Given the success of the Central Board of Direct Taxes (CBDT) in getting more people to e-file their income tax returns and in launching an e-scrutiny window—to avoid unnecessary face-to-face interaction between the taxpayers and officials that lead to harassment—taking it to the next level is a good idea. And that, going by a news report in The Economic Times, is to do away with the current jurisdiction-based assessment. It is the jurisdiction-based assessment which allows—on different occasions—collusion with, as well as arm-twisting by, tax officials. Knowing your tax officer is useful if you want to try and lower your tax burden, and that is a loophole that the tax department had sought to plug by reducing a direct interface with the taxman as well as ensuring that as much as possible of the interaction was done by e-mail which leaves a clear trail. The fact that ‘your’ tax official is going to be assessing your returns also ensures that when taxmen have to meet their targets, those under their jurisdiction tend to pay the necessary taxes and then file for refunds. Once the jurisdiction-free assessment is brought in, a taxman posted anywhere in the country could be assigned the job of assessing any taxpayer’s return, filed in any jurisdiction—that would mean a taxpayer in Delhi could be assessed by an official in Patna. So, the possibility of face-to-face interaction and harassment will get minimised to the extent possible. It would also mean a seamless operation making the country a single tax jurisdiction in terms of tax administration. In case a taxpayer is appealing a ruling, of course, the tax department will have to ensure the appeal will lie in the tax-bench nearest to the assessee (in this example, Delhi) and not in the area the assessing taxman (in this case, Patna) is located in.
While such a move would have been difficult to implement a few years back, the almost 100% shift to the e-filing of income tax returns has made this possible. From just 21.69 lakh in FY08, the number of e-filed returns rose to 1.64 crore in FY12, and then raced to over 4.33 crore in FY16. In FY17, the number reached 5.3 crore after Operation Clean Money tried to bring in more people into the tax net by identifying those who had made cash deposits of amounts that were not in keeping with their income profiles. In any case, the department’s centralised processing centre at Bengaluru, which started work in October 2009, has made the return processing part jurisdiction-free already since the bulk of tax returns were cleared without much scrutiny—this has also reduced the average processing time to just 65 days from 12 months earlier and has also expedited the refund process in a big way.
A related advantage will be allowing the tax department to be able to use tax officials more efficiently. Since a taxman in Patna will be looking at tax returns filed in, say, Delhi, better utilisation can be made of existing resources. Apart from ensuring the taxman is not inconvenienced by having to file appeals in the jurisdiction of the assessing officer, the tax department’s big challenge will be to get the taxman to accept this. Since this reduces the taxman’s power over assesses in his/her jurisdiction, chances are they will argue the move will reduce their ability to collect taxes as well.