Will the interim budget 2024 focus on improving ease of taxpayer- compliance?

The income-tax practice has been constantly shifting towards digitisation with the aim of reducing/ eliminating human interaction, providing ease to taxpayers, and better efficiency. From the introduction of Central Processing Centre (CPC) in 2009, making e-filing of returns mandatory to the introduction of the new income tax portal and implementing faceless assessment and appeals, the department has made major strides towards its goal of achieving efficiency and building trust among the taxpayers. This also helps avoid questionable activities due to personal interaction between taxpayers and the tax officials. The digitisation’s intent is undoubtedly in the right direction; however, taxpayers continue to face multiple issues in connection with tax administration.

This has led to various directions to taxpayers relating to procedural aspects and has also led to a series of petitions being filed in High Courts on procedural matters. The High Courts, under such scenarios, have set aside the proceedings and sent them back to the tax officer for fresh adjudication. This results in additional costs and human efforts for both the tax department and the taxpayers.

A decade ago, the Hon’ble Delhi High Court had issued various writs of mandamus on its initiative in response to Public Interest Litigation (PIL), to eliminate numerous difficulties faced by the taxpayers after the implementation of computerisation and central processing of returns. In response to the same, the revenue authorities came up with various circulars, instructions and even bought amendment in the Income-tax Act, 1961 (the Act) to resolve these issues. However, certain issues highlighted in ensuing paras still needs to be addressed by the Government.

1.Delayed disposal of rectification applications:

One of the issues dealt in court rulings relates to delayed disposal of rectification applications. The court recommended that rectification application should be entered in a register and be uploaded on the portal to ensure transparency. However, practically, rectification applications filed by the taxpayers remains unaddressed for years.

It is suggested to provide a separate tab on the e-filing portal to file rectification application before the jurisdictional tax officer and allow the taxpayer to track the status for the same.

2. Rectification against intimation passed under section 143(1) of the Act:

While filing rectification against intimation, the taxpayers only have 3 options to file a response on the portal i.e. Reprocessing the return, filing an updated return, and tax credit mismatch correction.

It is hereby suggested that a separate fourth option as “Other issues” be provided wherein brief submission can be made, and supporting documents can be uploaded. Further, the process can be streamlined by transferring the rectification rights to the jurisdictional tax officer once the intimation is issued.

3. Redressal of Grievances filed:

Currently, it takes inordinate time to receive responses to the grievances filed, and in many instances, the resolutions suggested are not satisfactory.

It is suggested that certain provisions specifying time limitation and escalation mechanism should be introduced under the Income tax Act. For instance, RBI in their grievance redressal mechanism, has mandated that complaints should be redressed within 1 month and if not redressed then copy is forwarded to nodal office.

4. Delay in passing Order Giving Effect (‘OGE’) and old demands appearing on the portal:

Several old demands appear on the portal despite favourable appellate orders having the effect of cancelling or reducing the original demand. Furthermore, the refunds get adjusted against such incorrect demand. Also, there is ample delay in passing OGE to the appellate orders by the jurisdictional tax officer due to which status of demand does not get updated on the portal.

It is suggested that all the appellate authorities, tribunal and court orders are uploaded on the portal and the application for the OGEs be tagged along so that CPC can verify the status and update the list of outstanding demand. Further, there should be strict adherence of the time limit to issue OGEs by jurisdictional tax officers.

5. Delay in disposal of appeals before Commissioner of Income Tax (Appeals) [‘CIT (A)’]:

There is delay in disposal of appeals filed before CIT(A)s which are transferred to National Faceless Assessment Centre (‘NFAC’). Furthermore, certain appeals filed by the taxpayers, e.g. appeals filed against OGEs, are not appearing on the portal, and hence not posted for hearing causing delay in adjudication. Also, there is no system to communicate with the NFAC to obtain status of appeal, place request for early hearing, file an application for stay of demand etc.

It is suggested to allow the taxpayer an opportunity to update the pending appeals information on the portal which can be reconciled by NFAC. Further, there should also be a tab opened for the taxpayer to communicate with NFAC to obtain status of appeal, place request to fix early hearing, file an application for stay of demand etc.

The above are the common procedural issues faced by the taxpayers on day-to-day basis. Multiple grievances and petitions are filed against such procedural issues. We are hopeful that government would be kind enough to recognise the difficulties faced by taxpayers in the above procedures and take corrective actions such as those suggested above in this interim budget.

Source:- ET insights