“It is completely doable… there may be some teething troubles, but they can be addressed,” Pandey said at a webinar on Transparent Taxation organised by ET Markets and FICCI on Friday.
The department is studying whether cases of penalty and transfer pricing could be included in the faceless regime, he said when asked about procedures for transfer pricing and penalties. He added that pending appeals, cases will be resolved without direct interaction with the tax authorities, with a technical unit to help the appellate officer.
India’s taxation system will have to be aligned with the challenges of global mobility of people, the finance secretary said in response to a question on the need for simplification of taxes for non-resident Indians.
“The government or the Central Board of Direct Taxes will have to be more aligned to such problems because these are recent phenomena and this problem will get highlighted more,” he said.
The faceless system will ease compliance and widen the tax base while doing away with discretion and subjectivity at the hands of tax officers, Pandey said.
“The move to a faceless system will lead to reduced compliance burden, lower cost of compliance and reduced litigation,” he said. “The faceless system will improve the ease of doing business and more people will come into the tax stream.”
The finance secretary said the tax department is relying heavily on data from sources including banks, stock markets, mutual funds, property registrations, remittances and foreign exchange transactions to identify mismatches in tax declarations and single out evaders.
“Data triangulation will help in weeding out tax evaders and hence lead to better tax collections,” he said.
India has a population of 1.13 billion, of which only 70 million are in the tax system and only 15 million of them pay tax, a disparity that Prime Minister Narendra Modi had pointed out last month.
Pandey added that of 70 million returns filed as of now, only about 200,000 are being selected for further scrutiny.
Asked whether faceless assessments could lead to varying interpretations of rules or guidelines and thus lead to increasing litigation, the finance secretary said that while officers were aware of the department’s stand, in case of different court orders on an issue, such matters would be discussed at a higher level within the CBDT.
India introduced faceless assessment of tax on a pilot basis in October 2019, taking up about 58,000 cases. Of these cases, orders were passed in 11,000 cases and about 4,000-5,000 orders will be issued soon.
In the transformation to faceless assessment, about 53% of the 40,000 income tax officers will be involved across assessment, technical and legal units, besides those handling the digital infrastructure required for supporting the change.