In the series of tax reforms, the Prime Minister announced some reformative measure during launch of ‘Transparent taxation honouring honest’ platform like faceless assessment, faceless appeal process and tax payers’ charter. Let us discuss the measures announced and its impact on the system and the tax payers. Since implementation of faceless appeal is postponed till September I will only discuss the faceless assessment and Taxpayers’ charter.

Faceless assessment and its impact

There was already in existence, a form of faceless assessment scheme called, “e-assessment scheme” which was introduced through budget announcements of 2019. E-assessment was supposed to be faceless process for assessment without there being any human interface.  In my opinion the faceless scheme announced yesterday  is nothing new but the old e-assessment scheme already in existence with little here and little there modifications.

Under the faceless scheme of assessment selection of the cases for scrutiny of the cases is supposed to be devoid of any human intervention. It will be done randomly and under an automated process . The faceless system of assessment will not apply to certain category of cases like black money and benami property matters, international taxation cases, serious fraud cases and tax evasion cases. All the cases covered under income tax raids will also be outside purview the faceless assessment scheme.

The selection of cases and communication is proposed to be centralised. The selection of the cases will be done with the help of algorithms put in place on the criteria applied through data analytics and artificial intelligence.  Excluding the role of human in the selection of cases for scrutiny will help remove individual bias as well as individual discretion of a particular assessing officer. This will result into altogether extinction of corruption practices involved in selection of the cases.

On the other part the assessment process though not fully automated but will be system driven under which all the communication will be centralised. All the communication will be sent by central assessment centre the way the processing of the ITR and handling of TDS matter is done by CPS, Bangalore and TRACES respectively.  The issue of notices and sending of final assessment order will be done through the central unit.

Under the new assessment scheme, the  taxpayer and the tax official will not have any direct human interface. The entire assessment process will be divided into various units. So the draft assessment will be done by one unit. The same would be reviewed by another unit and the final assessment will be done by a different units. The allocation of cases to various units will also be automated under the faceless scheme of assessment. It is also proposed that the particular task comprised in the assessment process will be allocated to different teams located at differently places geographically. This will create anonymous system where the tax payer does not know who the tax assessing officer is  as the function of assessment will be performed by various units and that too in the form of team and not an individual.

Impact of faceless assessment

Due to automation in selection of cases, the discretionary power of the officer to select some of the cases will go away and so will the corruption inbuilt in it. Moreover due to the assessment process being divided into various parts and each unit supposed to work as a team during the process of assessment, the component of corruption in the system will be minimised though it cannot be all together ruled out. This is because though the tax payer would not know who is his assessing officers but the persons involved in any team at any stage of assessment will certainly know fully about the taxpayer . So the possibility of the tax payers being approached by any team members of the team of any of the unit involved in assessment cannot be ruled out.

Though it will minimise corruption from the system but it will cause undue hardship to taxpayer in the form of having to scan and upload tons of documents. Submission of physical documents is far easier than having to scan and upload tons of documents. Moreover every tax payer may not have the well equipped system to carry out such tasks.

What is a tax payer’s charter and how effective it will be

The concept of Taxpayers’ charter is not a new thing. The tax payer’s charter has been there as far as I remember even before 2005.  The tax charter issued by the government defines the rights and obligation in very general term. In my opinion the taxpayers’ charter needs to be broken in different parts as applicable to income tax and GST with quantified time frames for various compliances.

The concept of tax payer’s charter can be seen like the concept of directive principles enshrined in our constitution.  The directive principles are not enforceable like fundamental right and have not been fully implemented even after 70 years of the constitution coming into force. So is the case with tax payers’ rights enumerated in the tax payers’ charter. It will not have any significant impact unless the same are made part of the respective tax legislations and made enforceable under the law.

So the new Tax payers’ charter is not going to change the life of taxpayers significantly in any way.  Unless the charter is made legally binding it will remain only ornamental piece for display. As per my experience earlier tax payer’s charters were followed more in contravention than in compliance.

I am sure the above discussion will give you a fair idea of the changes implemented through the new platform launched yesterday.

The writer is Chief Editor ApnaPaisa and a tax and investment expert. He can be reached at [email protected]

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October 2021