Budget 2026-27: Experts seek reforms to ease I-T litigation backlog | Budget 2026 News

According to a written reply by the finance ministry to Parliament in December, nearly 5.4 lakh appeals were pending before the Commissioner of Income-Tax (Appeals), or CIT(A), as of 2024-25 (FY25), involving disputed tax demands exceeding ₹16.75 trillion. 

In their pre-Budget submissions, industry bodies such as the Federation of Indian Chambers of Commerce and Industry (Ficci), the Confederation of Indian Industry (CII), and the Associated Chambers of Commerce and Industry of India (Assocham) have also underscored the importance of expediting dispute resolution at the CIT(A) level to reduce litigation and enhance certainty for taxpayers. 

Sandeep Bhalla, partner at Dhruva Advisors, said cases pending before the CIT(A) for over two years, where the delay is not attributable to the taxpayer, could be allowed to move directly to the ITAT. He suggested a structured process under which a senior tax officer prepares a concise, factual and legal note, with case records forwarded to the Tribunal for adjudication. Such a mechanism, he said, could help expedite dispute resolution while maintaining procedural discipline. 

Separately, experts pointed to the government’s dispute resolution scheme under Section 245MA of the income tax law, introduced in 2024, as an important step towards reducing litigation in smaller cases. The scheme provides a non-adversarial resolution mechanism for cases where declared income does not exceed ₹50 lakh and disputed additions are capped at ₹10 lakh, excluding search, survey and foreign income-related matters. 

While the institutional framework for the scheme, including the constitution of dispute resolution committees (DRCs) and online filing facilities, has been operationalised, participation under it has so far remained limited, experts said. 

Akhilesh Ranjan, former member of the Central Board of Direct Taxes (CBDT), said the scheme has the potential to clear a large number of smaller appeals through committee-based resolution. However, he said, the committees need to function in a more constructive and purposeful manner to build confidence and encourage wider use of the scheme. 

Tax experts also said that recent judicial rulings have contributed to greater interpretational complexity in certain areas of taxation, reinforcing the case for exploring alternative dispute resolution tools, such as arbitration and mediation. 

Vivek Jalan, partner at Tax Connect Advisory Services, said international experience in the US and EU suggests that such mechanisms can help resolve disputes at an earlier stage and improve predictability in tax outcomes.