In 2017, Prime Minister Narendra Modi envisaged a faceless taxation system for ease of life and the task to revamp the system came directly to the Central Board of Direct Taxes (CBDT). In a conversation with Rajeev Jayaswal, CBDT chairman Pramod Chandra Mody said the system is now up and running. Edited excerpts:
What was the idea of faceless assessment?
Faceless assessment brings in greater transparency with randomised and automated system, dynamic jurisdiction, and team-based approach, eliminating individual discretion in assessment process and thus enhances trust between income tax department and taxpayers.
This faceless mechanism is introduced to make taxpayers’ life easy and promote voluntary self-compliance. Earlier also, we used to have territorial jurisdiction loaded with subjective description and source-based financial transaction data which was not shared with the taxpayers. Any mismatch in a taxpayer’s return vis-a-vis the data would have invited a notice. Now, taxpayers have access to her/his data, hence chances of error in the returns are minimal. Therefore, the cause for issuing the notice or scrutiny has been eliminated.
Is it about sharing financial transaction data with taxpayers?
The reform is not just limited to access to one’s own data. It is also linked with a dynamic, faceless and non-territorial based system, where any discrepancy in a return will be flagged by a computerised system. Any tax notice will be sent only electronically and the taxpayer will be able reply electronically with the comfort of her/his home. Only cases with discrepancies will be randomly allocated to a team of tax officials anywhere across the country. A team will do faceless assessment of the case and decide on the merits whether the taxpayer has to pay any additional amount. Based on the taxpayer’s reply, again faceless review of the case will be conducted.
What are the benefits?
This would eliminate subjective discretions in assessment. Anonymity is maintained in both assessments and reviews. No vested interest and no chance of any malpractice.
What about such cases or businesses those are highly technical and taxmen are not adequately trained to assess nuances?
Even faceless randomise assessments have two stages — technical assessment and verification. A team of sector experts will assess technical aspects associated with personal or corporate tax. Say for shipping industry, an expert team will assess the matter. Later, its assessment will be verified by another team before sending a notice to the taxpayer. In this way, we are implementing a transparent and objective system where officials have no link with assesses, which will save taxpayers from any alleged harassment by tax officials.
What is the new ‘Form 26AS’?
The income-tax department, which anyway has the details of key financial transactions undertaken by individuals, corporate or trusts, will now share the same data with the taxpayers so that the assesses could file their annual tax return correctly and avoid scrutiny and litigations. A new ‘Form 26AS’ has been introduced to make system more transparent. This faceless system will provide details of transactions in advance to taxpayers that they can access online by using their PAN [permanent account number] and OTP [one-time password]. Thus chances of any default in filing returns would be minimal.