Income Tax – E Assessment

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In News: The government of India has over the last few years taken various steps to reduce human interface between the tax administration and the taxpayers and bring in consistency and transparency in various tax matters through use of Information Technology.

Finance Minister Nirmala Sitharaman has inaugurated the Income Tax Department’s National E-assessment Centre (NeAC). The NeAC will be based in Delhi, and will look after the functioning of e-Assessment scheme. The body would be headed by principal chief commissioner of income tax.

Regional e-assessment Centre (REC): Additionally, there would be eight Regional e-Assessment Centres (ReAC) in Delhi, Mumbai, Chennai, Kolkata Ahmedabad, Pune, Bengaluru and Hyderabad. Apart from assessment units, these centres would also be home to review, technical and verification units. Each ReAC will be headed by chief commissioner of income tax (CCIT). “Cases for the specified work shall be assigned by the NeAC to different units by way of automated allocation systems

Assessment units (AU): AU will perform the function of scrutinising tax returns, analysing submissions made and evidence submitted by the assesse and make requests, if any verification or technical assistance is required.

Verification units (VU): VU will perform the function of making enquiry, cross verification, examination of records or witnesses and recording statements, as may be required for verification.

Technical units (TU): TU will give advice on legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics, management or other technical matter required for conducting assessments.

Review units (RU): RU will review draft assessment order (DAO) to check if all material evidence, relevant points of fact and law, relevant tax case laws have been included in the DAO. It will also ensure the arithmetical accuracy of modifications proposed and perform other functions as may be required for review.

A paradigm shift in e-assessment

Between 2016 and 2018, the Central Board of Direct Taxes (CBDT), which is the apex tax administrative body, progressively amended rules, notified various procedures and issued the required guidelines to increase the scope of e-proceedings.

The CBDT also issued instructions that income-tax assessment proceedings to be framed in the year 2018-19 and 2019-20, shall be conducted through the e-proceeding facility. Exceptions were carved out for certain types of proceedings such as search and seizure cases, re-assessments, best judgement assessments, etc., where the assessment would be done through personal hearing process. CBDT also specified certain situations where taxpayer may be required to appear in person although the assessment is being carried out through e-proceedings.

However, under this framework, the element of personal interaction with the tax department was always present as the entire tax assessment was carried out by the tax officer having jurisdiction over the taxpayer. The government’s objective was, therefore, to move from ‘e-proceedings’ towards an ‘e-assessment’ mechanism where the tax officer conducting the assessment would not be known to the taxpayer.

• Towards this objective, the Finance Act, 2018, amended the provisions of the Income-tax Act, 1961, (Act) to empower the government to notify a new tax assessment scheme, whereby the proceedings will be conducted entirely in an electronic mode.
• The finance minister while presenting the Union budget in July also stated that the new scheme would be launched in a phased manner in the current financial year, i.e., financial year 2019-20.
• The new scheme was slated to bring in a paradigm shift in the way tax assessments were carried out in India by eliminating person-to-person contact to the extent it is technologically feasible, providing a fair and transparent framework of assessments, ensuring the tax assessments were technically sound and that consistent tax positions were taken.

E-Assessment Scheme, 2019

Centre Government had recently notified e-Assessment scheme to facilitate faceless assessment of income tax returns through completely electronic communication between tax officials and tax payers.

The first few steps…: In the first phase, the income tax department has selected 58,322 cases for scrutiny, for which e-notices have been served before September 30, belonging to cases of Assessment Year 2018-19. The cases for scrutiny in first phase have been identified based on risk parameters and are computer generated.

Why is it important?

The new system optimises the utilisation of resources through economies of scale.

• It will reduce face-to-face interaction between taxpayers and tax officials.
• Will reduce taxpayer’s grievances in line with the Prime Minister’s vision of ‘Digital India’ and promotion of ease of doing business
• It introduces team-based assessment with dynamic jurisdiction which will ease of compliance for taxpayers. 
• It is also expected to bring transparency and efficiency, thus improves the quality of assessment and monitoring.
• The department claimed that it will dispose of the cases expeditiously.
• Under the new system, taxpayers will receive notices on their registered e-mails as well as on registered accounts on the official web portal. They will also receive real-time alerts by way of SMS on their registered mobile number, specifying the issues for which their cases have been selected for scrutiny.
• The reply to the notice can be prepared at ease by the taxpayer at own residence or office and can be sent by email to the National e-Assessment Centre by uploading the same on the designated web portal.
• In view of the dynamic and all India jurisdiction of all officers of NeAC and ReAC, this kind of connective and collaborative effort of officers is likely to lead to better quality of assessments.