prolonged.

While most other jurisdictions have used a collaborative approach with taxpayers, the Indian tax authorities have often adopted an adversarial approach. Evidence of this is to be seen in instances of a mechanical application of laws, arbitrary tax demands and protracted litigation that is exacerbated by a multitude of conflicting rulings by tribunals and high courts.

As a result, statistics suggest approximately 215,000 cases are pending before the first appellate authority and 16,000 cases are pending before the Income Tax Appellate Tribunal for the financial year 2013-14. The long-drawn out dispute resolution process not only dampens faith in India’s tax administration, but also delays access by the government to billions of rupees in revenue.

Aseem Chawla is a partner at MPC Legal, a tax, business and corporate advisory law firm based in New Delhi. Pranshu Goel, who is an associate at MPC Legal, assisted with this article.