India’s faceless tax assessment system, introduced in 2019, is a giant step toward changing the way income tax appeals administration is being conducted without human interaction. The initiative promises transparency, efficiency, and a non-intrusive tax environment. Despite its potential, the system has faced several hurdles, especially for large taxpayers, creating challenges in compliance and dispute resolution.
Key Features of Faceless Assessments
i) Introduced by the National e-Assessment Centre (NeAC).
ii) Eliminates physical interaction between taxpayers and officers.
iii) Focuses on team-based assessments and standardised procedures.
iv) Minimises corruption and enhances fairness in tax administration.
Challenges in Implementation
Data Overload and Limited Analysis
Large taxpayers submit extensive financial records, which are often challenging for officers to analyse effectively. This results in delays, errors, and arbitrary claim rejections.
Lack of Real-Time Interaction
Absence of direct communication creates difficulties in explaining complex financial issues. Taxpayers, particularly businesses with intricate structures, struggle to clarify positions without interactive discussions.
Technical Issues
i) Frequent system downtimes and slow processing speeds.
ii) File size limits restrict evidence submission.
iii) Strict deadlines leave taxpayers with insufficient time to respond.
Inflexibility in Extensions
Rigid deadlines and limited options for extensions compel taxpayers to file appeals, increasing costs and delays.
Notification Gaps
Taxpayers often miss timelines as they are not notified when notices are uploaded online.
Limited Virtual Hearings
Complex cases requiring detailed discussions are hindered by the restriction to a single virtual hearing.
Rising Appeals and Pending Cases
i) The number of pending appeals has risen from 4.58 lakh in 2020-21 to 5.16 lakh in 2023-24.
ii) New appeals have surged from 47,752 to 1.44 lakh during the same period.
iii) While resolved appeals have increased, the growing backlog highlights the need for further improvements.
Expert Suggestions
Improving Communication
i) Allow multiple virtual hearings or opt for physical hearings in complex cases.
ii) Enhance taxpayer notification mechanisms, ensuring timely updates.
Enhancing Portal Infrastructure
i) Upgrade the e-filing portal to manage bulky data and minimise errors.
ii) Introduce help desks for grievance redressal.
Flexibility in Assessment Options
i) Provide conditions for opting for manual assessments where necessary.
ii) Extend the validity of video conferencing links and ensure accessibility.
Rectification Requests
Enable taxpayers to file rectification applications directly on the portal, eliminating delays caused by physical submissions.
Government’s Response
The CBDT is aware of the problems and is trying to enhance the technological infrastructure. It is implementing ITBA 2.0, PAN 2.0, and strengthening rectification processes. Officials stressed that more than 99% of tax returns are accepted without scrutiny, which shows the non-intrusive nature of the system. (Business Standard)