Withdraw Low-Value Tax Appeals In 3 Months: FM Sitharaman’s Clear Message to Tax Dept

Tax News: In a move that aims to reduce the massive backlog of tax litigation and strengthen trust in the tax system, Union Finance Minister Nirmala Sitharaman has directed the Income Tax Department to withdraw all appeals that fall below the revised monetary thresholds, all within a firm deadline of three months.

The instruction was issued at a high-level review meeting with Principal Chief Commissioners of Income Tax on Monday (23 June), where Sitharaman took stock of the department’s litigation management, grievance redressal, and taxpayer services.

The move follows policy changes announced in the Union Budget 2024-25, which raised the thresholds for filing departmental appeals. Under the new limits:

• Appeals to the Income Tax Appellate Tribunal (ITAT) can only be filed if the tax demand exceeds Rs 60 lakh (up from Rs 50 lakh)

• For High Courts, the threshold is now Rs 2 crore (up from Rs 1 crore)

• And for the Supreme Court, it has been raised to Rs 5 crore (from Rs 2 crore)

According to the Finance Ministry, over 4,600 such appeals have already been withdrawn and an additional 3,100 were not pursued in light of the revised thresholds.

But a much larger task lies ahead. Out of the 5.77 lakh pending tax appeals, 2.25 lakh are expected to be resolved in the current financial year, potentially addressing over Rs 10 lakh crore in disputed demand.

“This is aimed at reducing litigation backlog and ensuring timely resolution, thereby enhancing taxpayer trust in the system,” said the ministry in a statement.

Outlook Money covered a story in March 2025 concerning a letter by the All India Federation of Tax Practitioners (AIFTP), a national body that represents over 11,000 tax professionals, including chartered accountants (CAs) and advocates. The letter, which was addressed to Finance Minister Nirmala Sitharaman, highlighted that over 5 lakh appeals have been pending before the Commissioner of Income Tax (Appeals), and the National Faceless Appeal Centre (NFAC).

Apart from calling for the withdrawal of low-value appeals, the finance minister also urged tax officers to expedite the resolution of disputed tax demands under the faceless appellate system, a relatively new digital framework introduced to streamline appeals without a physical interface.

The larger thrust of the meeting, however, was on taxpayer experience and the department's service for the same.

Sitharaman emphasised the importance of making compliance simpler and more transparent. She reviewed regional performance in handling taxpayer grievances and called for consistent service standards across the country. As of mid-June, more than 82 per cent of the 1.6 lakh grievances received through CPGRAMS and e-Nivaran platforms have been addressed, the ministry said. Refunds worth Rs 33,872 crore have also been issued so far, marking a 58 per cent increase over the same period last year.

There was also a renewed focus on the department’s legislative overhaul. Sitharaman lauded the Central Board of Direct Taxes (CBDT) for its work on the draft of the new Income Tax Bill.

Once the Bill passes Parliament, she asked the department to roll out nationwide awareness and training initiatives to help taxpayers and professionals understand the changes.

The broader message was clear: minimise unnecessary litigation, enhance taxpayer services, and rebuild trust through governance reforms.

The finance ministry has been consistently pushing for a "taxpayer-first" approach, the Minister noted, aligning with the broader policy narrative of ease of doing business and voluntary compliance. Monday’s directions underline a push to clean up the system from within, and make it work better for those it serves.