The time taken to decide a case is crucial not only for the assessee, but is also considered a criteria for judging the efficiency and performance of the Income Tax Appellate Tribunals. The overall efficiency of forums have been discussed previously where we discussed the amount of workload on the members of the Tribunal affecting the time taken to decide a case. In this article, we take our magnifying glass and observe the changes in the average duration of income tax appeals across Tribunals situated in New Delhi, Mumbai, Chennai, Ahmedabad and Kolkata.
By average duration, we mean the average time taken for a case to be decided by a Tribunal from the date of filing to the date of decision of the appeal. In other words, it is the average time for which a case is pending before being decided by a Tribunal. For this purpose, we took the sum of the duration of all the appeals disposed in a FY and divided it by the number of appeals disposed in that year.
Using the Riverus database, we plotted this average duration of the income tax appeals disposed by a forum in a financial year as shown in the graph. The idea being able to see the changes in the average disposal duration of each forum over time and find out the reasons for such developments. We have considered the cases disposed from FY 2010-11 to FY 2016-17.
Under section 254(2A), the Income Tax Act recommends the ITAT to decide on the appeals within 4 years from date of filing, wherever possible.
Chennai leads by a huge margin
While there are appeals which have gone on for more than four years, the average duration remains well below the statutory threshold across the major forums.
Notice the sharp increase in the average duration from FY 2012-13 onwards for ITAT Kolkata and ITAT Delhi. Similar increase was observed in the average duration of ITAT Ahmedabad from FY 2013-14 to FY 2014-15. This indicates that cases that had been pending for a while were being disposed off en bloc. We set out to confirm this with the help of data.
What’s taking so much time?
To understand why the average duration suddenly jumped up, we analysed the date of filing of the cases disposed in the concerned FYs. Since the average disposal duration of the forums is around 2 years, it would be beneficial to analyse the number of cases that have been pending for at least 2 years as it would tend to push up the average disposal duration.
The graph below provides information on the number of cases disposed in a FY by a particular forum divided on the basis of the duration of their pendency.
1. ITAT Delhi
In FY 2012-13, around 10% of the cases disposed were pending for at least 2 years, going back as far as FY 2001-02. For FY 2013-14, we looked at the appeals filed in FY 2010-11 or before, and found out that the proportion had doubled. A few appeals were pending since FY 1999-00 were disposed off during this time. At the end of FY 2014-15, nearly 35% of the appeals disposed in that year were filed at least two years before.
Therefore, as the percentage of disposed appeals pending for at least 2 years tripled during this period, its effects can be seen in the dramatic rise in average duration for this Tribunal.
2. ITAT Kolkata
Out of the income tax appeals disposed by ITAT Kolkata in FY 2012-13, around 12% of them were filed between April, 2008 and March, 2010. In comparison, in the next FY, 27% of the income tax appeals disposed, were filed in or before FY 2010-11. For the appeals disposed off in FY 2014-15, 37% of the cases had been filed at least two years before.
As a result, the average duration for ITAT Kolkata saw a significant increase from FY 2012-13 to FY 2013-14 but the rise in FY 2014-15 is not as significant as the percentage of cases disposed which were pending for at least 2 years did not increase by that much.
3. ITAT Ahmedabad
Of the income tax appeals disposed off in FY 2012-13, 49% of them were filed at least two years before. In FY 2013-14, the percentage increased to 55%. At this point of time, the average duration was 2.5 years and appeals filed as far back as FY 1997-98 were decided during this FY. By the end of the next FY i.e., FY 2014-15, the average duration had risen to 3.5 years and 80% of the cases disposed were filed in or before FY 2011-12. Out of these, around 10% of the appeals were filed in or before FY 2008-09.
ITAT Ahmedabad behaves differently from other Tribunals. Apart from having the highest average duration for disposal of appeals amongst the five ITATs, it had an average duration of two years in FY 2012-13 which ITAT Delhi and ITAT Kolkata reached in FY 2014-15. This is not surprising as proportion of old cases was nearly 5 times more in ITAT Ahmedabad than ITAT Delhi or Kolkata for FY 2012-13.
In conclusion: don’t judge an ITAT by its duration of disposal
While the data suggests that the average duration has been increasing dramatically indicating inefficiency in the system, a closer analysis shows that this rise might not be as bad as it looks. The tribunals are focusing on disposing off old appeals, some of which had been pending for 15-16 years. Even the draft ITAT Rules, 2017 have specifically incorporated provisions aimed at speedier resolution of income tax appeals. Consequently, if a taxpayer has filed their case in ITAT Chennai, they can expect a speedier resolution of their matter compared to other Tribunals like ITAT Kolkata where the Tribunal has to allocate resources to dispose off old cases that have been pending for a while.
The bottomline is that the apparent increasing duration of disposal is less of an indicator of inefficiency but more of a case of ‘clearing the backlog’.
(Written by Ankit Sinha, Product Counsel and Rutuja Udyawar, VP – Analytics @ Riverus)