Breaking the Tax Dispute Logjam to Reduce Litigation

A better tax environment can benefit both businesses and the central government

- Sameer Gupta & Shalini Mathur

The past few Union budgets have acknowledged the problem of growing income tax disputes and litigation. While measures have been announced to tackle pendency at various forums, progress remains slow. Of the Central Board of Direct Taxes’ (CBDT) total tax demand of ₹42.3 trillion in FY24, about 74%, or ₹31.4 trillion, was under dispute, according to a parliamentary report submitted in December.

The largest pendency lies at the first appellate level—the Commissioner of Income Tax (Appeals). In FY19, 335,000 disputes awaited disposal, rising to nearly 550,000 in FY24. While in FY24 110,000 cases were resolved, over 140,000 new appeals were filed during the year. The numbers highlight the need for focused measures and capacity building to reduce tax disputes.

Breaking the logjam: To address the pendency at the CIT(A), the Centre created 100 posts of joint commissioner (appeals) and set a target to dispose of at least 600 cases for FY25. Though helpful, more is needed for time-bound disposals.