Experts call for review of faceless tax audit scheme

Experts have called for a review of the faceless tax audit scheme, seeking a more relaxed timeline for reconciliation between goods and services tax (GST) and income tax returns as well as more understanding on business transactions that may not fit the specified format.


At a virtual session on Thursday organised by public policy think tank Empower India, Ajay Rotti, Founder and CEO, Tax Compaas, said the requirement for detailed turnover reconciliations between GST and ITR pose several challenges, including short deadlines, excessive documentation, and partial understanding of GST laws. “This often results in unwarranted adjustments despite comprehensive explanations and documentation provided by taxpayers,” he said.

Several representations by industry as well as trade associations have also been sent to the Central Board of Direct Taxes seeking a revamp of the scheme that was introduced in 2020.

Empower India has also written to the CBDT recommending changes to the scheme. These include establishing guidelines for standardised GST and income tax reconciliation template to streamline assessments, including turnover reconciliation in tax audit reports for added assurance and focused assessment and requesting information on significant items upfront, reducing reliance on show-cause notices and aiding taxpayer preparation.

It has also suggested providing specialised training and updated databases for tax officers handling international transactions as well as making video conference recordings easily downloadable from the income tax website, extending accessibility to at least three years.

Rotti, however, noted that the government’s initiative of the faceless audit scheme is a very well meaning scheme that is aimed at bringing in transparency and tackling corruption.

Previously, in income tax audits, there existed a system where officers were identified, allowing face-to-face interactions for clarifications. “The shift to faceless assessments curtailed corruption by eliminating direct interactions and officer identification, establishing a comprehensive trail of proceedings,” Rotti said.

Shriram Subramanian, Managing Director, InGovern said taxpayers must proactively ensure meticulous records, allocate ample resources, both in systems and skilled professionals, and seek guidance from qualified tax advisors. “Discrepancies between reported turnovers demand a closer inspection and alignment between GST filings and income tax declarations,” he said.

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