Processing all tax assessments in a technology driven and faceless manner is set to offer a big compliance relief to businesses while giving income tax department officials more time to specialize in complex areas of taxation, said industry representatives and experts.
The Central Board of Direct Taxes (CBDT) on Thursday issued separate orders to the effect that other than certain specified cases, all assessment orders are to be issued under the faceless assessment scheme and that income-tax surveys can only be sanctioned by top officials handling investigation and tax deducted at source .
While the tax department processes bulk of the returns in an automatic way, some may need clarifications and the degree of deep dive needed may vary. Some returns are chosen for scrutiny although these account for only a fraction of all the returns processed. Now, most assessments including scrutiny cases will be under the faceless scheme.
Faceless assessment is a welcome step and is applicable for all taxpayers including corporate taxpayers, said Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP. “In complex tax matters, however, it is very difficult to expect the tax officer to appreciate the nuances of the taxpayer’s case just over emails and though an opportunity is given to have a face-to-face interaction, it is given at the time of issuing a showcause notice,” said Maheshwari. “Unfortunately by that time, the tax officer has already made up her mind and hence the face to face interaction may not be of much use.”
Tax reforms such as faceless assessment would promote ease of living, industry body Confederation of Indian Industry (CII) said quoting its president Uday Kotak. A policy-driven governance based on digital interface minimizes grey areas, eliminates discretion and promotes transparency and certainty, said Kotak.
Sangita Reddy, president of Federation of Indian Chambers of Commerce and Industry (FICCI) called it a milestone in the path of structural reforms.
For startups and small and medium enterprises, faceless assessment and appeals will be a great step forward, said Sachin Taparia, founder and chairman of LocalCircles, an online community of citizens. “The new tax administration model is in line with what we have been advocating— an Indian startup should not have to visit a tax inspector in the first 10 years of its existence,” said Taparia.
Experts added that there was a need to streamline the difficulties faced by non-residents who invest in India and who are partnering for business in the country. “They need to have tax certainty. Almost every transaction of large amount ends up in litigation. This is a great deterrent for foreign investors. If India wants to benefit from China plus one policy, taxation of non-residents needs to undergo fundamental change,” said Daksha Baxi, head – international tax, Cyril Amarchand Mangaldas, a law firm.