According reports, only 1% of taxpayers' tax returns are picked for inspection. The selected cases are based on reliable information collected through third-party reporting.
India's direct tax administration is essentially trust-based, with almost 99 percent of tax returns approved without inspection. This technique emphasizes minimal interference for most taxpayers, which counters concerns of aggressive income assessment notices.
Cases indicated for inspection are identified utilizing algorithm-based data analytics, with an emphasis on high-probability cases of tax adds. Taxpayers whose cases are reopened for assessment are given the opportunity to present their case.
The inspection process, from case selection to assessment, adheres to objective standards. The government's faceless assessment process attempts to eliminate arbitrariness and bias, while also maintaining fairness and openness.
Inefficiencies in tax dispute resolution
Despite these safeguards, the Comptroller and Auditor General (CAG) has identified inefficiencies in handling direct tax complaints. Concerns include excessive tax requests, inaccurate interest levies, and problems in executing appeal orders, all of which delay refunds and cause additional stress to taxpayers. Additionally, around 580,000 tax appeals remain outstanding.
Government efforts to reduce litigation
To address these concerns, the government has initiated a number of programs, including:
Faceless assessments are team-based evaluations that assure impartiality.
High-pitched committees: Regional panels formed to handle complaints about excessive evaluations.
Vivad Se Vishwas scheme: The Vivad Se Vishwas initiative was launched in 2020 to help settle disputes and reduce litigation.
Increased monetary thresholds: To reduce the number of cases, higher appeals criteria were implemented.
Steps are also being taken to speed the execution of appellate orders. Taxpayers can now file applications for appeal-effect or rectification of orders immediately on the e-filing platform, eliminating delays and increasing efficiency.
