The Indian Tax System

The intricate Indian tax system governs tax administration and collection in the country. It comprises various direct and indirect taxes levied by central and state governments. Designed to support economic development while generating revenue for public expenditure, this system is regulated by several laws, including the Income Tax Act, GST Act, and Customs Act. These statutes outline the processes for tax assessment, collection, and enforcement. The Central Board of Indirect Taxes and Customs (CBIC) and the Income Tax Department are responsible for overseeing and enforcing the tax system.

Types of Tax

In India, taxes are classified into two primary categories :

 

Direct Taxes : Imposed on individuals and businesses based on income or profits, such as income tax and corporate tax.

 

Indirect Taxes : Levied on goods and services at the point of production or consumption, including excise, customs duties, and GST.

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Reasons for Tax Litigation
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Tax litigation support service may arise for several reasons, including :

 

Disputed Tax Assessments : Disagreements between taxpayers and authorities regarding tax liabilities.

 

Interpretation of Tax Laws: Complexity and ambiguity in tax regulations can lead to differing interpretations.

 

Noncompliance Issues : Litigation stemming from failures in filing, reporting, or paying taxes on time.

 

Tax Evasion and Fraud : Legal action taken to enforce tax laws and recover evaded amounts.

 

Transfer Pricing Disputes : Conflicts over the pricing of transactions between related entities.

 

Disputed Tax Credits and Deductions : Differences in opinion regarding the eligibility or amount of claimed credits and deductions.

 

Income Classification : Disputes over the categorization of income as capital gains or business income.

 

Cross-Border Transaction Issues : Challenges in interpreting tax regulations, particularly in cross-border dealings and double taxation.

The Procedure of Tax Litigation

The following is the step-by-step procedure for tax litigation in India :

 

Taxpayer Return Filing : Taxpayers must complete their tax return filings by the stipulated deadlines to avoid penalties.

 

Assessment Order : The tax officer reviews the filed return and issues an assessment order based on the findings.

 

Filing an Appeal : If dissatisfied with the assessment order, taxpayers may file an appeal.

 

Time Constraints and Appeal Hierarchy :
• Appeal to the Commissioner of Income Tax (Appeals) must be filed within 30 days.
• Appeal to the Income Tax Appellate Tribunal (ITAT) must be submitted within 60 days.
• High Court appeals should be filed within 120 days.