Transparent Taxation to revolutionize Indian Tax Administration

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The Honourable Prime Minister of India, Shri Narendra Modi, unveiled the “Transparent Taxation-Honouring the Honest” platform on 13 August 2020 with the aim of the Digital India initiative and providing greater transparency/accountability to the taxation division. Transparent Taxation focuses on three major reforms – Faceless assessments, Faceless appeals and Taxpayers’ charter.

Faceless evaluations are an important component of the ambitious mission of the government to render “seamless, painless and faceless” tax systems. Unlike the previously implemented “E-Assessments” definition, the revised faceless assessment scheme takes the entire mechanism to an advanced level with the introduction of anonymity, i.e. cases will now be selected for review by the central cell named the National E-Assessment Center (NeAC) without revealing the information of the tax officer/competence concerned. The shortlisted cases shall be assigned in a random manner to select evaluation units which will then be responsible for conducting the entire scrutiny process.

The Faceless Evaluations principle is very appealing not only to the government but also to the taxpayer. Owing to the implementation of contactless administration and complex jurisdiction, it is expected that the faceless assessment scheme will remove the in-person hearing hassles. This should bring more transparency and precision.

Also, it suggested that the evaluation units conducting the scrutiny evaluation should be divided into three sub-units viz. The unit for evaluation, the unit for analysis and the unit for verification. — unit shall be headed by a Revenue official subject matter expert who shall independently check the contents of each assessment case relevant to its jurisdiction.

This pooling of money, expertise and experience will result in some standardisation in the tax positions adopted in the scrutiny orders that do not exist today. The scheme also provides an implicit internal control mechanism by which, before being given to the taxpayer, select appraisal order must undergo a peer review.

In addition to carrying out Faceless Reviews, the Honourable Prime Minister also assured taxpayers of equal, courteous, and reasonable conduct under the Taxpayers’ Charter. While taxpayer rights have always been part of the charter of people, Budget 2020 gave legal protection to the charter by integrating it into the tax law. The Taxpayers’ Charter now released outlines the income tax department’s dedication and the taxpayer’s rights and duties. Features such as having an appeal process, allowing a representative of preference, collecting the correct amount of tax were already part of tax administration.

Single features, however, such as preserving taxpayer privacy by not being more invasive than necessary, keeping tax authorities accountable, publishing service quality standards and reducing enforcement costs, are welcome features.

The main thing will be how the government executes the charter to prevent it from ending up hanging in the tax office corridors and being only an ornament of purpose.

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