Mohan Lavi

Clarity in execution a must for faceless tax assessment

Mohan R Lavi | Updated on August 27, 2020

If the Tax department can identify red flags, continuously train and educate officers, and make a concerted attempt to simplify the I-T Act, the FAS could see seamless implementation

“Implementation is the key” is the general opinion of almost everyone who is asked asked the Faceless Assessment Scheme (FAS) announced by the Prime Minister recently. On paper, the Scheme ticks all the boxes needed in a vision statement. Whether it remains only a statement or translates into reality at the offices of Aayakar Bhavan across the country remains to be seen. The reason for this touch of pessimism is that the success of the scheme requires a change in the culture and mindset of both the taxpayer and the taxman — which, considering past history, doesn’t come easily to either of them.

A number of Notifications implementing the FAS have quickly been issued — a reflection of the intent of the Department. The hub of the FAS would be called the National E-Assessment Centre (NEAC). The process of FAS — from serving a notice to the taxpayer to transferring all the electronic content to an assessing officer after completion of the assessment — involves a series of 26 steps, with the NEAC as the focal point from where electronic documents will either be sent or received.

One of the concerns expressed has been that some tax officers may not be adequately equipped to deal with assessments that have inherent complications. The modus operandi of the Scheme empowers the NEAC to assign either verification units or technical units to resolve the queries that such an officer may have. Since everything is planned to be automated, a taxpayer in Bengaluru may end up getting an assessment unit in Nagpur, verification unit in Madurai and technical unit in Srinagar — a thought that could scare the wits out of taxpayers. The FAS envisages a situation whereby an aggrieved taxpayer could request for an appearance in person; this would take place only through video-conferencing.

There are two sine qua nons for the FAS Scheme to be truly effective: First, tax officers in all the assessment/technical/verification units should be adequately and uniformly trained on the finer aspects of some complicated provisions of the Income Tax Act. Second, the Income Tax Act and the accompanying Rules/Notifications need to be simplified. While the former can be done, the latter could pose a challenge since the line between simplifying a provision in the Income Tax Act and complicating it is very thin. A case in point could be the equalisation levy (Google Tax) proposed in Budget 2020 on e-commerce operators. The section levying the tax is worded rather liberally and despite requests for clarity from the e-commerce operators, the Tax department continues to reiterate that the provisions are very clear.

Just as a bad workman blames his tools, assessment units could point to the provisions of the I-T Act for adverse assessment orders and the taxpayer can blame remote assessment units for receiving such orders. A system of e-assessment that was in place from 2019 has yielded mixed experiences — in some instances, taxpayers were given refunds they did not expect while in others, bank accounts were attached without prior notice.

Despite the scepticism about the FAS, the timing to introduce and pull off such a scheme is probably perfect. Domestic tax rates appear to have found their sweet spot and the all-encompassing nature of withholding taxes has ensured that even reluctant taxpayers get into the system at some point in time. If the Tax department can lay out some red flags for both the officers as well as the taxpayers, continuously train and educate officers, and make a concerted attempt to simplify the I-T Act, the FAS could see seamless implementation. Another incentive: the scheme could be replicated for the GST a few years.

The writer is a chartered accountant

Published on August 27, 2020

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