India to introduce paperless revenue audits

Attending to revenue audits (RAs) in India is a time-consuming and cumbersome activity where the taxpayer is required to visit the Tax Department frequently to submit various bits of information and explanations called for by the Tax Officer. Visits to the Tax Office are also characterised by long waiting times, either because the Tax Officer’s discussion with another taxpayer gets extended or because the Tax Officer is occupied with internal meetings or discussions. It is also not unusual for the taxpayer to visit the Tax Office on the appointed date to find that the Tax Officer is not available on that day.

With the new initiative of paperless RAs, waiting times and travel times would be significantly reduced. This will save the taxpayer and tax advisers or consultants the necessity of visiting the Tax Office time and again. This initiative will be particularly helpful in smaller cases where the issues involved are limited and the taxpayer is able to provide the necessary information without being physically present.

Paperless audits are being started as a pilot project for non-corporate taxpayers. Initially, this would be launched in five metro cities at Mumbai, Delhi, Bengaluru, Ahmedabad and Chennai and 100 cases would be selected  in each of these charges where RA has been initiated based on certain specified parameters. The tax authorities shall obtain the prior consent of the taxpayer before initiating the paperless RA. All communications with the taxpayer in such cases shall be made using the email address specified in the tax return.

It is expected that the initiative could soon be extended to other categories of taxpayer, including corporate taxpayers. The government is likely to start this initiative with smaller companies and thereafter extend it to larger companies. However, it appears that very large taxpayers, or taxpayers with significant complexities in their tax affairs, would still be required to attend the Tax Offices in the same way as at present, given the peculiarities of their cases.

This is a welcome move from the Modi Government under its flagship ‘Make in India’ and ‘Digital India’ programmes. This move is seen as a progressive step to promote ease of doing business in India and automate tax compliance. This initiative will help to usher in more efficiency and transparency for RAs and make tax compliance less cumbersome. The government is also actively focusing on reducing the touch-points between the taxpayer and the tax authorities so that the RAs and other tax matters are handled in an objective and tax friendly manner. The CBDT chairperson has aptly outlined the government’s intention by stating that they are working on initiatives where 99% of the taxpayers need not see their offices. 

Maulik Doshi is a partner at SKP Group in Mumbai, India.