It’s that time of the year when we have filed our tax returns and are waiting for them to be processed. Sometimes, while processing the returns, the tax authorities may consider it necessary to ensure the assessee has not understated his/her income, computed excessive loss or under-paid taxes.
For this, they will serve a notice (under Section 143(2)) that requires the assessee to meet the assessing officer on a particular date and/or produce any evidence in support of the return. This is commonly called scrutiny assessment (Section 143(3)).
To avoid hassles for the taxpayer as well as reduce any room for malpractices on the side of the Income Tax Department, this manual interface is being made online or faceless now. In this regard, the I-T Department recently notified the E-Assessment Scheme, 2019, to be operational from October 9, 2019.
How it works
E-assessment helps in bringing greater transparency and accountability to the scrutiny process. To remove any prejudice on the part of the assessing officer, the scheme introduces team-based assessment as well as dynamic jurisdiction, under which, cases from one part of the country can be handled anywhere else. Every notice or order will be delivered to the assessee electronically either by uploading it on the assessee’s e-filing account or on the assessee’s mobile app (Aaykar Setu), or sending it by email, followed by an alert in each of the cases. The assessee needs to then file their response through the e-filing account within 15 days.
On receiving the response, the National e-assessment Centre (NC) will assign the case to an ‘assessment unit’ (AU) in any part of the country through an automated allocation system.
After going through the details and taking help from technical or verification units created for the purpose, the AU will pass the draft assessment order either by accepting the taxpayer’s returned income or by modifying it.
This will then be looked into by the NC.
The centre will then prepare a final assessment order, after giving the assessee an opportunity to be heard, if necessary.
E-assessment may be applicable for select scrutiny cases, to begin with.
This online interaction with the tax payer during assessment is not entirely new. To avoid personal interaction, e-mail based assessment was first introduced in October 2015. Various types of proceedings/hearings over e-mail were made possible on a voluntary basis in Mumbai, Bengaluru, Delhi, Ahmedabad, Chennai, Hyderabad and Kolkata initially.
E-proceedings
Later, in April 2017, an E-proceedings module was launched, under which a host of proceedings could be conducted with the taxpayer using their e-filing account on the I-T Department’s website.
For instance, e-proceedings can be used to resolve issues such as arithmetical errors in the return, incorrect claims, mismatch between Form 26AS/Form 16/Form 16A and the return.
The latest e-assessment scheme could differ from e-proceeding on two counts: one, in the the type of cases taken up; two, the jurisdictional assessing officer may not be the one handling the case under e-assessment.
Pros and cons
Doing away with the need for the taxpayer to be present in a particular place and time helps avoid the hassles and expenses associated with travel. Problems such as non-receipt or delayed delivery of notice or inability to be present at hearings due to other emergencies will no longer arise.
However, tax experts such as Sandeep Jhunjhunwala, Director, Nangia Advisors (Andersen Global), feel that the absence of face-to-face communication could be a bane at times when assessees need to explain the commercial rationale behind the position they have taken.
Also, personal appearance through video-conferencing under the scheme is allowed only under two scenarios.
One, when the AU has passed a draft assessment order modifying the taxpayer’s returned income and the taxpayer makes a request for a personal hearing in this regard. Two, for examination or recording of the statement of the taxpayer or any other person.
Experts like Jhunjhunwala feel that the conditions set to obtain the video-conferencing facility is again restrictive. Besides, the scheme provides the NC the right to transfer the case to the assessing officer having jurisdiction over the case at any stage of the assessment. But, this right is not provided to the assesse.
The e-assessment scheme is impersonal or faceless only if you agree with the assessment. If you don’t, you have the right to appeal to the Commissioner (Appeals) relevant to the jurisdictional assessing officer, followed by the Appellate Tribunal, a High Court and the Supreme Court. All these processes are not online.
Benefits limited to few now
While the E-assessment Scheme is aimed at reducing the face-to-face interaction between the taxpayer and the taxman, it should be remembered that the scheme will be applicable only for select scrutiny assessment cases.
The Tax Department, though, is yet to notify the kind of scrutiny cases that will come under e-assessment. What happens to those scrutiny cases that do not fall under the scheme?
In such cases, assessment proceedings will still be conducted electronically. For this, the assessing officer will issue notice/communication/show cause electronically and the taxpayer will have to respond or produce any evidence required through their e-filing account on the e-filing portal. This is similar to the e-proceedings process.
Exceptions
However, there are a few exceptions to this rule of scrutiny assessment through e-proceedings. One, even when assessment is carried out through e-proceedings, personal hearing/attendance can take place when books of accounts need to be examined, examination of witness is required, assessee requests for personal hearing based on the assessing officer’s proposed adverse view, or when the department invokes its power to conduct enquiries (Section 131).
Two, e-proceeding is also not mandatory in some cases. These include assessment of non-PAN cases; when the income tax return is filed manually and the assessee does not have an e-filing account; when an existing assessment is set aside and a fresh one is ordered; in Section 144 cases (best judgement assessment); in Section 147 cases (income escaping assessment); or in cases where complexities or administrative difficulties may stand in the way of conducing them online.
In these circumstances, the assessment can be done in the conventional mode.