Taxpayer Charter: Why execution matters

The Centre recently unveiled a new Taxpayer Charter, listing out an income taxpayer’s rights and obligations.

The UK and Australia have similar charters in place.

This move comes a year after the Centre abolished the Tax Ombudsman institution that was established nearly a decade ago. The Charter is trying to address this gap in a way. It addresses only income taxpayers, while the ombudsman scheme was available for both direct and indirect taxpayers. The Charter emphasises that the Income Tax (I-T) Department trusts the taxpayers upfront.

However, there are no new elements in the charter as such because the rights and obligations are already part of the Income Tax Act, 1962.

Global experience

Australia and the UK have strived to codify their tax charters into an institutional philosophy on how revenue-collecting agencies deal with taxpayers. There are frequent reviews of implementation of their charters based on the experience of taxpayers. In India, there has been no such information yet, except the one page that enumerates rights and obligations of a taxpayer.

It doesn’t stem from any legal provision in the I-T Act either. The announcement of the charter seems to be an attempt to tone down the adversarial approach that the I-T Department has taken in the past with some taxpayers.

The charter seems to dovetail the new faceless assessment and appeal scheme that the Centre has unveiled.

Here, the assessment proceedings have been de-linked from the taxpayer’s location, and will be distributed to income-tax officials across the country in a randomised manner.

There is not enough clarity as to whether all cases will be taken up through this faceless assessment and appeal scheme, or how documents that are needed for assessment proceedings will be allowed to be shared with the assessing officer or at the level of commissioner appeals.

Execution is key

The Taxpayer Charter seems to have resurrected the complaint mechanism that was earlier available through the ombudsman scheme.

Taxpayers who are unhappy or perceive the handling of their assessment proceedings to be contrary to the Taxpayer Charter can approach the Principal Chief Commissioner of Income Tax of their respective zones.

How this will work in an environment where assessments are distributed across the country to income-tax officials is still not clear. One will have to wait for more details.

One reason the Taxpayer Charter might not work well in the current environment is the practice of assigning steep revenue targets to income-tax officials.

Only if the I-T Act, its rules and the Central Board of Direct Taxes’ regulations make complying with the charter mandatory, can there be any meaningful change in the experience of an income taxpayer.

It needs to be seen whether this new charter changes the income taxpayer’s experience while dealing with officials while undergoing scrutiny assessments.

It also needs to be seen whether the charter evolves into a more robust grievance redressal mechanism. The current mechanism available through the Income Tax Department’s return e-filing portal and ASK centres allows grievances such as non-processing of returns, not receiving refunds, return rectification pending with assessing officer and correction of incorrect outstanding demand.

It will be interesting to see how the charter evolves these processes to make the interaction of Income Tax Department with taxpayers easier, especially in cases involving alleged harassment.