Introduction to Section 130 of the Income Tax Act
The tax administration in India has been on a continuous journey towards digitization and transparency. Section 130 of the Income Tax Act marks a significant milestone in this journey by introducing the Faceless Jurisdiction of Income-Tax Authorities. This initiative enables income tax operations to be carried out in a faceless manner, reducing direct interaction between taxpayers and authorities, thus fostering transparency, efficiency, and accountability.
In this blog, we will explore the objectives, historical background, and key elements of Section 130 of the Income Tax Act, and delve into how the Faceless Jurisdiction Scheme aims to reshape tax administration in India.
Objectives of Section 130: Making Income Tax Jurisdiction Faceless
Key Aims of the Faceless Scheme
The faceless scheme under Section 130 is designed with the following objectives:
- Transparency and Reduced Interaction:
- One of the core objectives of Section 130 is to eliminate face-to-face interaction between income tax authorities and taxpayers to the maximum extent possible. This minimizes bias and enhances transparency.
- Efficient Use of Resources:
- By adopting advanced technological tools, the faceless scheme aims to make the best use of resources through economies of scale and functional specialization.
- Dynamic Jurisdiction and Team-Based Operations:
- Section 130 introduces a team-based approach where two or more income-tax authorities work collaboratively on cases. This approach facilitates a dynamic jurisdiction where teams address cases based on the area, income type, or other parameters.
Powers and Performance Under Section 130
Key Provisions Facilitated by Section 130
Under Section 130, the Central Government is empowered to establish a faceless scheme that facilitates various functions in a faceless manner. Some of the key provisions covered are:
- Exercise of Powers under Section 120:
- Allows income-tax authorities to exercise their functions and powers as conferred by the Income Tax Act.
- Vesting Jurisdiction with Assessing Officers under Section 124:
- Empowers assessing officers to handle cases without physical interaction, as described under Section 124.
- Transfer of Cases under Section 127:
- Facilitates seamless case transfers through digital means, ensuring continuity of jurisdiction.
- Jurisdiction Management in Change of Incumbency under Section 129:
- Manages jurisdiction transitions effectively when there’s a change in the incumbent officer, promoting uninterrupted tax administration.
Historical Evolution of Section 130
Section 130 has undergone various amendments to reflect evolving tax administration requirements. Initially, Section 130 dealt with jurisdictional issues among Commissioners when they had concurrent powers over the same taxpayer. Over time, several amendments have enhanced and expanded the section to accommodate modern needs.
Key Milestones in Section 130
- 1970 Amendment: Section 130 was redefined to clarify the role of Commissioners with concurrent jurisdiction over the same taxpayer.
- 1984 Amendment: Expanded jurisdiction of Commissioners over search and seizure cases under Section 132.
- 2020 Amendment: Marked a new era by introducing the Faceless Jurisdiction of Income-Tax Authorities through the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020.
Introduction of the Faceless Jurisdiction Scheme
The Faceless Jurisdiction Scheme was officially notified by the Central Government on March 28, 2022, laying the foundation for a modernized and transparent tax administration system. This scheme applies the powers conferred by Section 130 to bring a range of income-tax operations into a faceless system.
Benefits of Faceless Jurisdiction Under Section 130
The Faceless Jurisdiction Scheme offers various benefits that simplify tax administration in India:
- Enhanced Transparency:
- By eliminating face-to-face interaction, the scheme promotes greater transparency, building trust between taxpayers and the authorities.
- Optimized Resource Allocation:
- With automated allocation and specialized teams, resources are better utilized, ensuring swift and accurate case handling.
- Reduced Bias:
- Randomized case assignment using AI minimizes human biases, enabling a fairer tax administration process.
- Improved Accountability:
- The team-based approach and dynamic jurisdiction enhance accountability, making tax officers more responsible for their actions.
Frequently Asked Questions (FAQs)
1. What is the purpose of Section 130 in the Income Tax Act?
Section 130 aims to facilitate a faceless and transparent tax administration system by enabling various income-tax operations in a faceless manner.
2. How does the faceless jurisdiction work under Section 130?
Faceless jurisdiction operates through automated case allocation, using AI and machine learning to assign cases randomly to income-tax authorities. This setup minimizes human bias and optimizes resources.
3. Which provisions are covered under the Faceless Jurisdiction Scheme?
The scheme covers provisions related to faceless assessments, appeals, penalties, verification, settlement, and advance rulings as per Sections 144B, 250, 274, 135A, 245D, and 245R of the Income Tax Act.
4. How does faceless jurisdiction improve transparency and accountability?
Faceless jurisdiction reduces face-to-face interaction, which minimizes biases. It also introduces team-based, accountable operations that enhance transparency and build taxpayer trust.
Conclusion
Section 130 of the Income Tax Act and the Faceless Jurisdiction Scheme represent a transformative step in India’s tax administration, driven by technology and transparency. By reducing direct interaction, optimizing resources, and fostering dynamic jurisdiction, this scheme promises a more efficient and trustworthy tax administration. With the benefits of reduced bias, enhanced transparency, and optimized resource allocation, faceless jurisdiction is set to become a cornerstone of tax administration in India.
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