The honourable Prime Minister has recently launched a platform for transparent taxation- honouring the honest bestowed three gifts to the honest taxpayers of this country:
• Faceless Assessments
• Faceless Appeals
• Tax Charter
Faceless Assessment and Appeals
The main aim of faceless assessment and appeal is to curtail down the face interaction between taxpayer and officers. As we know that interactions between the two had originated various evils like corruption, undue favours, creation of cartel, harassment of honest taxpayers etc. and these problems will be addressed through faceless assessment and appeals. Detailed guidelines with respect to the functioning of faceless assessment have been formulated and made available to the public soon after the announcement by the Prime Minister.
Hurdles in implementation of the proposed procedure
The intent of the brining of faceless assessment and appeal is laudable, but the success of such noble schemes will require sheer firm determination of CBDT and Finance Ministry as various roadblock will be seen in the execution of the plan. First and most roadblock will be lack of standardized language. It is highly probable that reply by the taxpayer in his vernacular language or supporting documents in vernacular language does not properly understand by the concerned assessment unit as the main crux of the scheme is that assessment unit will be decided by the system, and it is highly probable that assessment of Gujarat assesses might be made by a unit located at Assam which does not know Gujarati. Drafting skill of every assessee may not be at PAR with the adapting skill of officer or vice versa, especially in the English language looking to the literacy level of India.
Non-familiarization of the specific production system and prevalent business system and custom of particular industry or area will be another major roadblock. Production cycle and business system of textile and diamond industry situated at Surat might not be known to officer located at Shimla who is entrusted with the task of assessment. In such a situation, it is highly probable that a judicious assessment of income is not determined. Such a problem was not found in existing assessment and appeal system.
As rights and discretion of assessing officers have been curtailed down substantially in the proposed faceless assessment and appeal, It is highly probable that stiff opposition may come from officers and derail the whole system. It will be very cumbersome and time consuming for the revenue officers to adapt to this new normal practice.
It is not the case that the proposed scheme will be a nightmare only for the revenue department, but equally, it is going to be very tough for taxpayers community also. Now they have to be very vigilant and prompt in reply. Time-bound actions will be required in the new scheme, and they cannot linger their actions until the last moments.
Availability of internet at fast pace and adaptability of latest technology is a prerequisite for the success of such scheme. In the initial period, this specific problem will be faced at assesse located in the non-metro area.
While presenting the budget for this year, the Finance Minister has promised to bring a “TAX CHARTER” for taxpayers and further assured that it will be part of Income Tax Itself having legal status. Part of this promise has been fulfilled by bringing a codified tax charter for taxpayers and remaining part to give this charter a statutory recognition will also be fulfilled later or sooner.
Why Tax Charter
A general perception in the world economy is that India is a country where tax terrorism is the Mantra which is often chanted by the tax administration. Various rules and regulations of tax statue are framed in such a way that irrational utilization of these powers without accountability will ultimately result in tax terrorism. A tax charter with legal support is going to be an important tool to eradicate the evils of tax terrorism. This charter if implemented properly, will establish a cordial relationship between department and taxpayers. Taxpayers will be more compliant, and our country will gradually be in the league of tax-compliant nations. A properly codified tax charter will be a great assistance in formulating tax policies and regulations.
Importance of Legal Status
Broadly most of government department or organization used to adopt its charter, but such charters are rarely followed in its letter and spirit while formulating policies. The income tax department also has its own charter-like other government departments but rarely followed in its letter and spirit while discharging its responsibilities towards valued taxpayers. Present tax charter of the income tax department is somewhat like directive principle as enumerated in the constitution which are idealistic situations which a government should achieve for its people, but no right is conferred to the citizen on these points if not adhered by the government hence most of the principle of directives have not adhered so far likewise present tax charter of the income tax department seldom adheres but once tax charter which is now properly coded will garner the legal status as promised by Finance Minister will be like fundamental rights which are enforceable by the law of the land if not adhered by the concerned authorities.
Contents of tax charter
The tax charter issued by the Ministry of finance contains 14 rights of the taxpayers and 6 obligations or expectation from taxpayers by the departments. Taxpayers include not only persons who are obliged to pay tax but also includes a person who is required to deduct, remit any tax or information to the tax department. Tax charter is broadly applicable to matters related to the Income-tax and Value added tax but does not includes Goods & Service Tax (GST).
Important Rights and their repercussions
The most important right contained in the tax charter is right to be treated as honest and tax compliant. Your tax payment and the claim is right and correct unless contrary proved by the department. Up till now assessee has to prove it credentials nut now onus will be on the department to prove that claim of the assessee is not right and contrary to the law, but it is going to be very interesting to see how the balance will be made between various draconian sections of the Act and tax charter. For example, how the balance will be made between provisions of section 115BBE and tax charter. Section 115BBE stipulate charging of high rate of tax @ 60% on the amount of income which is not satisfactorily substantiated by the assessee whereas tax charter says that unless until contrary proved by the department, claim of the assessee and tax payment by the assessee shall be true and correct.
Another important right conferred by the Tax charter is right not to be subject to retrospective taxation. Retrospective taxation in the Indian tax system is very infamous and notorious amongst worldwide tax community. Tax charter has addressed this problem to a great extent and regenerates confidence in the taxpayers, especially multinationals who are afraid of such retrospective taxation. India will greatly have benefitted if tax charter is properly advertised amongst worldwide business community as India was not getting much benefit in the spree of the relocation of manufacturing facilities from China by various MNCs despite several favourable factors due to complex taxation system especially retrospective taxation.
Another important right made available to the taxpayer is Right to request a payment plan. Presently assess often has to approach judicial route for payment of tax in instalments looking to the financial stringencies. Rate of interest on such scenario is also pegged at 9% per annum, which is 12% at present.
Another right which is made available to the taxpayer is right to know about information department hold about the taxpayer. Department is bound to supply all information in its possession to the assessee unless it is sensitive or legally protected or on other grounds as enumerated in the tax charter.
Other rights conferred by the tax charter are as under:
• Right to be treated with fairness and impartiality,
• Right for certainty about tax implications of all actions of the taxpayer, Conduct of an enquiry and arrange for a suitable time and place of an interview related to an enquiry,
• Right for assistance and information from the tax department,
• Right to pay no more than the correct amount of tax,
• Right to minimize compliance cost,
• Right to be advised and represented by any person on taxation matters,
• Right to appeal,
• Right to privacy and confidentiality of the information possessed by the tax department,
• Right for the licit arrangement of tax affairs that minimize the tax liability,
• Right to complain about services of the department.
Obligations of the taxpayers
Tax charter has also cast various responsibilities and obligations on the taxpayers who are as under:
• The taxpayer is expected to be honest, truthful and act within the law. He is expected to declare all assessable income.
• The taxpayer is expected to be compliant and cooperate while dealing with the tax department.
• The taxpayer is expected to keep proper records in accordance with the law.
• The taxpayer is expected to file proper and complete tax documents and pay the tax within statutory due dates.
• The taxpayer is expected to inform the tax department about changes in circumstances like address, marital status, business activity etc.
• The taxpayer is expected to know about tax responsibilities and the consequences of non-compliance.
Tax charter is made two-way traffic for the taxpayers, which gives the right to the taxpayer but also cast an obligation on them. Smooth implementations of faceless assessment, appeals and tax charter is very tedious job looking to the various odds and mentality of the officers and taxpayers. This can be achieved through strong political will, zeal and support from administration. Support from tax administration is very crucial, and only future will tell to what extent the government will succeed in its target to make taxation seamless, painless for taxpayers.