Faceless Income Tax Appeal: Will it bring transparency, reduce corruption?

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September 28, 2020 9:26 PM

It is expected that the taxpayers under the faceless system would face lower incidents of corruption as the new system is expected to make the system more transparent.

income tax, faceless assessment, honest taxpayers, faceless appeal, corruption in income tax system, transparency in faceless assessment"... this TCS shall be applicable only on the amount received on or after 1st October, 2020," the CBDT said.

To eliminate physical interface between tax officials and taxpayers, the income tax department has made its appeals systems anonymous with immediate effect to move to the faceless regime. It is expected that the taxpayers under the faceless system would face lower incidents of corruption as the new system is expected to make the system more transparent.

While, according to The Central Board of Direct Taxes (CBDT), about 88 per cent of the current pending appeals at the commissioner (appeals) level would now be handled under the faceless system, certain cases related to serious frauds, major tax evasion, sensitive and search matters, cases related to international tax and Black Money Act would be exempt.

Presided over by a commissioner-rank official of the Income Tax Department, the commissioner (appeals) is the lowest level where an assessee begin challenging an income-tax assessment order. If unsatisfied, the decision of the commissioner (appeals) can subsequently be challenged in the income-tax tribunals, high courts and the Supreme Court by the aggrieved party.

With about 4.6 lakh appeals pending, according to CBDT, 85 per cent of the present strength of commissioners (appeals) shall be utilised for disposing of the cases under the faceless appeal mechanism.

“The process to allocate the cases without any human intervention with the support of data analytics and artificial intelligence not only bring transparency in the system and reduce the possibility of corruption but also bring uniformity in determining the appeals,” said CA Geetanshu Bhalla, Founder, The Virtual Compliance.

Talking on review of the draft order, Bhalla said, “The step to allow to review the draft order by another appeal unit in case of demand including tax, interest, and penalty exceeding the threshold limit or otherwise, by National Faceless Appeal Centre in accordance with the risk management strategy will not only ensure that all the contentions of the taxpayers including papers on the record are duly considered by the appeal unit but also ensure that no mistake apparent on record is made while passing the order, thereby not only reduce the further litigation but also reduce the rectification application.”

“The step to include consultants – including tax expert, legal expert, industry expert to be the part of the Appeal unit – will certainly assist the appeal unit in appreciating the complex business structure, tax strategies and thereby reducing further litigation,” Bhalla added.

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