Income tax department biggest litigant in govt: Pranab Mukherjee

Calling it the biggest litigant in the entire government, finance minister Pranab Mukherjee today asked the income tax department to re-examine the way it handles tax disputes.

Speaking at the 150th anniversary of the income tax in India, the finance minister also exuded confidence that direct tax collections, hit by the global financial crisis in the last two fiscals, will regain its pre-crisis collection with the economy poised to grow by 8.5% this fiscal, 9% the following year and double digits thereafter.

"One area of concern is litigation with taxpayers. The department is filing appeals in a routine manner without careful thought and examination leading to the department earning the dubious distinction of being the biggest litigant in the government of India," Mukherjee said.

He said some of the appeals filed by the department have been dismissed by the courts on account of inordinate delays.

"These issues require a relook at the system of legal and judicial management," the finance minister said.

He said that there must be institutional arrangements to address tax disputes to the satisfaction of both taxpayers and tax collectors so as to reduce the number of litigations to a minimum.

The finance minister said that the proposed Direct Taxes Code (DTC), expected to replace the Income Tax Act from the next fiscal, will provide a taxation regime which is simple and broad based and in turn will lead to lower tax rates, better tax compliance and reduced litigation.

He said a bill on the code will be tabled in the upcoming session of Parliament starting from Monday.

The finance minister said that the annual growth of direct taxes has averaged about 24% in the last five years.

"This was despite two low growth years in 2009-09 and 2009-10 due to the slowdown in the global economy. With the Indian economy poised to grow at 8.5% in the current fiscal, we expect the growth to regain its past buoyancy," he said.

Mukherjee also hoped that the economy will grow by nine per cent next fiscal and will cross the barrier of double-digit growth soon after that.