Till the late nineties, each and every case of taxpayers were scrutinised for assessment. For this, on the appointed date, he or his representative was required to visit the income tax office with loads of books of accounts and other records (usually tied up in a red cloth) and wait anxiously for his turn which could sometimes go up to late in the evening. The Officer would then scrutinise the hand-written records and after several hearings would always find faults to reject the books and make additions with hefty tax demand.
The only option available to taxpayers was either to go on appeal with uncertainty and costs or to settle with the assessing officer under- or- over the table depending on maturity and experience of the officer and negotiation skills of the tax consultant. However, there were honourable exceptions of honest, intelligent officers who safeguarded the interest of the revenue and also taxpayers who would fight even for small additions suffering heavy legal costs. I was personally witness to a case of prominent businessman-cum-politician from Panjim known for high integrity and honesty, who brought his entire office records systematically arranged in pickup outside income tax office and whenever any document or proof was asked for, it was produced through human chain of assistants since office was on the second floor. This verification went on for three consecutive days and the officer could not find a single discrepancy. The frustrated officer suffered a stroke in the process.
The shift to technology advancement
This scenario started changing slowly over the years with the computerisation of the income tax department and the continuous upgradation of technology. The Income tax law was also amended simultaneously from time to time, making it compulsory to quote PAN for opening and operating bank accounts, investments, mutual funds, high-value cash, and financial transactions, purchase and sale of properties, vehicles, hotel and travel expenses, consumer goods, precious metal; TDS/TCS provisions were introduced for payments and collections; Mandatory furnishing of Annual Information Report (AIR) by various regulatory authorities like Registrar of immovable properties, motor vehicle registration department, postmaster general, stock exchanges, depositories etc.
The information based on PAN, AIR, TDS, and such other sources about different transactions made by a person at different times, at different places, and with different parties is collated and is available in a single database. Based on this, “Annual Information Statement (AIS)” is prepared in respect to each person based on his PAN. These statements are electronically linked with the data of return / assessed income and tax payments of the taxpayer.
Based on this data, the department was able to build a 360-degree profile of every taxpayer with complete information of all his income and assets leaving no scope for hiding or suppressing income. Shortly, the Income Tax Department will have a complete pre-filled income tax return form for non-business taxpayers with provision for changes and corrections, dispensing the need to have a tax consultant to file tax return.
Revolutionary change:
Introduction of
E-Assessment system
Armed with the latest State-of-the-Art digital Technology, tools of data mining, machine learning, artificial intelligence, a revolutionary change is brought in by the Government of India by introducing Faceless E-assessment Scheme from August 13, 2020 which does not require taxpayer to visit Income Tax office or meet income tax official for the purpose of assessment. Personal assessment hearings, harassments, and bribery are now history.
New faceless assessment procedure
As soon as the Tax return is filed by a taxpayer electronically, it is automatically processed and accepted if there are no discrepancies u/s 143(1). Refunds are credited directly to a designated bank account within 48 hours. In case of any apparent mistakes in a tax return as compared to the Form 26AS or AIS, adjustments are made after giving an opportunity to the assessee for online clarification before raising demand/refund by issuing notice under 143(1)(a) or 139(9). However, in case a discrepancy is noticed for under-reporting of income, or omission of transactions, or for any abnormality, the case is selected for scrutiny assessment or best judgment assessment under 143(3) or 144 respectively or under the E-verification scheme.
Under the new Faceless Scheme, assessments of such cases selected for investigation or best judgment assessment are made in a very transparent seamless, painless and faceless manner without any human intervention with the help of State- of- the- Art digital technology automated examination tools without any human intervention, artificial intelligence, and machine learning.
Process of the faceless tax assessment
The Scheme works as under – The selected case with an identification number will be assigned to officers in different locations through an automated allocation system without human intervention. For example, the case of a Goa assessee identified with a Specific Number can be assigned to assessment unit in Assam, for legal support to Technical Unit in Bengaluru, for examination to the Verification unit at Pune and draft assessment order may be reviewed by Kolkata unit. In the entire process, no one will know the name or see face of the income tax officer of the units thereby preventing any possibility of influence or corruption. Thus, all scrutiny cases will be completed in a faceless way in a faceless environment, without any chance of bribery giving relief to honest taxpayers and thereby helping ease of doing business and encouraging taxpayers to file tax returns voluntarily. Filing of tax returns are increasing every year as also tax collection. Cost of administration has come down. Litigations are reduced significantly. Taxpayers are happy.
The willpower of the government and implementation of advanced technology has transformed the image of the Income Tax Department from being the most corrupt to complete corruption-free on August 13, 2020; a glorious day for India.
(The author is a Chartered Accountant by profession)