Faceless Scrutiny

The new electronic assessment scheme for faceless scrutiny is being touted by the Government as a landmark move to improve ‘ease of compliance’ for India’s harried income tax payers. But while it may save taxpayers the hardship involved in presenting themselves at the Income Tax office at the whims and fancies of an assessing officer, faceless scrutiny as it stands now is unlikely to vastly simplify life for the taxpayer.

The scheme seeks to do away with the discretionary selection of IT returns for scrutiny and obviate demands for bribes that accompany personal hearings, by relying on a team-based selection of returns and dynamic jurisdiction.

But small tax-payers may still come up against three problems with the new system. With low levels of digital connectivity and awareness in India’s hinterland, requiring taxpayers to respond within 15 days to demand notices through the e-filing system, is a tall ask. Given the complex tax laws, it will take a lot of toing and froing and uploading of voluminous documents, before a taxpayer can convince the assessing unit of his tax claims. There are also enough exceptions built into the new rules that offer ample scope for a determined assessing officer to side-line the ‘faceless’ process.

In truth, it is the IT departments habit of peppering small compliant taxpayers with demand notices for measly sums, based on half-baked analysis of data, that presents the biggest hindrance to ease of compliance. It isn’t re-assuring that four lakh taxpayers have already been picked up for scrutiny this year. Completely doing away with scrutiny assessments for more compliant sets of taxpayers such as the salaried, and setting a minimum bar on the value of transactions that can be scrutinised, are better ways to end the harassment.

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