Focus on guidance over intimidation while dealing with taxpayers: CBDT to officials

Income-tax department officials should make renewed efforts to come across as responsible, responsive, transparent apart from undertaking an approach of "guidance over intimidation" while dealing with taxpayers, the CBDT chairman has said.

Ravi Agrawal, the head of the direct taxes administration body of the country, suggested a 'PRUDENT' approach to be followed by the taxmen as the income tax regime completed 164 years in India. The Central Board of Direct Taxes (CBDT) chief recently spoke to his colleagues via an online video 'Samvaad' session -- The Chairman Speaks -- on the occasion of the 165th Income Tax Day that was observed on July 24.

He said the tax department has undergone "transformational" change, adopted technology in its processes, increased taxpayer base and that its orientation has changed from being largely an "enforcement and adversarial" department to largely a service department facilitating taxpayer compliance through non-intrusive tax administration.

Agrawal said revenue under the direct tax category has been growing and there were about 65 crore PANs and more than 8.5 crore ITRs were filed during 2023-24 fiscal.

"Our role as part of the tax administration is critical. It is incumbent on us to service the citizens as well as business with professionalism as we embark on our journey to fulfil honourable Prime Minister's vision of 'Viksit Bharat' by 2047 and with the beginning of 'Amrit Kal', I take this opportunity to present an approach to be adopted by each one of us irrespective of rank in the department," he said.

The approach, he said, has been encapsulated under the acronym PRUDENT and it will guide the officials as they continue to navigate the "complexities" of tax administration. Explaining the acronym PRUDENT, Agrawal said P stands for professionalism, R for being responsible and responsive, U for understanding transactions and businesses, D for dedication and due diligence, E for effective enforcement, N for non-intrusive administration and T for technology-based tax administration.

He said the tax officials should enhance professionalism in the department by investing in capacity building, fostering adaptability, prioritizing taxpayer service, maintaining a judicious approach and ensuring ease of business on one hand, while ensuring data driven action. By being responsible and responsive, he said, the taxman has "to be decisive, rather than have an ad-hoc approach". "I would like to emphasize that any decision that we take has impact on the concerned taxpayer. As a responsible administration, we must commit ourselves to be transparent in our actions. This transparency builds trust and ensures that the administration is held accountable for its actions," the CBDT chairman said, adding that at the heart of the department's efforts "lies the taxpayer".

He said the taxman's action must be "grounded in rigorous research and analysis" and guided by evidence-based strategies that promote fairness, efficiency and sustainability. The word U, he said, stands for tax officials having "good understanding" of tax laws. "It involves staying informed about current regulations, amendments, judicial interpretations, and legal obligations. Equally important is understanding the nature of financial transactions, which entail recognising the implications of various financial activities," Agrawal said.

The chairman said the taxman should undertake decisions that "stand the test of" judicial scrutiny, as well as assist in taking well informed decisions. "It shall also bring more credibility and acceptability of our decisions amongst taxpayers," he said.

The D stands for dedication, due diligence and taking data-based decisions, he said. "In a pursuit of excellence, every step we take must be deliberate and well considered. Excellence is not just an accidental quality," he said, adding that the taxman must evaluate every aspect of their decisions, ensuring that they are based on "solid information" and "thorough analysis".

The word E in PRUDENT is meant for effective enforcement with empathy, he said adding deep analytics and artificial intelligence should be used to "throw up red flags in potential cases and their approach "should prioritize guidance over intimidation". "By addressing the challenges taxpayers face, and offering solutions thereon, we can create an environment that encourages dialogue and trust," Agrawal said.