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E-mail response to tax notice: step in the right direction
September, 24th 2015

On 19 September, the chairperson of the Central Board of Direct Taxes announced that a process was being set up where taxpayers would soon be sent notices for scrutiny assessment by e-mail, instead of by a paper document, in cases where a bona fide e-mail address was mentioned in the return of income. Instead of attending physically before tax officers, a taxpayer can respond through e-mail, giving the required details in her e-mail and through scanned attachments. Notices seeking further information would also be sent by e-mail, and physical attendance may be required only for the final hearing.

The CBDT is working on a strategy to create the required processes and capacity in this regard. It was also stated that certain security issues in this regard were currently being addressed, after which the system would be implemented.

As mentioned by the CBDT chairperson, there were instances where taxpayers complained about tax officers raising various queries orally, which were not recorded in the proceedings sheet forming part of the taxpayers file, and going beyond their brief in raising unnecessary roving or fishing enquiries. According to her, this would enable a focused and specific query, linked to the criterion on which the tax return was selected for scrutiny. Tax officers have also been instructed to inform taxpayers about the reason that their case has been selected for scrutiny.

This is indeed a welcome initiative, as it would reduce and minimise the physical interface between tax officials and taxpayers. The intended measure is certainly laudable and taxpayer friendly, and will result in reduction of harassment of taxpayers by tax officials. The CBDT needs to be complemented on taking up this initiative. However, one would need to wait and see how it is actually implemented in practice.

The past experience of implementation of income tax systems has left much to be desired, particularly in the initial stages. Filing e-returns often leave taxpayers grappling with the issue of how to fill up the return, given their particular circumstances. The forms are also made available very late, leaving taxpayers little time to prepare and file returns. In fact, such delay has attracted a number of writ petitions all over the country, seeking postponement of the due date of filing of tax returns.

There is an online system of objecting to demands appearing online, so that they are not adjusted against refunds due to the taxpayer. This is an excellent system, if it really worked. However, personal experience shows that even after providing proof of pending rectification applications in respect of such demands online, no action is taken to delete such incorrect demands, resulting in the same demands again being raised for enquiry in subsequent years. There is no system for a taxpayer to ensure that the actual process of rectification is carried out even today, though there are time limits for such rectification. It is, therefore, absolutely essential that there is system-driven monitoring, which ensures that follow-up action is being taken by tax officers within the prescribed time. It is only then that a taxpayer would not have to resort to repetitive responses and reminders for the same problem.

Proper controls also need to be put in place to ensure that adequate time is given to taxpayers to respond to e-mailed notices. In the past, one has come across instances where a notice is e-mailed, giving a deadline of just a day to respond, failing which demands are raised. Instructions need to be issued that at least two weeks time needs to be given to taxpayers to respond. Further, where a taxpayer seeks more time to provide the requisite information, such requests for extension of time should be speedily replied to, within 24 hours. Adequate e-mail space needs to be provided to each tax officer, to ensure that taxpayer e-mails do not bounce due to the mailbox being full, on account of the bulky attachments which taxpayers may need to send with their e-mails.

Tax officers also need to keep in mind situations where a taxpayer may not be able to access her e-mail for some periods of time. Take for instance, the recent withdrawal of Internet services in Gujarat for certain periods to prevent public unrest (when the CBDT rightly extended the due date for filing of income tax returns by a week), or a situation of natural calamities, such as floods, or electricity blackouts, which could result in the e-mails not being received or accessed by taxpayers.

Lastly, e-mail notices and responses should not be mandatory for all taxpayers. There are certain taxpayers who are still not comfortable with electronic media, such as senior citizens. Such taxpayers need to be given the option of receiving notices in physical form, and responding through physical letters, which could be filed without the requirement of personal attendance. In any case, even given a choice, most taxpayers would opt for e-mail responses, rather than undertake the trek to the tax office.

The CBDT seems to be taking steps in the right direction in the interest of taxpayers, so far as tax processes are concerned. Many of the problems outlined above arise due to the attitude of the lower rung tax officers towards taxpayers. There is a crying need to reorient tax officer attitudes through proper training and orientation courses, proper monitoring of certain key processes and ensuring accountability. That would make taxpayers a happy lot indeed, and go a long way in improving voluntary compliance.

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