To honour honest taxpayers Prime Minister Narendra Modi on Thursday announced three tax reforms that are expected to bring in transparency in the tax collection system and thus encourage people to pay taxes.
The tax reforms announced are: faceless appeal, faceless assessment and a tax charter. Faceless assessment and tax charter are applicable from Thursday while faceless appeal will come in effect from 25 September.
Over the past few years, the government has taken several steps to ease the compliance burden on the taxpayers and bring in transparency in the dealings of the tax department. Most recently the government introduced a documentation identification number (DIN) in all its communications with the tax payers. Any order or notice without DIN is considered invalid.
Experts believe with Thursday’s announcements, communications from the tax department to the taxpayers will be digitalized further. This will lower manual intervention by tax officers, and thus reduce corruption and harassment of taxpayers. Let’s understand how faceless appeal and assessment will benefit taxpayers.
If a taxpayer doesn’t agree with the order passed by the assessing officer, then he or she can appeal against it to the commissioner of income tax. While earlier the supporting documents filed by the assessee or the taxpayer with the appeal was heard physically and involved manual interaction, now this will be done digitally. There will be no physical interaction.
“Faceless appeal proposes to replace the manual appellate proceeding (that is physical interaction) before the jurisdictional commissioner (appeals) by embracing digitization whereby all the documents of the taxpayer will be examined electronically by the tax department. This is expected to bring more accountability and efficiency in the dispute resolution process, and also reduce the chances of inconvenience to taxpayers,” said Parizad Sirwalla, partner and head, global mobility services, tax, KPMG India.
However, how effective faceless appeal will be, will actually depend on how it is implemented by the tax department.
“The success of this faceless appeal endeavour would depend on the modalities and the rules which would be framed by the government in the due course alongside setting up a robust and strong technological ecosystem,” added Sirwalla.
Faceless assessment enables the tax department to assess the tax returns electronically without any personal contact between officials and tax payers. The returns are picked up by the systems using artificial intelligence and data mining tools automatically in case the system finds anomalies between the return filed and data available with the tax department. No human intervention is involved in the process.
The government had notified the final guidelines on the e-assessment scheme last year. However, the scheme was optional earlier and was implemented on pilot mode in a few cities.
“Faceless assessment is in its pilot stage where currently eight cities viz. Mumbai, Pune, Bengaluru, Hyderabad, Kolkata, Chennai, Ahmedabad and Delhi have been selected for implementation,” said Neha Malhotra, executive director, Nangia Andersen LLP.
After Thursday’s announcement, it has become mandatory for all barring a few exclusions.