The Centre fulfilling its Budget 2020 promise of a taxpayer’s charter is a welcome development. With only a small fraction of the 130 crore people in the country paying taxes, there is certainly a need to improve the compliance level and that can be done only by coaxing people to voluntarily come forward and pay tax, without the fear of the taxman harassing them. The new platform for faceless assessment and faceless appeals of tax, along with the Tax Charter, is an attempt on the part of the Centre to hold out the olive branch to the taxpayers. The 14-point Charter states that taxpayers can look forward to fair, courteous and reasonable treatment from tax authorities, an efficient mechanism for appeal and review and a system that maintains confidentiality of the taxpayers’ information. The most important part of the Charter, that most taxpayers will be hoping that the Centre adheres to, is the promise that the tax authorities shall henceforth not be too intrusive in inquiry and examination, or enforcement.
That the Centre is serious about walking the talk is proved by the order issued by the CBDT on Thursday, restricting survey under Section 133A to only the investigative wing of the Income Tax department and the Commisionerates of TDS. According to existing rules, any income-tax officer or an inspector of income tax authorised by the officer, could enter any place in the area under his/her jurisdiction, to inspect books of accounts and other documents. These raids are very intrusive and the Centre restricting such actions will provide relief to both individual as well as corporate tax payers. The number of such raids and the resultant tax demands have risen quite sharply in recent times. Tax demands amounting to ₹11 trillion had been raised towards the end of March 2019, of which ₹9.5 trillion, or 86 per cent, were under dispute. A CAG report had also criticised the increasing number of frivolous tax demands, that raise serious concerns about tax terrorism.
The new resolve of the Centre will also help improve India’s ranking in the ease of doing business index. But the Finance Ministry needs to ensure that the message about presenting a friendlier interface to taxpayers is communicated to all the officers on the ground. This communication is particularly important this year, when tax revenue is going to contract sharply. Faceless assessments and faceless appeals, if resolved in a timely manner, can be the right way forward to improve the tax-paying experience.