Chartered accountants could find themselves grappling with additional responsibilities as the possibility of robots being taxed in the future looms. Pinakin Desai, a practicing chartered accountant, revealed at the Reimagine Summit hosted by the Bombay Chartered Accountants’ Society that a law mandating robots to file tax returns might be on the horizon within the next two years.
Advocate Nishith Desai, the founder of Nishith Desai & Co., raised the question of whether robots should be recognized as distinct entities, akin to humans, noting that some countries are even offering citizenship to robots.
He went on to assert that robots in India could soon be subjected to taxation, leading to an increased workload for chartered accountants. However, uncertainties persist within the industry regarding whether chartered accountants would be absolved if errors are introduced in tax returns due to the use of artificial intelligence tools. Currently, meticulous due diligence is essential in tax return submissions, as errors introduced by technological tools offer no escape from potential tax litigation.
Nishit Desai explained that Section 273B of the Income Tax Act, 1961, states that penalties should not be imposed in certain cases if sufficient due diligence is conducted. However, tax professionals face the quandary of whether AI-based evidence will be admissible in tax litigations, with legal courts potentially relying solely on past cases to make their decisions.
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This challenge is exacerbated by the Income Tax Department’s utilization of data from diverse sources, including banks, mutual funds, customs, property registrars, social media, and satellite imagery. The department even employed satellite images in a tax dispute related to agricultural income, highlighting the complexities introduced by technology, as mentioned by Pinakin Desai.
Despite the use of advanced tools, the need for caution remains paramount. Shariq Contractor, a partner at CNK & Associates, emphasized that even with government-based software, taxpayers need to double-check returns to mitigate potential errors.
Another facet of this technological evolution is the necessity for auditors to safeguard against legal disputes. The careful analysis of insurance contracts is recommended to shield against potential legal battles arising from the use of AI or inadvertent technological errors, as demonstrated by a US lawyer losing their bar license due to AI-generated misinformation.
In navigating the ever-evolving landscape of AI and technology, ensuring robust professional indemnity insurance coverage for Chartered Accountancy firms becomes crucial to safeguard against litigations tied to AI and different jurisdictions, according to Nishit Desai.