August 24, 2020
India introduces Transparent Taxation platform
The Indian Government, on 13 August 2020, formally launched the “Transparent Taxation – Honouring the Honest” platform (the Platform). The Platform addresses the following three areas: (i) faceless assessments; (ii) faceless appeals; and (iii) the Taxpayers’ Charter (TC). The Platform has been introduced primarily to give effect to certain statutory provisions of the Income Tax Laws (ITL), for e-assessment, e-appeals and declaration of the TC to enhance fairness and efficiency in tax administration and to protect citizens’ rights.
The Indian tax administration has evolved by embracing the latest technology to simplify various tax compliance practices and improve internal administration via electronic filing of tax returns and forms including centralized processing of tax returns; electronic compliance verification process; and electronic assessment scheme.
The Finance Act 2020 introduced provisions enabling the Central Government to develop a platform to conduct faceless appeal proceedings before the First Appellate Authority. In addition, the Central Board of Direct Taxes (CBDT) was empowered to declare and adopt a TC.
With the greater use of technology by the Central Government, the CBDT, in September 2019, launched the E-assessment Scheme, 2019 (the Scheme). The Scheme automated various regular assessment proceedings under the ITL but was only applicable to a limited class of taxpayers that had been issued statutory notices under the Scheme.
The CBDT has now directed that, with effect from 13 August 2020, all assessment orders are required to be passed only under the Scheme, except in the following cases:
Any assessment order passed on or after 13 August 2020 outside the Scheme (except for two exceptions as stated above) is to be treated as invalid and deemed to have never been passed.
In addition, the CBDT has also made several modifications to the Scheme, including:
As announced by the Prime Minister, the Faceless Appeals Scheme will be effective from 25 September 2020. However, the scheme is yet to be announced by Central Government.
Centralization of powers for conducting survey proceedings
The ITL currently authorizes the jurisdictional Tax Authority to conduct survey proceedings at the business premises of a taxpayer or its other place of business to inspect books of accounts, verify cash, stock and other valuable articles or for such other purposes as required under the ITL.
Recognizing that these powers are very wide and intrusive in nature and should be invoked with the utmost responsibility and accountability, the CBDT has now withdrawn the power to conduct survey proceedings from the jurisdictional Tax Authority and confers only and exclusive authority to conduct a survey by the specified Tax Authority1.
The TC provides for various rights and obligations of taxpayers and will now have legal backing pursuant to statutory provisions under the ITL.
With the world moving towards a customer-centric focus, the platform is an attempt to make India’s tax administration taxpayer-focused and taxpayer-friendly. This is expected to improve the way in which the Indian tax administration works with taxpayers. In addition to providing better customer service, it also has the potential to increase tax revenue due to improved compliance.
The Central Government’s decision to expand the faceless assessment proceedings to almost all taxpayers, including large taxpayers, reveals the Central Government’s confidence in its technology and the Tax Authority. The amendments are a bold move by the Central Government and will bring a paradigm shift from the traditional manner of conducting assessment proceedings under the ITL. Although the modifications in the Scheme are effective immediately, migration of ongoing assessment proceedings may create inconveniences for some taxpayers.
1. Directorates of Investigation (Investigation Wing) and Commissionerate of TDS.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (India), National Leader – International Tax and Transaction Services, Mumbai
Ernst & Young LLP (India), National Leader – International Corporate Tax Advisory, Bangalore
Ernst & Young LLP (United States), Indian Tax Desk, New York
Ernst & Young LLP (United States), Indian Tax Desk, San Jose
Ernst & Young Solutions, Indian Tax Desk, Singapore
Ernst & Young LLP (United Kingdom), Indian Tax Desk, London
Ernst & Young LLP (United States), Asia Pacific Business Group, New York