Budget 2023: FM proposes system to lessen litigation by Income Tax department

In a bid to lessen litigation in tax disputes, Finance Minister Nirmala Sitharaman on Wednesday proposed a case management system where the Income Tax department would defer filing a lawsuit if an identical question of law is pending adjudication in high courts or the Supreme Court.

Presenting the Union Budget for 2023-24 in the Lok Sabha, Sitharaman said a lot of time and resources are consumed in filing appeals involving identical legal issues pertaining to income tax.

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"Taking forward our policy of sound litigation management, I propose to provide that if a question of law in the case of an assessee is identical to a question of law which is pending in appeal before the jurisdictional high court or the Supreme Court, the filing of a further appeal in the case of this assessee by the department shall be deferred till such a question of law is decided by the jurisdictional high court or the Supreme Court," the minister said in her budget speech.

She said litigation management is needed to avoid repetitive appeals by the Income Tax department.

The finance minister said the mechanism to defer the filing of a case in a tax dispute till a constitutional court decides the common legal question would "greatly help in reducing the repeated litigation between taxpayers and the department".

Sitharaman also said necessary amendments in the Insolvency and Bankruptcy Code will be carried out to enhance the efficacy of the resolution process and facilitate cross-border insolvency resolution.

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