Government auditor the Comptroller and Auditor General of India (CAG) today asked the Income Tax department to set up a separate dispute settlement mechanism for small taxpayers in order to expedite their cases.
"We recommend that the small taxpayers' disputes may be dealt with by the Department separately through an alternative dispute resolution mechanism," the CAG said in its report tabled in Parliament today.
The report said that differentiating corporate disputes from the smaller ones would help in faster disposal of the amount locked in appeals.
"This would clear the pendency as in such a situation disposal rate will be higher.. And promote greater focus on big-ticket appeals," it said.
Further, the report also noted that the implementation of the Direct Taxes Code (DTC) would help in simplifying the process of appeal settlement, but the government should work on bridging the holes in the Income Tax Act.
The proposed DTC, expected to replace the Income Tax Act from the next fiscal, is intended to provide a simple and broad-based taxation regime which will, in turn, lead to lower tax rates, better tax compliance and reduced litigation.
"Lacunae in the provisions of the Act need to be addressed without linking them to the DTC," it said.
The report said between 2006-09, a staggering Rs 2.2 lakh crore was locked up in IT appeal.
