“Transparent Taxation – Honouring the Honest”

Prime Minister Shri Narendra Modi launched a platform for “Transparent Taxation – Honouring the Honest” On 13th August 2020

Transparent Taxation – Honouring the Honest

PM Modi launches platform for “Transparent Taxation – Honouring the Honest” On 13th August 2020, the Honourable Prime Minister Shri Narendra Modi announced new tax platform “Transparent Taxation – Honouring the Honest” and called it 21st Century tax System.

‘Honouring the Honest’ is a new chapter in the history of India. As a part of the new platform ‘Transparent Taxation – Honouring the Honest’, the government has announced three revolutionary changes in Income Tax.

  1. Faceless Assessment

  2. Faceless Appeal

  3. Taxpayer Charter

PM Modi said that launching a new tax platform which is Policy-driven governance instead of process and power centric approach, would minimize grey areas, cutting discretion.

Faceless assessment and taxpayer charter starts from immediate effect i.e. 13.08.2020 while a faceless appeal to begin from 25th September 2020 i.e. Deen Dayal Upadhyay’s birth anniversary.

Honourable Prime Minister said that the focus in the last six years has been on “Banking the Unbanked, Securing the Unsecured and Funding the Unfunded” and that the platform of “Honouring the Honest” is in the similar direction.

Prime Minister also praised the role of honest taxpayers in nation-building and said that making the lives of such taxpayers easy is the responsibility of the government.

According to him, the government is committed to make the tax system Seamless, Painless, Faceless.
  • He said the Seamless system works to resolve the problems of a taxpayer instead of entangling him further.
  • By being Painless he said, everything from technology to rules should be simple.
  • Referring to the Faceless system he said there is no need for direct contact between the Taxpayer and the Income Tax Officer in all matters of scrutiny, notice, survey or assessment.

In the context of the launch of Taxpayers Charter, he said that it is a significant step where the taxpayer is now assured of fair, courteous and rational behaviour and this charter takes care of maintaining the dignity and sensitivity of the taxpayer and that is based on a trust factor and that the assessee cannot be merely doubted without a basis.

New tax platform “Transparent Taxation – Honouring the Honest” which consist Faceless assessment, Taxpayer charter and Faceless appeal is discussed as below:

1. Faceless assessment

Faceless assessment is an extension/amendment of the e-assessment scheme of 2019, which was launched by the Government of India in September 2019.

Vide Notification No.60/2020 and Notification No.61/2020 dated 13th Aug 2020][Order F.No.187/3/2020-ITA-1 dated 13th Aug 2020] the word “E-assessment” has been substituted with the word “faceless assessment” in the law.

The major difference in E-assessment and faceless assessment is that in E-assessment the assessee will be aware of the assessing officer who will be carrying out the assessment proceedings while in Faceless Assessment, the assessee will not be aware of assessing officer who will be doing his tax assessment.

The faceless assessment scheme applies to scrutiny assessment and best judgment assessment. The main objective of this scheme is to eliminate the human interface between the income tax department and the taxpayer.

The scheme lays down the procedure to carry out a faceless assessment through electronic mode.

Procedure of Faceless Assessment –

The assessment under this Scheme shall be made as per the following procedure, namely: —

(i) The National e-Assessment Centre shall serve a notice on the assessee under sub-section (2) of section 143, specifying the issues for selection of his case for assessment;

(ii) The assessee may, within fifteen days from the date of receipt of the notice referred to in clause (i), file his response to the National e-assessment Centre;

(iii) Where the assessee – (a) has furnished his return of income under section 139 or in response to a notice issued under subsection (1) of 142 or sub-section (1) of section 148; and a notice under sub-section (2) of section 143 has been issued by the Assessing Officer or the prescribed income-tax authority, as the case may be; or (b) has not furnished his return of income in response to a notice issued under sub-section (1) of section 142 by the Assessing Officer, or (c) has not furnished his return of income under sub-section (1) of section 148 and a notice under subsection (1) of section 142 has been issued by the Assessing Officer;

The National e-Assessment Centre shall intimate the assessee that assessment in his case shall be completed under this Scheme;

(iv) The National e-assessment Centre shall assign the case selected for the purposes of e-assessment under this Scheme to a specific assessment unit in any one Regional e-assessment Centre through an automated allocation system;

