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This article has been written by Divya Vishal.

Introduction

The development of an economy is relative to the quality of its structure of tax. The tax structure in India has changed characteristically in the former times to expand the economy. One such change in outlook was the presentation of the Goods and Services Tax in 2017, which is an extensive, multi-stage, objective put tax expense exacted with respect to each value expansion planning to eliminate the natural flaws of innate defects of indirect taxes that is the dropping impact. As rightly said by Arthur T. Vanderbilt, a former American judge and judicial reformer, “Taxes are the lifeblood of government and no taxpayer should be permitted to escape the payment of his just share of the burden of contributing thereto.”

The GDP of India lowered from 6.8% in July, 2017 to 4.5% in Jul, 2019 according to the Ministry of Statistics and Program Implementation.[1] Further, GDP has shown a downward approach after the pandemic. The central government has launched the scheme-‘Transparent Taxation-Honoring the Honest’ to attend to the vital difficulty of falling base of income taxpayers. This was introduced to make the taxation process simpler by reducing physical interaction and providing greater responsibility along with transparency to prevent any sort of foul play in the income tax department. This scheme includes the platform for key reforms that are: Faceless Assessment, Appeal and Taxpayers Charter.

Structural Reforms in Taxation

The scheme of transparent taxation provided by the central government is an addition to the E-assessment scheme introduced in September, 2019. It has now been authorized to incorporate all appraisals under Section 144 of the Income Tax Act, 1961 aside from International tax expense and central charges. The vision of the plan is least government intercession and greatest administration to guarantee ‘Easy, Seamless, and Faceless’ tax assessment measures. This is done to decrease prosecution, make the tax filing process simpler and forestall any sort of difficulties for those capable of paying taxes by stressing on the requirement for a less complicated tax assessment system.

Moreover, the Central Board of Direct Taxes (CBDT) has functionalized many assessment changes by smoothing out direct tax laws. The Direct Tax Vivad se Vishwas Act, 2020 was ordered to give a quick solution to looming tax issues and an assortment of income and revenue. The Finance Act, 2019 specifies a 100% discount on tax to an individual citizen with available pay up to INR 5 Lakh and upgraded standard allowance from INR 40,000 to INR 50,000 for salaried tax-paying citizens.[2] The Personal Income Tax was changed through the Finance Act, 2020, which furnishes people and co-agents with a substitute for releasing income tax at favorable rates in the event that they don’t benefit determined exception and motive. The Structural Reforms introduced by the government is threefold in nature:-

  1. Faceless Assessment-Faceless Assessment has become operative from 13th August,2020. Assessment or evaluations include a significant level of individual connection between a citizen and the jurisdictional income tax office, which prompts certain unfortunate practices with respect to taxation authorities. To eradicate it, faceless assessment has been the first structural reform under the transparent taxation scheme. The assessment will be done remotely led by a group of officials under the idea of dynamic purview doing away the well-established act of territorial jurisdiction. The citizens can respond to the notice virtually via electronic mode. It will wipe out the requirement for citizens to be physically present at the income tax office. The evaluation request will be drafted in one city, surveyed in another and finished in the third city.
  2. Faceless Appeals-This mechanism has become effective from 25th September, 2020. It will have a random designation of cases without the requirement for individual visits by tax-paying citizens. The cases will be chosen by analysing data and artificial intelligence. The assessment specialists must lead a survey before passing the order finally on any case in a set period of time. The survey, appeal or review to be done must be reasonable and unbiased.
  3. Taxpayers’ Charter-This charter was delivered by laying out the targets. Any procedures will occur without the interruption of the protection of the taxpaying citizen more than required under any assessment or order. Further, the office won’t unveil any citizen data except if legally necessary. The citizens will likewise be allowed to pick their approved representatives for procedures, and there will be methods set down for raising any protests and removal thereof. 

In general, the intention is additionally to lessen the expense of consistency by officials while adhering to tax laws. The officials will be considered responsible for every one of their activities and must observe the administration conveyance norms occasionally published by the legislature. Quoting Martin Luther King, Jr., an American Christian activist and minister, “You don’t have to see the whole staircase just take the first step”. Thus, the first step by the government needs the support of law-abiding taxpayers so that the whole staircase is not ambiguous.  Therefore, the taxpayers are expected as per the charter to:-

  • Be straightforward and agreeable by revealing full data. 
  • Be educated and cognizant of taxations laws and look for help from the office if necessary. 
  • Keep up exact records and act within the time limit in accordance with the income tax law. 
  • Have total information about the data shared and presented by his legally approved representative.

