Income Tax Act was introduced in this sub-continent in 1922. Since then the prevailing practice is to go to income tax offices physically for tax related activities viz. return submission, production of books of accounts and supporting evidence, hearing, collection of certified copies of return, balance sheet or wealth statement or other necessary papers and for other requirements. Assessees need to meet tax officials face-to-face in person or through their authorised representatives. Assessees were habituated to this system for over a century but along the flow of time situation has changed a lot. In place of physical appearance online return filing has been introduced. Without going to tax offices assessees can submit return and collect acknowledgement online. This is certainly a good initiative.
As reported, immediate former Chairman, NBR said that NBR is now moving towards a fully digital and faceless tax administration to reduce harassment of taxpayers and bring transparency in the revenue system. Under this system, taxpayers will be able to receive all services, including return filing, online from home without going directly to tax offices (The Bangla Tribune, 16-5-2026).
A good intention indeed but ahead of going to details we need to know some primary details about this expected faceless taxation system. Procedurally (please read - theoretically) speaking, faceless taxation system is a fully automated and technology-based tax system where no direct interaction between taxpayers and tax officials is required. In this system, return filing, assessment and other works are done online. As taxpayers need not to go to tax office and face officials, this system reduces opportunities for corruption and harassment. As assessment is completed in an automated way, transparency remains in the entire process. As all works are supposed to be completed through internet, it is very time-saving for taxpayers and tax officials. All correspondence, submissions and hearings are conducted through online portals which entirely eliminates the need for personal appearance at tax offices.
Normally, every taxpayer falls under the territorial, classified or otherwise assigned jurisdiction of a particular tax office i.e. circle in our country. Return is to be filed there physically. Under online system, filed returns are stored in the database of concerned circle but under faceless taxation system a taxpayer’s return is no longer confined to that particular tax office. Returns are randomly assigned to a team of officers across the country ensuring full anonymity. There is no way to know for a taxpayer where his/her return has been placed. At global level, India became the first country in the world to introduce a completely faceless tax system (Faceless Assessment System) in 2020. The entire process of assessment, appeals and penalties is done in an automated system. In this system, a taxpayer’s file goes to an officer in another part of the country selected in an algorithmic manner. It eliminates the need for any face-to-face meeting between the taxpayer and the tax official.
South Korea has a fully faceless taxation system. Nepal is now trying to follow South Korea. As reported, Bangladesh is also thinking about it. Practically, the first step towards faceless taxation system has been initiated in Bangladesh through introducing online return (e-return) filing system. Major portion of individual assessees have been brought under this online system but the result is not at all encouraging. Finance Advisor of interim government acknowledged that 70% e-return filers have shown zero income in financial year 2025-26. Experienced persons think that e-return system has been utilised as a platform of tax evasion. NBR has notified (please read - warned) that there is no provision of filing zero return in income tax act. Filing zero return is a punishable offence under sections 312 and 313 of Income Tax Act, 2023 but it has turned ineffective. Situation clearly shows that the first step towards intended faceless taxation system has become frustrating. It is very difficult to be optimistic about the next stages.
Audit is now a widely used term in income tax department and among assessees. NBR has selected 72,334 files for audit under risk-based automated system for assessment year 2023-24. It has not been clarified what are the risks and for whom, assessee or tax department. For audit purpose notices are being sent from income tax offices to those assessees whose returns have been selected for audit. Such a notice, containing the reasons for audit, issued from a particular circle of Taxes Zone - Dinajpur, has recently been posted in social media. In that notice the assessee has been asked to produce explanation and evidence to concerned tax official on 24-5-2026 whereas the date (printed and handwritten) on that notice is 17-5-2023. So, on simple arithmetical calculation, the notice was issued three years ago which is nothing but absurd. It is a glaring instance of inattention, carelessness and irresponsibility of both office staffs and the official. However, it’s a different issue but the assessee certainly had to go to tax office either in person or through his/her authorised representative for producing explanation and evidence to DCT. So, the expectation of faceless taxation system is not effective here.
As reported, immediate former NBR Chairman said that if the faceless system is introduced, the need for taxpayers to directly interact with tax officials will be reduced which will reduce corruption and harassment to a large extent. So, if is the most important point here. If faceless taxation system is introduced, will the sections 179 (production of accounts and documents) and 327 (appearance by authorised representative) of Income Tax Act, 2023 be partially of fully deleted? Development of introducing faceless system is not yet clear. There are many other legal and practical points to ponder before advancing towards faceless taxation system.
The writer is a former Commissioner of Taxes.
