Faceless tax assessment plan faces challenges

The income tax department is fighting dozens of writ petitions by taxpayers seeking redress for grievances ranging from inadequate time to file responses to opaque and arbitrary orders. The petitions have also challenged the constitutional validity of the scheme that aims to eliminate the physical interface between assessing officers and taxpayers. The aim of the scheme was to substitute the discretion of tax officers with a team-based approach.

There are dozens of writs filed by taxpayers challenging the faceless assessment scheme, a tax official said, requesting anonymity.

Tax experts said such cases have increased in number because the new system has failed to give taxpayers the opportunity to be heard, violating their rights.

“The purpose of the faceless assessment measure was to create a taxpayer-friendly system. However, this has been turning out opposite to the same as revenue has proceeded ahead without adhering to the principles of natural justice," said Amit Maheshwari, a partner at AKM Global, a tax and consulting firm.

“No personal hearing leads to genuine challenges in cases involving complex issues and high amounts. Also, another problem is issuing of final assessment orders without issuing draft orders, and in some cases, even the statutory procedure of issuing a show-cause notice has not been followed."

The disputed matters have been remanded back to the assessing officers in most cases as it is well settled in law that the availability of an appellate remedy does not bar the maintainability of writ petitions in cases of violations of principles of natural justice, Maheshwari added.

Queries emailed to the spokesperson of the Central Board of Direct Taxes on Saturday remained unanswered.

Another tax practitioner claimed that in one case, a taxpayer got two assessment orders. “There is a lack of communication between assessing officers and the Central Processing Centre of the income tax department. Large corporations are particularly facing difficulties," he said, requesting anonymity.

“While the faceless assessment scheme is a good one, there are some practical issues, essentially on the administrative and communication side. It is affecting large corporates. Guidance for the officers should come from the top to address taxpayers’ concerns and may be grievance redressal mechanism could be explored," said Neeru Ahuja, partner, Deloitte.

Abhishek A. Rastogi, a partner at Khaitan and Co., said: “The other issue is related to the jurisdiction of the court that must decide where the writ is filed. The taxpayer may have obtained the registration in a particular state, may have a presence in a different state/states, and the faceless order may have been passed in a completely different state."

The writ petitions in high courts have challenged the constitutional validity of the faceless assessment regime for being arbitrary and contrary to the settled principles of natural justice and administrative law.