These structural reforms in the tax laws appear to be assuring in reducing the defects concerning the tax department in the past.

Analysis of Transparent Taxation: honouring the Honest Scheme

According to the Union budget 2020-21, INR 8.02 Lakh Crore is under dispute related to direct taxes, of these, around 40% have been pending for more than two years.[3] The horrifying fact is that as per the Economic Survey, 2017-18; the rate of success under the tax division with regards to the cases of appeals at all levels is less than 30%.Due to it, the threefold structural reform under the Transparent taxation scheme has been introduced.

The assessment via faceless mode is to guarantee there is no human interface between the taxpaying citizen and the Income-tax division, along these lines, shortening corrupt practices. This structure includes the foundation of the National e-Assessment Center, Regional e-Assessment Centers’, Assessment, Verification, and Technical Units. Principally, the NeAC issues a notification or notice on the assessee under Section 143(2) of the Income Tax Act, 1961 determining the issues for picking up of the case for Assessment to which the answer is to be documented within a time period of 15 days. At that point the case is naturally allocated to ReAC for investigation wherein individual hearings as a special case are held just by means of video conferencing, thus, taking out territorial jurisdiction with the group based evaluation. All the interchanges will be sent electronically. The order of the CBDT, under Section 119, has coordinated that the investigation officers and the officers of Tax Deducted at Source (TDS) department will only be the Income Tax Authorities to direct the overview under Section 133A.

The second reform is Faceless Appeal is administered by making changes to Section 250(6A) of the Income Tax Act, 1961. It eliminates link or interaction among Commissioner and the litigant to the degree innovatively possible. It enhances the use of the assets through economies of scale and practical specialization. [4] The alarming points that these two angles present are especially with respect to reassessment and examination. With overview power being restricted to just examination and TDS units, the reassessment is empty as right now, 30-40% cases are reassessment which will be in peril with this new plan. This is proverbial in the way that after demonetisation, tax authorities have discovered implicating proof against specific assesses during preventive overviews but with evaluations to be done electronically such hidden income may actually be followed to its source.

The taxpayer charter fuses the rights and commitments of the taxpaying citizen. It gives a reasonable, respectful, and sensible treatment of the citizen. It specifies a system for allure and audit to give quick decisions. It requires a productive assortment of income as it frames the reason for the government assistance plans of the biggest Democracy. With regards to the Puttaswamy judgment [5], it explicitly outlines the security and classification matters of the citizen. Simultaneously, the Charter includes obligations that a citizen ought to be a straightforward and educated resident with precise records regarding its business exercises. He ought to likewise guarantee timely and prudent instalment of tax duties.

Conclusion

This faceless framework for taxpayers must be attempted and tried before being executed all around the nation. One can expect beginning execution challenges as not all citizens might be acclimated with the computerized method of correspondence. Everything under it is being done digitally for which the taxpayers need to be comfortable enough to adopt this mode. For its smooth functioning and greater effectivity, it should become more user friendly in nature. Therefore, this structural reform under the tax department by the government is an initial step towards error-free taxation procedures which will not become successful without the cooperation of the taxpaying citizens.

References

  1. Sudhir Mehta, ‘Tax reforms can help revive the economy’, The Hindu, Available at https://www.thehindubusinessline.com/opinion/tax-reforms-can-help-revive-the-economy/article30658892.ece , accessed 26th September, 2020.
  2. ‘Growth trajectory of direct tax collection and recent reforms’, CNBC, Available at https://www.cnbctv18.com/finance/growth-trajectory-of-direct-tax-collection-and-recent-reforms-6089761.htm  accessed 26th September, 2020.
  3. AIR Discussion, ‘Platform for Transparent Taxation-Honouring the Honest’, Dr. Raj Kumar Academy, Available at https://www.drrajkumaracademy.com/showcurraffairs?CA_Id=2713&CurrentAffair=WA  accessed 27th September, 2020.
  4. Gopala CA, ‘All About Transparent Taxation-Honouring the Honest’ ,Tax Guru, Available at https://taxguru.in/income-tax/transparent-taxation-honouring-honest.html accessed 27th September, 2020.
  5. Justice K. S. Puttaswamy (Retd.) and Anr. vs Union Of India And Ors., (2017) 10 SCC 1

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