Increase in monetary limits for filing of Appeals – A Double-edged sword

The Central Board of Direct Taxes has increased the limits for filing / pursuing of appeals before various appellate fora, vide Circular No.17/2019. The Department would no longer be interested in taking matters before the Tax Tribunal if the Tax impact of the case is less than INR 50 lacs.  Similarly, the monetary threshold for Appeals before the High Court and the Supreme Court have also been enhanced to INR 100 lacs and INR 200 lacs respectively.

The increase in limits would also apply to pending appeals and all such appeals filed by the Department, which fall below the revised threshold,  by would have to be  withdrawn by October 31, 2019.

Whilst increase in the monetary limits is a welcome step to clear the backlog of tax cases, it does pose a moral hazard and could also have an unintended consequences of greater back-log at higher levels, as the lower level authority, specially at the first level of the Commissioners would now think twice before ruling a case in favor of the tax payer. As for the moral hazard part, this is what an old wise counsel quipped – ‘every increase in the monetary limits for filing appeal is observed to also result in a corresponding increase in monetization efforts of the black sheep in the system!’