E-assessments, e-appeals and taxpayers’ charter promise a more friendly tax administration

To keep its promise of providing a cooperative, non-adversarial and conducive tax ecosystem, the government has taken numerous steps over the years. Rationalisation of tax provisions, simplification of income tax returns forms, faster processing of refunds, speedy resolution of grievances, reducing unnecessary litigation and penalising careless assessing officers are some efforts that have been made so as to erase the fear of taxmen and to make India a more tax compliant society.

Another attempt has now been made to add strength to the government’s efforts to reform and simplify the tax system by way of introduction of the scheme of ‘Transparent Taxation’. The government will make extensive use of technology, digital analytics and artificial intelligence to ease the compliance burden and minimise the physical interface between the taxpayers and the tax officials. The main features of the seamless, painless and faceless tax administration scheme are – faceless assessments, faceless appeals and Taxpayers’ Charter. These measures were a part of Budget 2020.

Faceless-assessments / appeals

Faceless-assessments and appeals is an inevitable move towards transparency through digital means. With features such as automated random allocation of cases, abolition of territorial jurisdiction, central issuance of notices with Document Identification Number (DIN) and team-based assessment/ review, the government has attempted to lessen, if not eliminate, the interface between taxpayers and the department, thereby, curtailing the powers of overzealous tax officials.

The functional framework of the scheme shows that this layout endeavours to create a taxpayer-friendly, transparent and accountable system of governance, to address impending issues of corruption/ overreach of tax officials and harassment of taxpayers. In its pilot phase, the faceless assessment is operative in eight cities. The scheme has been quite successful in its first phase. However, the government will have to ensure robust tech infrastructure to handle the humongous data that would be submitted by taxpayers once the faceless-assessment is operational across the country.

E-appeals may pose practical difficulties for taxpayers who are in appeal to fight their case. Thus, there may be a need to argue and counter argue the issue to substantiate their tax position. ‘Personal hearing’ is the essence of the judiciary, where taxpayers get an opportunity to explain their take on the issue and argue against the order passed. It will be challenging for taxpayers to explain and for tax officials to understand, the complex business transactions and legal positions so adopted, merely by way of written submissions made online. Taxpayers will thus have to ensure that submissions are well articulated, detailed and supported by evidences, so as to substantiate their claims.

A faceless-appeals scheme, like the faceless-assessment scheme, is yet to be issued, which is expected to clearly define the procedure and processes that should be followed to conduct appellate proceedings meaningfully. Pertinently, appellate proceedings need court-room play to give the taxpayer a fair chance to put his case strongly with the help of experts including chartered accountants and lawyers. We hope that the faceless appeal scheme is formulated keeping these needs in mind, lest the appellate proceedings may not remain fruitful for the taxpayer.

Taxpayers’ Charter

Demonstrating the commitment of the department towards improving taxpayer services, the Taxpayers’ Charter clearly articulates the rights and responsibilities of taxpayers. The charter promises to maintain the privacy and confidentiality of taxpayers and assures a fair, courteous and reasonable treatment to all taxpayers. The absence of such a guiding principle has mortified taxpayers in the past, owing to the release of their tax affairs in the public domain.

Another laudable commitment included in the charter is that taxpayers shall be treated as honest unless there is a reason to believe otherwise. Further, the department shall hold its authorities accountable for their actions. This notion departs from the current mindset of taxmen, who adopt an accusatorial approach.

The department has also committed itself to provide timely decisions, collect only the amount of tax due as per law and to provide a mechanism for lodging complaints and timely disposal of the same. If adhered to, the measures will help keep a check on the actions and operations of tax officials and will promote transparency and confidentiality.

Light at the end of tunnel

Any reform, initially, always causes a ruckus. However, it becomes stable once the dust settles down. The Scheme of Transparent Taxation is also expected to cause some disruption in the short term, but in the longer run, it will culminate in a positive system of tax administration, that offers taxpayers greater ease and transparency.

(The writer is Director, Nangia Andersen LLP. With inputs from Vasudha Arora)