One of the biggest challenges faced by a taxpayer under the faceless taxation regime is to ensure that he/she gets a fair trial during the assessment process as well as the appeal process. Similarly, with electronic centralized processing of tax returns, taxpayers often bear the brunt of mistakes, without being given ample opportunity to express their views. Another challenge faced by taxpayers is that tax laws are framed unilaterally without considering their views. Its opposition by the government and the Income Tax (IT) Department is that during assessment and appeal, taxpayers are given an opportunity to present their case, and pre-budget and post-budget consultations are held to discuss with various bodies. go. tax provision. Is it really effective in practice?
mere formality
In many cases challenging the orders of assessment and appeal before the High Courts, the courts have quashed the orders only on the ground that the taxpayers were not given an opportunity of being heard. Tax proceedings are quasi-judicial proceedings, where justice is to be done, and where the right to be heard is one of the principles of natural justice. The denial of such right violates this principle, and renders the entire proceeding invalid.
Even in those rare cases where this right of hearing was granted, the final order generally did not reflect any argument of the taxpayer, or did not address any objection. Therefore, such hearing appears to be a mere formality, without any genuine intention to truly understand or address the concerns of the taxpayer.
Similarly, while processing the return of income, taxpayers often receive e-notices or notifications proposing either to treat the tax return as defective, or by not deducting tax at source or giving credit for taxes paid. Raises demands. Feedback or rectification applications filed are often ignored or summarily rejected by the Centralized Processing Center without any valid reason. As a result, taxpayers are compulsorily required to file appeals to get justice.
About a month ago, the finance minister had actually asked tax officials to take the time to talk to taxpayers and make them understand the problems they face with tax laws. This was in response to complaints about the ambiguity of certain provisions of the tax laws. Several representations have been made in both pre- and post-Budget budgets regarding proposed amendments to tax laws. Many representations are related to formatting errors that need to be corrected or would otherwise result in litigation or have unintended consequences. Unfortunately, the final passage of the budget rarely takes any corrective action, resulting in litigation manifold in subsequent years.
Need for counseling process
In all these situations, while the tax authorities seem to be going through proposals to listen to the taxpayers, such meetings are often held with a closed mind, where the outcome is pre-decided. Unless tax officials approach such meetings with an open mind, and treat it as a truly consultative process and not just a process to tick a box, taxpayers’ discontent continues. Will be
One of the imperatives of a faceless tax processing system is an easily accessible process for taxpayers to take their grievances to the right person and not just a call center that addresses only superficial complaints. In Faceless Assessment and Appeal, taxpayers are required to obtain assurance that justice is indeed being done not only by hearing them, but by ensuring that all their concerns are actually addressed and that the order is fair. and have been passed judiciously.
The formulation of tax laws should also be a consultative process with a proper understanding of the ground reality and difficulties faced by the taxpayers. What may sound good in theory can often lead to great practical difficulties – compliance problems must be taken into account when making laws. While someone heard a few years ago that the compliance cost that taxpayers incur when proposing tax amendments would be weighed against tax benefits, amendments in recent years did not consider such a cost-benefit analysis. Is. If this has been done, it is necessary that such analysis be made public, so that taxpayers can understand the significant offsetting benefits enjoyed by the government.
The consultation process with the taxpayers should also not be confined only to the time of budget, but should be a continuous process throughout the year to address the grievances of genuine taxpayers. This will result in more productive taxpayers who can actually boost tax collection.
Gautam Nayak, Partner, CNK & Associates LLP.