(v) Where a case is assigned to the assessment unit, it may make a request to the National e-assessment Centre for (a) obtaining such further information, documents or evidence from the assessee or any other person, as it may specify; (b) conducting of certain enquiry or verification by verification unit; and (c) seeking technical assistance from the technical unit;

(vi) Where a request for obtaining further information, documents or evidence from the assessee or any other person has been made by the assessment unit, the National e-assessment Centre shall issue appropriate notice or requisition to the assessee or any other person for obtaining the information, documents or evidence requisitioned by the assessment unit;

(vii) The assessee or any other person, as the case may be, shall file his response to the notice referred to in clause (vi), within the time specified therein or such time as may be extended on the basis of an application in this regard, to the National e-Assessment Centre;

(viii) Where a request for conducting of certain enquiry or verification by the verification unit has been made by the assessment unit, the request shall be assigned by the National e-assessment Centre to a verification unit in any one Regional e-assessment Centre through an automated allocation system;

(ix) Where a request for seeking technical assistance from the technical unit has been made by the assessment unit, the request shall be assigned by the National e-assessment Centre to a technical unit in any one Regional e-assessment Centre through an automated allocation system;

(x) The National e-assessment Centre shall send the report received from the verification unit or the technical unit, based on the request referred to in clause (viii) or (ix) to the concerned assessment unit;

(xi) Where the assessee fails to comply with the notice referred to in clause (vi) or notice issued under subsection (1) of section 142 or with a direction issued under sub-section (2A) of section 142, the National e-Assessment Centre shall serve upon such assessee a notice under section 144 giving him an opportunity to show-cause, on a date and time to be specified in the notice, why the assessment in his case should not be completed to the best of its judgment;

(xii) The assessee shall, within the time specified in the notice referred to in clause (xi) or such time as may be extended on the basis of an application in this regard, file his response to the National e-Assessment Centre;

(xiii) Where the assessee fails to file a response to the notice referred to in clause (xi) within the time specified in the notice or within the extended time if any, the National e-Assessment Centre shall intimate such failure to the assessment unit;

(xiv) The assessment unit shall, after taking into account all the relevant material available on the record make in writing, a draft assessment order or, in a case where intimation referred to in clause (xiii) is received from the National e-Assessment Centre, make in writing, a draft assessment order to the best of its judgment, either accepting the income, or sum payable by, or sum refundable to, the assessee as per his return or modifying the said income or sum, and send a copy of such order to the National e-assessment Centre;

(xv) The assessment unit shall, while making draft assessment order, provide details of the penalty proceedings to be initiated therein if any;

(xvi) The National e-assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide to, — (a) finalize the assessment as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; or (b) provide an opportunity to the assessee, in case a modification is proposed, by serving a notice calling upon him to show cause as to why the assessment should not be completed as per the draft assessment order; or (c) assign the draft assessment order to a review unit in any one Regional e-assessment Centre, through an automated allocation system, for conducting a review of such order;

(xvii) The review unit shall conduct a review of the draft assessment order, referred to it by the National e-assessment Centre whereupon it may decide to, — (a) concur with the draft assessment order and intimate the National e-assessment Centre about such concurrence; or (b) suggest such modifications, as it may deem fit, to the draft assessment order and send its suggestions to the National e-assessment Centre;

(xviii) The National e-assessment Centre shall, upon receiving the concurrence of the review unit, follow the procedure laid down in sub-clause (a) or sub-clause (b) of clause (xvi), as the case may be;

(xix) The National e-assessment Centre shall, upon receiving suggestions for modifications from the review unit, assign the case to an assessment unit, other than the assessment unit which has made the draft assessment order, through an automated allocation system;

(xx) The assessment unit shall, after considering the modifications suggested by the review unit, send the final draft assessment order to the National e-assessment Centre;

(xxi) The National e-assessment Centre shall, upon receiving final draft assessment order, follow the procedure laid down in sub-clause (a) or sub-clause (b) of clause (xvi), as the case may be;

(xxii) The assessee may, in a case where a show-cause notice under sub-clause (b) of clause (xvi) has been served upon him, furnish his response to the National e-assessment Centre on or before the date and time specified in the notice or within the extended time, if any;

(xxiii) The National e-assessment Centre shall, – (a) in a case where no response to the show-cause notice is received, finalize the assessment as per the draft assessment order, as per the procedure laid down in sub-clause (a) of clause (xvi); or (b) in any other case, send the response received from the assessee to the assessment unit;

