NEW DELHI: The Faceless Assessment mechanism is aimed to revolutionise tax administration by enhancing transparency and efficiency. However, as the system has evolved, it has faced significant challenges that have hindered its effectiveness, raising concerns among taxpayers and tax professionals alike. One of the primary issues is the limited opportunity for real-time interaction between taxpayers and assessing officers.
The absence of video conferencing for cases involving complex disputes has made it difficult for taxpayers to clarify factual nuances or rectify misunderstandings. This lack of direct communication often leads to arbitrary assessments and prolonged disputes, frustrating many taxpayers who find themselves unable to effectively present their cases.
“Taxpayers often struggle to clarify factual nuances or correct understandings, leading to arbitrary assessments or prolonged disputes,” says Punit Shah, Partner, Dhruva Advisors. According to him, technical difficulties have further complicated the assessment process. Taxpayers frequently encounter bulk upload errors, stringent size limits for document submissions, and various glitches within the system. These barriers prevent individuals from providing detailed evidence, undermining the goal of a fair and transparent assessment process.
Vivek Jalan, founder of Tax Connect Advisory Services, pointed out that large taxpayers face unique challenges as their extensive financial records can overwhelm assessing officers. The inability to have personalised discussions often leads to inflated demands that could be easily resolved in a manual hearing.
To mitigate these issues, Jalan suggests allowing taxpayers to request assessments by Jurisdictional Assessing Officers for more complex cases, ensuring a localised and personalised approach. Additionally, while income tax laws permit video conferencing for assessments, the current system’s limitations have led to inadequate access to recordings of these sessions. Taxpayers have struggled with the short validity period of these links, and the lack of sharing them further complicates matters.
He recommends that these recordings be made readily available on the income tax e-filing portal for easier access and download. Meanwhile, Shah of Dhruva Advisors highlights the need for mandatory or easily accessible video conferencing sessions for cases involving significant disputes or complex factual matters.
Experts like Pritin Kumar, Partner at Deloitte India, have highlighted that while the faceless assessment was expected to be a transformative change, it has mainly resulted in a digital exchange of information without addressing the underlying complexities. The pendency of appeals has surged, showcasing the need for a reevaluation of the scheme.
"A relook at the scheme, coupled with the introduction of SAF-T, may be worthwhile," Kumar suggests.
"Train officers to interpret digital submissions accurately and focus on improving their understanding of industry-specific issues to minimize the need for repeated clarifications. These measures would not only improve the taxpayer experience but also build trust in the system while maintaining the intended transparency and efficiency," suggests Shah.
In conclusion, while the faceless assessment mechanism holds promise, it has yet to meet its intended objectives. Significant reforms are necessary to address communication barriers, technical challenges, and the need for personalized assessments, ensuring that the system truly benefits taxpayers and maintains the transparency and efficiency it was designed to achieve.