Topic: Inclusive growth and issues arising from it.
4. What is faceless E-assessment system for income tax? Evaluate its performance in achieving high quality, unbiased and time bound assessment orders. (250 words)
Difficulty level: Moderate
Reference: Insights on India
Why the question:
The question is part of the static syllabus of General studies paper – 3 and mentioned as part of Mission-2022 Secure timetable.
Key Demand of the question:
To write about faceless E-assessment and its performance.
Directive word:
Evaluate – When you are asked to evaluate, you have to pass a sound judgement about the truth of the given statement in the question or the topic based on evidence. You must appraise the worth of the statement in question. There is scope for forming an opinion here.
Structure of the answer:
Introduction:
Begin by explaining about faceless E-assessment system for income tax and its aims and objectives.
Body:
First, write about the pros of faceless E-assessment system for income tax – removes the unwanted methods, no individual biases and subjective judgment, use of modern technology for assessment, time bound nature and maximum governance and minimum government.
Next, write about the limitations of faceless E-assessment – lack of proper scrutiny, technical glitches, improper communication and Incorrect Taxpayer’s Database etc.
Conclusion:
Conclude by writing a way forward to overcome the above limitations.
Introduction
In the Union Budget 2019, the Finance Minister proposed the introduction of a scheme of faceless e-assessment. The faceless assessment scheme was launched in 2020 with the objective of promoting an efficient and effective tax administration, minimizing physical interface, increasing accountability and introduction of team-based assessments. The scheme lays down the procedure to carry out a faceless assessment through electronic mode.
Body
Faceless e-assessment system for IT
- E-assessment will bring an epitome shift in taxation by expelling the human touch in the tax assessment of the Income Tax system.
- Faceless assessment is administered through separate units within the tax department each of which has specific and important role in the process, viz assessment units, verification units, technical units and review units.
- All these units work closely with the National e-assessment Centre (NeAC) and Regional e-assessment Centre (ReAC).
- The NeAC is the single point of faceless contact between the taxpayer and the I-T Department and follows a team-based approach.
- Cases for scrutiny are transferred to assessment units in a random manner, using automated algorithms which are generated by computer.
- Then, notices are issued electronically by a Central Centre, the National e-Assessment Centre, without disclosing the identity of the assessment officer.
Pros
- Under the new system, taxpayers won’t be needed to go to territorial jurisdiction tax officers or the I-T Department on receiving tax scrutiny or assessment notices, preclusive the necessity for face-to-face interactions. This can bring an end to any doable harassment of honest taxpayers.
- The system is additionally expected to evoke a considerable increase in trust within the system by creating the method transparent and taxpayer-friendly.
- It has resulted in substantial time savings on account of travel to tax office, waiting time over there, etc.
- Also, online submission of responses outside of regular office hours has helped the taxpayers and their representatives in better time management.
- This scheme is a manner of conducting trials in an automated way that involves dynamic authority.
- This scheme removes the unwanted methods that appear when there is a chance for individual biases and subjective judgment.
- The anonymous nature of the method can discourage high-pitched assessments and result in objective, truthful and simply assessment orders, which may be finalised in a very short time.
- The introduction of the scheme has also supported tax authorities and taxpayers during covid times when face to face interactions were not possible.
Shortcomings of the scheme
- Many times assessment proceedings entail filing of bulky voluminous submissions and it would not be appropriate to assume all taxpayers have the requisite IT infrastructure in place to have the documentation of such excessive records in electronic format.
- Measures needed: It is imperative that suitable facilities or guidance centres in the form of e-centres be made available by the IRA to assist the taxpayers who need technological assistance while making filings or who are facing specific issues.
- Further, it is only fair that e-centres may be established near income tax departments that could provide latest IT infrastructure and technological tools to taxpayers at a minimal cost.
- A taxpayer’s right to a hearing or right to be heard in income tax matters is an absolute right as any adverse orders passed in such hearings can have huge implications on the taxpayer.
- Under such circumstances, denial of such rights or leaving them to the discretion of the Revenue Authorities can make such rights illusory and, may also have to be examined by the judiciary in India as to whether this violates the fundamental rights of the taxpayer.
- Measures needed: It is advisable that the revenue authorities gives due consideration to a taxpayer’s request of a personal hearing and allow such requests freely at least in the initial years of the Scheme.
- Technical issues: There are long-standing and recurring technical glitches, issues related to the e-portal server, difficulty in uploading data, VC links not working, and many others
- Another niggling issue is the lack of time afforded to the taxpayer to respond to notices during assessments. No more than a day’s time has been provided to respond to show-cause notices and the assessee’s requests for adjournments have often been ignored.
- Cybersecurity issues: The faceless assessment has “the use of any telecommunications software which supports video telephony” without a preferred decision for individual hearings. There is a security concern until the officials state the operation and give notification for the purpose
Conclusion
In a nutshell, the faceless assessment scheme is a significant tax reform and a step in the right direction to achieve ease of doing business and bringing in more transparency and certainty in tax matters. Success of this scheme is the joint responsibility of both sides and with increased collaboration between tax authorities and taxpayers, the scheme can result in better quality assessments in future. Consistency in tax positions on industry-wide issues would help provide certainty for taxpayers and avoid unnecessary disputes and litigation.
