Future of income tax: From electronic to faceless assessment, tax officer not to be feared anymore

February 21, 2019 3:53 PM

Government has notified a new scheme of e-assessments of income tax on a pilot basis where the assessment would be done in electronic mode, in order to ensure greater efficiency and transparency. It was also proposed to move to ‘faceless assessment’.

income tax, income tax return, ITR, tax payable, income tax refund, how to pay income tax, income tax challan, Income Tax Challan 280, BSR Code, ITR-1, ITR-4, ITR-4S, Sahaj, Saral, income tax efiling, TDS, interest income, FD interest, NSDL, tax utility, Prepare and Submit OnlineThe government has provided a road-map to move from e-assessment to faceless assessment of income tax returns.
  • By Maulik Doshi

In India, litigation with tax authorities has always been a long-drawn process — so much so that sometimes, it takes more than a decade to arrive at a conclusion or settlement. As a result of this, the processing of tax returns and subsequent revenue audit proceedings take a whole lot of time to arrive at a proper conclusion.

To streamline the process and eliminate person-to-person interface and to ensure greater efficiency and transparency, the Indian Government has notified a new scheme of e-assessments on a pilot basis where the assessment would be done in electronic mode. It was also proposed to move to ‘faceless assessments’.

The key highlights and future expectations of the scheme are as follows:

  • A step towards Digital Economy
  • Completion of assessment based on limited scrutiny would assist in reducing unnecessary documentation
  • Helpful in reducing the time and costs involved in the entire process and should significantly reduce the discretionary powers of the tax authorities
  • Reduction in corruption
  • Greater transparency and accountability in conducting assessment proceedings

Budget 2019: Move towards future

The Finance Minister thanked the taxpayers and highlighted that compliance has improved over the years. Mainly, the tax return filing saw a magnificent growth of 80% from 37.9 million tax returns in 2013-14 to 68.5 million now.

Finance Minister also spoke about how the government is trying to make the interface between the taxpayers and the tax officer taxpayer-friendly. It was highlighted that 99.54% of the tax returns filed are accepted without any scrutiny. The government has approved a path-breaking technology intensive project, which will help in processing the tax returns in 24 hours and issue refunds simultaneously.

Government also provided a road-map to move from e-assessment to faceless assessment. Government has proposed to set-up an anonymized back office under the supervision of tax experts and officials. This means that the taxpayer and the tax officer would be unaware of each other’s identity. Furthermore, this system also attempts to avoid collusion between the taxpayer and the tax officer, thus ensuring that the taxpayer does not leave scot-free despite paying low taxes vis-à-vis actual tax liability.

Conclusion

While the project of automating the entire return processing system and creating a robust back office for carrying out faceless and fare assessment appears to be a massive task, we are sure that slowly but steadily India would reach that stage.

Automatization and minimizing the paperwork is in line with the best practices followed in the developed countries. However, in case of faceless assessment, it should be ensured that complex cases are looked at by experts in detail and no arbitrary orders are passed merely because the facts were not understood correctly by the tax officer.

While this is a welcome move, the government should also focus on reduction of arbitrary litigation by the Income Tax Department. Currently, the Income Tax Department is one of the top litigants in the country. Even though the appeal filing limits have been increased recently, the government should look at taking more intensive measures to reduce arbitrary litigation.

The government can look at setting up a process whereby taxpayers can consult the tax authorities on matters/issues where two views are possible. This will help in settling the issue at the inception. Even though taxpayers have the option of opting for an advance ruling, the same has not been effective as the time involved is substantial and the limits prevent the small/mid-size taxpayers to avail these schemes.

The way forward could be to develop an Artificial Intelligence-based interactive website/program, where small taxpayers can resolve their routine queries. All in all, India is moving towards digitization and we may see further improvements on this front.

  • Maulik Doshi is Senior Executive Director – Transfer Pricing and Transaction Advisory Services, SKP Business Consulting LLP. Views are author’s own.

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