With a view to make tax administration more efficient and further ease taxpayer woes, the Union Budget announced a slew of steps.

Amid various difficulties being faced by the administration and the taxpayers in the operation of the faceless assessment procedure, the Budget proposed that the existing provisions of the section 144B be amended to streamline the process of faceless assessment. Detailed guideline has been announced in this regard. These will take effect from April 1, 2022.

Secondly, a deterrence against tax-evasion has been proposed. Presently, there is ambiguity regarding set off of brought forward loss against undisclosed income detected in search operations. It has been observed that in many cases where undisclosed income or suppression of sales etc. is detected, payment of tax is avoided by setting off, of losses. In order to bring certainty and to increase deterrence among tax evaders, the Finance Minister has proposed that no set off, of any loss will be allowed against undisclosed income detected during search and survey operations. This is being done by inserting a new section 79A. The amendment will take effect from April 1, 2022 and will accordingly apply in relation to the assessment year 2022-23 and subsequent assessment years.

Thirdly, rationalisation of provisions relating to assessment and reassessment have been announced.

Fourthly, the Budget has announced rationalisation of the provisions of sections 271AAB, 271AAC and 271AAD. These sections contain provisions which give powers to the assessing officer to levy penalty in cases involving undisclosed income in cases where search has been initiated u/s 132 or otherwise, or for false entry etc. in books of account. In order to improve deterrence against non-compliance among tax payers, the Budget has proposed to amend the sections 271AAB, 271AAC and 271AAD by enabling the Commissioner (Appeals) to levy penalty under these sections along with assessing officer.

Fifth, the amount of penalty for failures listed under sub-section (2) of section 272A has been increased to Rs 500 from Rs 100 for every day during which the failure continues. Section 272A ensures compliance with various obligations under the Income Tax Act by penalising non-compliance and acting as a deterrent. However, the penalty of Rs 100 had been commented upon by the CAG as being too low. The penalty had not been increased since the section was introduced in 1999 and does not have an adequate deterrence value.