Income Tax returns scrutiny to become faceless

Scrutiny or investigations into income tax (I-T) returns will now be faceless. The current practice in which a taxpayer’s returns being scrutinised appears before an I-T department representative will be done away with. Importantly, neither the taxpayer nor the I-T official will know each other in such cases.

In her budget speech on Friday, finance minister Nirmala Sitharaman described the move a “paradigm shift” in the I-T department’s functioning.

She said initially the new process of scrutiny will be limited to “verification of certain specified transactions and discrepancies”.

It will be rolled out in a phased manner, Sitharaman added. She said the cases selected for scrutiny shall be allocated to assessment units in a random manner and a central cell shall issue notices electronically without disclosing name, designation or location of an assessing officer. The cell shall be the single point of contact between the taxpayer and the department.

Sitharaman explained the need for a change saying the existing system of scrutiny involves a high level of personal interaction between the taxpayer and the department. It leads to certain undesirable practices on the part of tax officials, she added.

Delhi-based tax consultant and chartered account Mandeep Kapoor said the change has the potential of reducing corruption, but teething problems are likely.

An I-T department official called it a noble idea.

“The new process proposed in the budget can handle single points of scrutiny or verification, for instance, if a person has not properly declared capital gains. But what if there are multiple query points involving voluminous documents? Importantly, only a certain amount of data can be transmitted through emails,” the official said, on condition of anonymity.

Another official said it is a step in the right direction.

“But the tax department does not have domain experts, for instance, who understand the functioning of the hosiery or the film industry? An income tax official is not an expert of all trades,’’ the second official said.

“An assessee is likely to lose out because there will be a tendency of the assessing officer to play safe and add on income,” the official said.

The official said there was a proposal to identify domain experts before bringing this change and added scrutiny always has a human interface across the world. “An assessee will feel more comfortable when they can explain their points of view to tax officials.”

Confederation of Indian Industry director general Chandrajit Banerjee said the proposal will help bring in transparency and efficiency. “A system where scrutiny is done without any human intervention will remove all biases if any and give confidence to the taxpayer.”