Finance Minister Nirmala Sitharaman
| Photo Credit:
Finance Minister Nirmala Sitharaman expressed concern on Friday over the massive backlog of pending income tax appeals, urging the Central Board of Direct Taxes (CBDT) to conduct a thorough review. To curb litigation and offer greater certainty to taxpayers, she outlined a comprehensive framework featuring five priorities, three pillars and seven core principles.“The total pendency declined by over 34,000 cases, to 5.4 lakh appeals,” she said while addressing taxmen on the Income Tax Day. However, she noted that the volume of pending appeals remains critically high, warning that if the backlog continues to grow at its current pace, it could take a century to clear. ”I appeal to the board that you should have one more review to see how you are going to handle this,” she said.She highlighted that following the revised monetary thresholds announced in FY25 Budget, 6,000 departmental appeals have been withdrawn, freeing resources for cases with substantial questions of law. Therefore, “the implementation of the Income Tax Act, 2025 must be accompanied by consistent guidance and continuous engagement with taxpayers, professionals and industry,” she said.Focus on 5RsThe Minister asked the IT Department to focus on 5Rs for Responsive Tax Governance. First one is ‘Recognise’ every taxpayer’s concern promptly, acknowledging that all grievances deserve timely attention. Second is ‘Respond’ with clarity, courtesy and empathy, ensuring taxpayers receive meaningful communication at each stage. Third is ‘Redress’ genuine grievances fairly and within defined timelines, delivering timely and reasoned resolutions.Fourth is ‘Reflect’ on the root causes of recurring grievances, using complaints as an opportunity for institutional learning. And fifth is ‘Reform’ the processes, systems and procedures continuously so that similar grievances become increasingly rare. “Our approach should ensure convenience for the honest taxpayer, an opportunity to correct bona fide errors, and firm consequences for deliberate evasion,” she said.She asked taxmen to ensure convenience for honest taxpayers and take firm action against evasion. “Tax certainty is an economic imperative,” she said. Emphasising the need to be empathetic, Sitharaman said the department should know how to draw a line between those deliberately evading taxes and those committing bona fide errors.3 pillarsSitharaman emphasised on shifting long-term objective must shift from ‘litigation management’ to ‘litigation prevention’. It should rest on 3 pillars: Clarity in taxpayer obligations through timely circulars, Consistency of interpretation across jurisdictions; and Continuous Institutional Learning from appellate orders to inform future reform.Talking about path for Viksit Bharat by 2047, she advocated seven broad principles for the Income Tax Department. These include deepen voluntary compliance, continue simplifying the taxpayer experience, further strengthen tax certainty at the implementation level, harness technology responsibly, build institutional excellence, strengthen public trust and embrace continuous improvement. “These priorities reinforce one another: simpler laws encourage better compliance, better services strengthen trust, and greater trust promotes voluntary compliance,” she said.Further she said: “as we continue to invest in world-class infrastructure, we must invest with equal commitment in building the knowledge, skills and leadership capabilities of our officers.” She said she would encourage strengthened specialised training in AI, data analytics, forensic accounting, international taxation, transfer pricing, digital assets, cybersecurity and advanced financial investigations.Published on July 24, 2026
