Whether Automation has helped either Income Tax Assessees or Department

Introduction: The integration of automation in tax systems has been a subject of much discussion, particularly concerning its impact on both taxpayers (Assessees) and the Income Tax Department. This article delves into the complexities of this issue, examining the purported benefits and the challenges faced by both parties.

For the question ‘Whether the Automation has helped either the Assessee or the Department’, the answer would be ‘Neither the Assessee nor the Department is benefited’ because of too many mails/messages which keeps the Assessees on tender hooks always by spending most of their time in attending to the mails/messages from the Department and denying the assessees to concentrate on their business and earn income. As of now there is no data showing that the automation has increased the revenue of the Department or reduced the appeals.

Sending notices to the registered e-mail id and sending messages through the registered mobile number by bulk mail or by bulk messages may be an easy task for the Department. The software providers engaged for this purpose may be happy because they may be getting good revenue from the I-T Department for each and every mail/message. But for the assessees it is not so because whenever they receive mails/messages they get disturbed, and they are not able to understand how important the mail/message is because of too many messages/alerts. For example, if a notice is going to be sent an alert is sent in advance and the notice is being sent after several days and the assessees or their representatives must log-in on a daily basis and check whether the said notice is appearing or not. In addition, since there is no statutory minimum period prescribed in law for responding to such notices, the I-T Department gives one- or two-days’ notices in some cases within which the assessees may not be able to give response and have to seek either more time or file partial response, which results in loss of man hours on both the sides.

As of now the problems face by the assessees due to automation are enumerated below:

1. NFAC is flooding the assessees with too many notices calling for irrelevant particulars because it seems that the NFAC is not supplied with the back files of the assessee, whose case was selected for scrutiny. For example, since they do not know the nature of activity they put up standard questions, which are not connected with the assessee at all and hence the time of the assessee/representative is wasted in replying to those questions which are in no way going to help in completing the assessment. NFAC team should be given access to the back digitized records such as ‘How long the assessee is filing his/her ROI’, ‘What is the nature of business/industry’, ‘Details of past completed assessments’ ‘Quantum of Income returned in earlier years’ etc. Though the fast disposal by the NFAC has resulted in reduction in the number of the pending cases out of the cases taken up for hearing by random sampling of the current returns and by re-opening completed assessments under section 143 by initiating proceedings under section 147/148 of the Income Tax Act 1961 basing on fresh information obtained from various sources, the effectiveness of the orders passed by the NFAC is either doubtful or not known, because many orders are struct down by the High Courts and many are appealed against and pending with the Commissioner of Income Tax (Appeals) or with the Income Tax Appellate Tribunal. This is mainly because of the faulty orders by the NFAC due the problems associated with the FACELESS HEARING such as ‘the assessee is not able to understand the nature details required by the ‘NFAC Assessment Team’, ‘either the assessee is not able to furnish the full details called for due to technical issues such as the size of the file is too big or due to problems in uploading the data etc.’, apart from technical issues such as ‘poor connectivity’, ‘hard ware/software compatibility etc.’, language problems such as the pronunciation, ascent etc.’ of the English by an Hindi speaking official in video conferencing’, ‘very short time is given for response etc. Another failure in the process of Assessments is that neither the grievance mechanism attends to the plea by the assessees for the high-pitched assessments nor the rectification mechanism attends to the ‘mistakes apparent on record’ brought to the knowledge of the assessment team; even arithmetical errors are not rectified. It is prescribed that the rectification will be attended to by the jurisdictional assessing officers, and they never attend the petitions filed under section 156; the worst part of it is that the Jurisdictional Officers have got time up FOUR YEARS to attend to the petitions. To mitigate all these mounting problems the Department should collect the data not only as to percentage of orders passed by the NFAC out of cases referred to it but also as to the percentage or orders accepted by the assessees and percentage of orders appealed against and out which the percentage of orders which were passed by the NFAC withstood till last and stuck down at the CIT Appeals Stage or at ITAT stage and percentage orders which were annulled by the High Courts through writs. Then only we can come to a conclusion whether the NFAC is functioning well and really it has brought down the pendency, for which purpose it was introduced.

2. Assessees are receiving notices from the newly established ‘Demand Facilitation Centre’ directing the Assessees to pay the demands as per the original assessment order without considering the subsequent adjustments made from the refunds due, stay granted etc. for which the assessees are filing details of adjustments made, stay granted etc. But afterwards there is no further communication from the Demand Facilitation Centre. It is not known whether the Centre is functioning or not.

3. Separate notices are being sent for the mis-matches in TDS claims between the Return of Income filed and Form 26AS/AIS, whereas actually in many cases there are no mis-matches at all. This should be taken care of by the CPC which has to send notices before passing an order under section 143(1) and based on responses received the CPC has to decide whether to give credit for the TDS or not.

4. Recently the assessees are receiving mails/messages basing on the deposits made in the bank accounts to pay Advance Tax without looking into the Advance Tax paid by them already. Since an assessee has deposited huge amounts of money in his Bank Account, he is not liable to pay Advance Tax. It may be a borrowing or out of funds received from repayment of loan or from sale of an asset. If the tax payable is more than Rs. 10000, Advance Tax will be paid by the Assessee in the normal course. More than that he should have cash flow to pay Advance Tax. Even if not paid now, he will have to pay with interest at the time of filing the Return of Income. If the assessee is more than 60 years of age and he does not have Income from Business or Profession, he is not liable to pay Advance Tax irrespective of the deposits made in Bank Accounts. Further since he has earned a very high income in the previous year it does not mean that he will have the same level of income during the current year also. Hence liability to pay Advance Tax does not depend on either huge deposit in Bank Accounts or he has paid huge tax in the previous year. Too many mails/messages on this count are unnecessary exercise which ends up in waste of time on both the sides.

Conclusion: In conclusion, the advent of automation in tax administration has brought mixed results for both taxpayers and the Income Tax Department. While it aims to streamline processes and enhance efficiency, its implementation has been marred by communication overload, technical challenges, and operational inefficiencies. To truly reap the benefits of automation, a concerted effort is needed to address these issues, ensuring a more balanced and effective tax ecosystem for all stakeholders involved.