Vasan MS, Senior Vice President – Global Taxation
Central Board of Direct Taxes (CBDT), the apex body for Income Tax Assessments has set up a high powered committee of nine members to prepare a roadmap by February 28, 2018 to do e-based income tax assessment. This is to have complete transparency and work online within the timelines fixed for doing the assessment. The pilot project is already in place.
Let us give the wish list to this road map which includes modalities and manpower distribution cum infrastructure requirements with assessment wing, investigation wing and technical wing working in tandem.
- Similar to the proposed GST model of assessment, the standard questions can be raised by the system and replied by the taxpayer, once the assessment starts
- All the replies can be verified and validated by a tax officer of rank and his comments can be recorded. Any further queries can be asked for.
- Another officer who is picked up by the computer, based upon the taxpayer’s size of operations can review and put his comments for additional submissions
- The third officer can go through all the observations of first two officers with answers given and pass orders, if satisfied
- If he wants a personal hearing, a summon can be issued through the system with specific requirements called for and computer can have an officer chosen to hear and give his recommendations for closure or for tax adjustment
- An order can be passed considering all the above which could be fair and reasonable with four brains instead of one
- By doing so, the taxpayer is not attached to one officer for doing his assessment and chances of prejudicial approach can be avoided
How fair the tax assessment would be?
– It is nameless and faceless as suggested by CBDT
– However, can the tax officer understand the complexities of each business by reading through the papers is the larger question
– Many a corporate re-structuring lack substance. Can substance over form be elicited through paper trails itself?
– A complete study of the business models and pointed questions only can bring out the hidden facts
Are the officers competent and taxpayer transparent enough?
– Many Multinational Enterprises (MNEs) do not disclose many factual aspects while doing assessment
– The Indian Subsidiary of a foreign parent do not have any idea of the global structures and planning initiatives. It is more a templated job being carried out without knowing the reasons thereto, and the profits generated out of such jobs globally elsewhere
– In the initial years, Automatic Exchange of Information / Exchange of Information clause need to be invoked under Treaty provisions to get the foreign affiliates information to firm up the India sourced and India based transactions
– Whether the tax officers are trained to run through electronically and have sufficient time to go through all the records of each taxpayer
– Will the revenue targets haunt the tax officers and taxpayers under e-assessment model or left out?
– All the documents required to firm-up the assessment be called for and received before concluding the assessments. There shall be no case of inadequate data or document before passing the final orders.
Scrutiny assessments at the taxpayer’s premises
- Can investigative audits and scrutiny of records be done at the taxpayer’s premises for a couple of days and completed rather than taking longer time to complete?
- Can speaking orders be passed after the assessment is completed, except for the disagreements on questions of law and interpretation to the next level of tax litigation?
- The question of facts should be put to rest and agreed upon between the tax officer and tax payer
One of the major issues before the tax officers is the “owning up” for the decisions taken. If there is a nil tax adjustment, there is a questioning which follow through CAG and other departmental audits. There has been pinning of the tax officer who lets go of the tax demands. As the decisions are taken on a consultative method, diverse opinion might emerge. This can lead to more litigation at the first level of appellate forum itself.
Despite all the odds, to conclude, e-assessment is a welcome move in the era of digitization. As long as there is sufficient data provided by the taxpayer for the tax officer to adjudicate, there should be no need for face to face interaction and connect. Also, the tax officer should, on his part, be fair and reasonable in asking for data and documents and apply the principle of natural justice giving sufficient opportunity before adjudication.
Author- Vasan MS, Sr. Vice President – Global Taxation, Hinduja Global Solutions
(The article is the author’s personal view.)
