Promoting a transparent and fair tax regime, Prime Minister Narendra Modi on Thursday unveiled ‘taxpayers’ charter’ on Thursday, enshrining rights of assesses in a statute under the Income tax law. With this, India joined ranks with a handful of countries like the US, Australia and Canada that have such a provision in their law.

With the launch of ‘Transparent Taxation — Honoring the Honest’ platform, Modi also unveiled faceless appeal and expanded the scope of faceless assessment, eliminating physical interface between taxpayers and tax authority. It does away with territorial jurisdiction and substitutes individual discretion with team-based assessment, thereby bringing in transparency.

“This platform has big reforms like faceless assessment, faceless appeal and taxpayers charter big reforms. It will help reduce government interference. Our effort is that the tax system should be seamless, faceless and painless,” Modi said in his inaugural address via video conferencing.

Finance Minister Nirmala Sitharaman said that the platform brings in a transparent, efficient and accountable tax administration. “It uses technology, Data Analytics and Artificial Intelligence,” she said.

While faceless assessment and Taxpayers’ Charter came into effect from Thursday itself, the facility of faceless appeals will be rolled out from September 25.

Announced in the budget for 2020-21, Taxpayers’ Charter is aimed at promoting voluntary compliance by creating trust between taxpayers and the administration. Giving it in the statute, it is binding on the tax department. The Charter lists out the fundamental rights of taxpayers and basic standards of services that they should expect. The department will be expected to provide services that are fair and efficient. It aims to change the relationship between taxpayers and the tax department from being an enforcer to a facilitator.

“Taxpayers’ Charter is a big step in the development journey of the nation. It is a big step in bringing together rights and duties, and clarifying government's responsibilities towards the taxpayer. The charter ensures dignity of the taxpayer,” said Modi in his address via video conferencing.

India’s Taxpayers' Charter has enforceable rights like a time bound process for dealing with the taxman, a laid out redressal mechanism, respecting privacy and maintaining confidentiality. The Taxpayers' Charter also lists out the obligations of the taxpayer or citizens towards nation building.

Faceless assessment facility was extended to the entire country on Thursday, ending territorial jurisdiction and individual discretion, where an officer was the whole and sole to the assessee.

“Under this system, an income tax officer will not get an opportunity to harass a taxpayer. Now, scrutiny will be allotted on a random basis. Assessment of a taxpayer in Mumbai could well be carried by an officer sitting in Chennai. It will put an end to needless litigation. In addition, the appeals mechanism will also be faceless,” said Modi.

The I-T Department had rolled out the faceless e-assessment scheme in October last year, covering Mumbai, New Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Ahmedabad, and Pune. Communication to the taxpayer goes from the National e-Assessment Centre (NeAC) in New Delhi. The NeAC randomly allots cases to different assessment units. These assessment units do not correspond to the taxpayer directly.

Of the over 58,000 cases picked up for faceless assessment, 8,700 have been disposed of, with a target for completion by October. Faceless e-assessment.

Abhishek Rastogi, partner, Khaitan and Co said that while the faceless assessment is a great beginning, there could be various challenges in terms of the appropriate explanation which needs to be understood by the person assessing the tax liability. “It is hoped that the new system will provide appropriate opportunity for the taxpayer to explain the complex transactions and get a fair order in a time bound manner”, he said.

Archit Gupta, founder and CEO, Cleartax said that although the tax charter is based on easing compliance for all taxpayers, the policy announcements must also reflect in the functioning of tax administration. “Tax officers need to be trained and focus needs to shift from merely raising tax orders to supporting taxpayers and truly streamlining assessments,” he added.

Modi added that over the last six years, the income tax department has reduced complexity, lowered taxes, reduced litigation, increased transparency, tax compliance and trust on the taxpayer.

Scrutiny by the department reduced to 0.25 per cent of all Income Tax Returns (ITRs) in AY19, from 0.55 per cent in AY18, shows data by the finance ministry.

Aravind Srivatsan, Partner, Nangia Andersen LLP said that with heavy technology and targeted audits, a clear message has been signaled to the taxpayer community is that the government is committed to acknowledge and treat the honest & compliant taxpayers with fairness and courteous manner. “Conversely, non-compliance to tax laws will be severely viewed leading to automatic penal consequences with strict enforcement approach by the tax department,” he said.