Perspectives from ISB

Aditi Goyal (Student of AMPPP Class 2023)

Joint Commissioner, Income Tax (Audit)

In India, the income tax department collects Direct Tax Revenue. This revenue collected is used for nation-building like providing infrastructure and promoting development, especially in socially and economically backward areas. This is a big responsibility, and one of the department’s primary functions is facilitating Income tax Return filing and collecting taxes. These returns are then processed and assessed based on a computer-aided, transparent selection system based on specific criteria. The income tax department has very recently introduced system-wide changes in how the assessment is carried out of the returns filed by the assessees.

Faceless Assessment of Income Tax

With the policy goal of bringing “minimum government, maximum governance”, the Faceless Assessment was introduced to promote transparency and efficiency by removing the human interface with the department using IT solutions and allocating assessment cases within its jurisdiction.

This scheme is a novel initiative by the department towards promoting true e-governance by ensuring transparency and accountability towards assessments. This has also provided greater accessibility to the assesses, where they can access the department from their laptops at their convenience.

This scheme was introduced on August 13, 2020. The project has been implemented by separating the role of the Assessing officer into a Jurisdictional Assessing officer (JAOs) and a Faceless Assessing officer (FAOs). While the assessee’s PAN lies with the JAO, and they are still responsible for all the services provided by the department, the assessment is exclusively assigned to the FAO.

The scrutiny and internal control

Cases get assigned to FAO upon their selection for scrutiny through a centralised centre automatically and randomly; upon the completion of assessment proceedings, the case is given back to the JAO for routine proceedings like rectification, appellate, etc.

The income tax department has a very robust internal audit system. Internal audit parties are entrusted with evaluating the assessments and raising an objection where it is found that some factual error had been made or some legal issue has escaped, which would have some bearing on the assessee’s income. These objections are then communicated to the Assessing Officers (AOs) to take appropriate remedial action. However, Audit objection can only raise issues based on the material available on the file to not impinge upon the powers of the appellate authorities.

This internal audit system is essential for every organisation to remain efficient and to ensure that work is being conducted in compliance with the organisation’s legal provisions, rules, regulations, and procedures. With regular internal audits, the organisation will retain its healthy environment for a long time. Systemic checks and balances on the power exercised by its officials are crucial, especially in a department like income tax, where the outcomes directly impact the taxpayers and the government’s revenue collection.

With the change in the way the assessments are conducted, changes have also been introduced in how the audit is conducted. The income tax Department has not only become faceless with respect to its surroundings, but it has also become faceless on the inside by turning the internal audit online and faceless. Internal Audit of the cases is now conducted without any knowledge of the officer who has passed the order thereby removing the possibility of bias or influence. This will ensure greater checks on the functioning of the AOs. However, since the audit work must be done online, the department should ensure that the officials receive regular and adequate training.

Upskilling as a way forward

A lot of hand-holding is required, and upskilling is necessary to enable them to adjust to the new responsibilities of their role. Also, it is essential to provide them with training holistically so that they learn to download details regarding assessments from various other department portals. In this regard, an initiative was taken in my last posting where we organised an in-house training session for the staff. The result of the same was very encouraging. We realised that work efficiency could be drastically improved with guidance and encouragement. It is necessary to rethink the entire audit structure, revamp it, and provide regular training modules tailored explicitly to the needs of Internal Audit. Taking the department’s presence in taxpayers’ lives from offline to online is a great initiative, and all aspects of the department need to be tailored to ensure that we can make this a sustainable and successful “new way” of governance.

DISCLAIMER : “The views expressed in this blog/article are personal. Aditi Goyal is a student of the Advanced Management Programme in Public Policy at the Indian School of Business.”

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