How Does a Faceless Scrutiny Assessment Enhance Tax System Fairness?

With the implementation of the Faceless Assessment Scheme, the Indian Government aims to bring transparency and fairness into the tax assessment process. In this scheme, the identity of the tax officers responsible for assessing returns will remain anonymous to the taxpayer. This article discusses the benefits and implications of this scheme and how it ensures a fair tax system.

What is the Faceless Assessment Scheme?

The Faceless Assessment Scheme is designed to enhance the transparency and fairness of the tax assessment process by removing the personal element from the interaction between taxpayers and tax officers. Under this scheme, the taxpayer's identity remains unknown to the officers, and all responses and documents are submitted online. This means that taxpayers will no longer need to visit physical tax offices or meet with officers in person.

Key Features of the Faceless Assessment Scheme

1. No Human Interaction: The new system eliminates human-to-human interaction, reducing the potential for personal biases and favoritism. Assessment will be carried out by a team of tax officers, rather than a single individual, ensuring a more comprehensive and unbiased review.

2. Jurisdiction Freedom: As tax assessments will be conducted by a team of officers from different regions, taxpayers can be confident that their returns are being reviewed by competent professionals, regardless of their location. This means that taxpayers can stay in Mumbai while their assessment is handled by officers from other parts of the country, such as Chennai or Guwahati.

3. No Oral Submissions: Oral submissions will be strictly limited to specific cases, such as responses to show cause notices. However, these oral submissions must be approved by senior officers to ensure that they are justified and adhere to the established guidelines.

Improving Transparency and Public Trust

The introduction of the Faceless Assessment Scheme is expected to boost transparency and public trust in the tax assessment process. Taxpayers will have more confidence knowing that their returns are adequately reviewed and processed without undue bias. This can lead to better compliance and a more efficient tax collection system.

Importance of Proper Accounting and Documentation

With the Faceless Assessment Scheme, taxpayers will need to maintain proper accounting and documentation to support their submissions. This requirement will ensure that taxpayers have a robust system in place to substantiate their claims and positions. Regular maintenance of accounting records and documentation will be crucial to avoid misunderstandings and potential penalties.

Increasing Tax Base Through Enhanced Fairness

The Indian Government has noted that only a small percentage of the population is currently filing income tax returns. Specifically, out of the 135 million population, only 8 million have filed returns, and only 1.5 million of these are actual taxpayers, with 80% belonging to the salaried class. To address this issue, the government has introduced several parameters to enhance fairness in the tax system, with the aim of increasing the tax base and encouraging greater participation in the tax filing process.

Some of the factors that have been introduced include:

Electricity Bills: These are a reliable indicator of an individual's income level and can be used to assess the accuracy of tax returns. Air Travel in Business Class: Indicative of high-value transactions or luxurious lifestyles, these can be used to identify potential tax evaders. Purchase of Cars: High-value purchases can also be indicative of income levels, and thus, are important in determining tax liability.

By introducing these and other parameters, the government aims to make the tax system more comprehensive and fair, ensuring that all taxpayers are contributing their fair share to the economy.

Conclusion

The Faceless Assessment Scheme is a significant step towards enhancing the fairness and transparency of the tax assessment process in India. By eliminating human bias and promoting robust documentation, this scheme is poised to increase public trust and encourage greater participation in the tax filing process. The introduction of additional parameters will help to broaden the tax base, ensuring that more individuals are contributing to the economy through their taxes.

With the right measures in place, the government can achieve greater compliance and a more efficient tax system, ultimately benefiting all stakeholders in the economy.