(xxiv) The assessment unit shall, after taking into account the response furnished by the assessee, make a revised draft assessment order and send it to the National e-assessment Centre;

(xxv) The National e-assessment Centre shall, upon receiving the revised draft assessment order,— (a) in case no modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, finalize the assessment as per the procedure laid down in sub-clause (a) of clause (xvi); or (b) in case a modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, provide an opportunity to the assessee, by serving a notice as per the procedure laid down in sub-clause (b) of clause (xvi); (c) the response furnished by the assessee shall be dealt with as per the procedure laid down in clauses (xxii), (xxiii), and (xxiv);

(xxvi) The National e-assessment Center shall, after completion of the assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act;”

Exceptions to faceless assessment –

The Principal Chief Commissioner or the Principal Director General, in charge of National e-assessment Centre, may at any stage of the assessment, if considered necessary, transfer the case to the Assessing Officer having jurisdiction over such case, with the prior approval of the Board.

Exchange of communication exclusively by electronic mode – For the purposes of this Scheme –

(a) All communications between the National e-assessment Centre and the assessee, or his authorized representative, or any other person shall be exchanged exclusively by electronic mode;

(b) All internal communications between the National e-assessment Centre, Regional e-assessment Centre and various units shall be exchanged exclusively by electronic mode;

Authentication of electronic record –

For the purposes of this Scheme, an electronic record shall be authenticated by:

(i) The National e-Assessment Centre by affixing its digital signature; and

(ii) the assessee or any other person, by affixing his digital signature if he is required under the Rules to furnish his return of income under digital signature, and in any other case by affixing his digital signature or under electronic verification code;

Personal hearing to make oral submissions only through video conferencing –

In the case where the modification is proposed to the draft assessment order, an opportunity is provided to the assessee by serving a notice.

In such a case, the assessee or his authorized representative may request for personal hearing, so as to make oral submissions or present his case before the income tax authority in any unit under this scheme.

The Chief Commissioner or Director-General in charge of ReAC may approve personal hearing. Once approved personal hearing shall be made only through video conferencing. Any examination or recording of the statement of the assessee or any other person shall be conducted by the Income-tax authority through video conferencing.

2.  Faceless Appeal –

Budget 2020 proposes faceless appeals in the Income-tax Act. In order to take the reforms initiated by the Department to the next level and to eliminate human interface,

Finance Minister proposed to amend the Income Tax Act so as to enable Faceless appeals on the lines of Faceless assessment.

The e-appeal scheme is to be made on similar lines of e-assessment by making amendments to Section 250(6A) of the Income Tax Act. E-Appeal scheme to have the following features:

  • Empowering Govt. to notify e-appeal scheme for disposal of appeals.
  • Eliminating interface between Commissioner (Appeals) and the appellant during appeal proceedings to the extent technologically feasible.
  • Optimizing utilization of the resources through economies of scale and functional specialization.
  • Introducing the appeal system with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals).

3. Taxpayers Charter –

The taxpayer charter was initially mentioned in the budget speech by Honourable Finance minister while presenting the budget for the year 2020-21.

This Taxpayer Charter explains what assessee can expect from the tax department and what is expected from the assessee.

14 rights and 6 obligations of the assessee has been mentioned in this charter which is mentioned as under:

Rights of the assessee as per Charter –

(i) To be treated with fairness and impartiality.

(ii) To be treated as honest and tax compliant unless there is evidence to the contrary.

(iii) For certainty.

(iv) For assistance and information from the Tax Departments.

(v) To pay no more than the correct amount of tax.

(vi) Not to be subject to retrospective taxation.

(vii) To minimize compliance costs.

(viii) To be advised and represented by any person on taxation matters.

(ix) To appeal.

(x) To privacy and confidentiality of information tax department hold about assessee.

(xi) To know what information tax department holds about assessee.

(xii) For the licit arrangement of your tax affairs that minimize the tax liability.

(xiii) To request a payment plan.

(xiv) To complain about the tax department’s service, behaviour and actions.

The obligation of the assessee as per Charter –

(i) To be honest.

(ii) To be compliant and cooperate when assessee deal with the tax department.

(iii) To keep proper records in accordance with the law.

(iv) To file proper and complete tax documents and effect payments by the statutory due dates.

(v) To inform the Tax Departments about changes in circumstances

(vi) To know tax responsibilities and the consequences for non- compliance.

 

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