Changing times, Transparency and Purposive compliances in the era of Artificial intelligence: Note for the Tax practioners, Revenue Officials.

Changing times, Transparency and Purposive compliances in the era of Artificial intelligence: Note for the Professionals in the field, Revenue Officials and to the tax payers. Important to all.

Something was revolutionary, when Anna Hazare raised the voice against corruption. It really was the voice of the country. And the movement led by him, was appreciated by all, consented by all. It was the Transparency which people wanted. The problem was identified and taken up. It was a work going on. There were many complications into the same. A country too big. So many states. It was really difficult to bring in the change in system.

Just sharing the scheme which existed since our independence. The sales tax, which was called by various names, were levied and collected by the states, apart from the state excise. Income Tax and Central Excise and Customs was collected by the Central Government. There was no co ordination between the state and the Centre. Information sharing consumed a lot of time. Investigating Agencies , such as the Directorate of Income Tax, Enforcement Directorate, CBI etc, had their own information and information sharing was very difficult and time consuming, and this brought huge Litigations too. Sometimes unending.

In the days now, slowly but gradually, we are preparing for a big change. It is bringing transparency for the first time. Now with the introduction of GST, the complications by Central Excise, State Sales tax, Service Tax, have all merged into Goods and Service Tax. (GST). Information in forms of Returns is all digital and difficult to change. The collections of both these taxes are done by the Centre. They constitute the major collections by the Government. Registrar of Companies has all the data submitted by the companies. KYC of all the persons and signatories have been completed. Investigating agencies are sharing information with each other electronically, and the discrepancies and mismatch of information are flagged automatically. Shady transactions are eyed through Artificial Intelligence. Lesser interface in collection of evidence and data. This simplifies investigation but makes difficult to disprove. In these cases, the chances of second innings and delaying the litigation becomes difficult.

It is the change in system and procedure. Adopting the same is a wise choice.

Now , this transparency in collection of data, the information sharing has also become very easy. Use of artificial intelligence has reduced the chance of manipulations too. This shall lead to purposeful Investigation by the Investigating Agencies too. By this the harassment in making Roving enquiries would be difficult. It would lead to the easy adjudication too. And the process will be changing. The earlier adoption would lead to easy adjudications.

Putting this in a very simple manner as we are studying not only the basics in compliances but also the reasons for the compliances and its implication too.  One fault or one additional compliance, would lead to a misinformation. There are several independent professionals working over the same. At this juncture , the advise on hearsay would lead to big implications. Importance should be over the understanding of compliances and the responsibility for the same. Reference is drawn towards the series of articles off late published in the same forum.

Off late, the Government has structured new sites for the Ministry of Corporate Affairs who hold the basic information. It means that by a click of button, companies with same directors, same location, or same venture can come out in a minute and this data can be shared to any agency within a fraction of a minute. This would include the phone Nos of all the persons and the professionals who has certified the form through the digital signature. Location can be tracked through that. The information of all the financials with the registrar can be matched with the Income tax returns and the financials. The banks have been given the permission to see the profile of any of their customers, which is again duly monitored. The Movement of goods are identified by the e Way bills, which are linked with the GSTIN, and same is automatically tallied with the income tax details. This is use of artificial intelligence, which raises flags without bias. These flags can be lifted only by way of perfect reconciliation. It is to be mentioned, that all the information so given on Digital Signature are duly verified by the person signing and the certification done by the professional becomes an valid evidence. This is important to understand because many professionals just fill up compliance, and later revise the same. The revisions are normally a bad practice as it leads to two verifications. Wrong verification means a wrong affirmation. The purpose of compliance should be understood and applied with responsibility by a professional advising the client.

If a comparison is made with the GST and Income Tax, then the number of total assesses in India assessed to income tax are around 5.78 Crores Individuals and around 1.38 crores other entities other than Individuals. The Total no of GST registrations in India are just 1.04 Crores. The Government has made the total system of Income tax faceless, which is not liked by many, but this change looks evident as it is the part of transparency and simplification in adjudication too.

There is a debate going on, for the making the changes in phased manner. The changes do not come in phases. If it is made in phases, the entire process looses its virtue. Matter is under discussion and before the courts too. Where the matters are sub judice, we should wait for the courts for the right adjudication. After the implementations, there are bound to be many corrections to the same. These bottlenecks should be removed fast. The professionals like us need to adopt the changes understanding the purpose fast. It becomes the prime duty for the seasoned professionals to be part of the promoting the changes for the early and speedy disposals of the matters. This is the time, when the advisory should be based on the assured results.