Governments across the world are leveraging digital platforms to assess taxpayer’s data, including cross-referencing information at source, running it through increasingly sophisticated analytics and sharing it among other agencies.

In India as well, the tax administration is going digital. The benefits of technology in the tax space are apparent —better taxpayer compliance, collection of fair share of tax, reduced administrative cost in collecting taxes and increased taxpayer satisfaction in tax administration.

With this intent, the government’s recent digital agenda has included a number of key initiatives.

The much talked about GST implemented by the government has extensive use of technology. Everything, from invoice upload, mismatch reconciliation to return filing is now done online. Therefore, it has become extremely important for enterprises to utilise an application that is robust, efficient and secure.

In a total shift from the traditional assessment mode, e-assessments are expected to become a reality soon. The traditional assessment mode had numerous practical challenges like difficulty in managing and locating critical documents, inadequate information sharing across tax departments and geographic locations, redundant data collection methods, excess time and effort spent on administration and manual tracking, lack of visibility and oversight of deadlines.

In October 2015, the Central Board of Direct Taxes (CBDT), the policy making body of income tax department initiated the concept of using email-based communication for paperless scrutiny proceedings. As a part of e-governance initiative to facilitate compliance, a pilot project of taxpayer friendly measure in the form of a scheme for e-assessment through e-mail was introduced in seven cities of Ahmedabad, Bangalore, Chennai, Delhi, Hyderabad, Calcutta and Mumbai which was extended to 102 cities.

In the month of December 2017, the CBDT has constituted a nine-member committee headed by a Principal Chief Commissioner rank officer to prepare a roadmap on e-assessment. The deadline for the committee to submit its report is 28 February 2018.  The committee has been constituted with the objective of embarking upon the concept of a faceless and nameless e-assessment procedure.

In his budget speech, Arun Jaitley acclaimed that with the experience gained so far, India is ready to roll out e-assessment across the country which would transform the age-old assessment procedure of income tax department and the manner of interaction between tax department and taxpayers and other stakeholders.

As a step towards implementation of vision of e-assessment, Budget 2018 has proposed to amend the provisions of the Income-tax Act, 1961 to empower the central government to prescribe a new scheme for e-scrutiny assessments.  The new scheme is proposed to impart greater transparency and accountability, by eliminating the interface between the tax authorities and the taxpayers, optimal utilisation of the resources, and introduction of team-based assessment.

Expected impact

Increased data requirements: Regulatory authorities are likely to call for transactional level details, data directly from the ERPs, etc

Tax payers will need to have a high level of confidence in the data to be submitted to the authorities. It is expected that authorities will undertake more focused audits. In electronic mode, the authorities are able to scan through voluminous data, compare that with other data sources such as scanning all expenses to identify cases where taxes have not been withheld or using the transactional data from GSTN portal to do the same.

Shorter response time: Using electronic audit techniques, the authorities are likely to process the data submitted speedily.

Tax payers will thus need to reinforce their tax processes/IT systems to respond to the requests of the authorities and identify upfront possible risks.

The income-tax department has brought digital transformation of its business processes to a significant extent through the Income-Tax Business Application (ITBA) project which provides an integrated platform to conduct various tax proceedings electronically through the ‘e-proceeding’ facility available on it.  ITBA is a digital platform for conduct of scrutiny assessment proceedings in an end to end manner. A new link — e-proceeding — was recently hosted by the department on the personal login of the taxpayer on the e- filing website incometaxindiaefiling.gov.in.

In order to digitise the appellate proceedings, online filing of appeal before the Commissioner of Income Tax (Appeals) has been made mandatory from April 2016 for the taxpayers who are required to file the return of income electronically. 
In line with the e-Governance policy of the government of India, the Income Tax Appellate Tribunal is expected to launch e-Filing of Appeals for providing efficient taxpayer services.

The Honourable Supreme Court has introduced paperless, digital management system which will enable litigants to access data and retrieve information online. The system is the first step towards ending the age-old practice of filing voluminous case records.

Along with e-assessments, the tax authorities are using analytics to help detect patterns and plug leakages to improve policy and operational effectiveness. Use of analytics will help the administration to collect data not only from traditional sources such as banks and financial institutions, but also from social media sites to match spending patterns with income declarations. Recently it was announced that with help of analytics the government has identified 67.54 lakh potential non- filers for Assessment Year 2014-15 (Non- Filers Monitoring System). Similarly under “Operation clean money” post demonitisation over 18 lakh people were identified with suspected irregular cash transactions.

With the increasing focus on ‘Digital India’, India should be looking at becoming efficiently managed tax rationalised nation. Use of technology will fast-forward the transformation of the tax function, thereby helping it keep pace with business expectations, create more efficiencies and manage risks better.  Transparency in the system coupled with reduction in time, cost and efforts of all concerned is a step in the right direction. Though there could be few hassles in the early stages, a well-coordinated system should be able to overcome these.

Analysis by Dinesh Agarwal — tax partner, EY India. With inputs from Ankur Goel, senior tax professional, EY