Newly Notified E-Assessment Scheme - An “E-volving” Revolution?

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The digital revolution bug seems to have bitten everyone…even the Income-tax Department! What started as a pilot project in 2015 with introduction of ‘paperless scrutiny’ has now snowballed into a full-fledged revolutionary pan-India based ‘faceless assessment’ with notification of the ‘e-Assessment’ Scheme. We cannot say that we did not see this coming…CBDT has, since 2015, steadily taken progressive steps/ initiatives to achieve this objective by amending various rules and notifying several procedures like revising format for Sec 143(2) notices to implement e-assessments, mandating 'E-Proceeding' for 'all' assessmentsthe mandatory quoting of DIN in all communications, launching a comprehensive system, i.e. the Income Tax Business Application [ITBA] etc. The recently notified e-assessment scheme involves creation of e-asssessment centres at National and Regional levels, auto-allocation of cases among these centres etc. For the purposes of this Scheme, the National E-Assessment Centre shall be the one-point contact between both, the taxpayer and the Departmental centre/units inter-se.

While the specified territories or class of people for the applicability of the Scheme are yet to be notified, who do you think the scheme should be made first applicable to? Will the Scheme lead to more additions being made in the hands of taxpayers as ITOs may not understand complexities of each business by reading through the documentation as uploaded by the taxpayers sans personal interaction? Is the Govt. well equipped to mitigate technical anomalies, if any, during actual implementation of the Scheme? 

Dinesh Kanabar
(CEO, Dhruva Advisors LLP)

The Government through the provisions contained in the Finance Act and in the subsequent addresses by the Finance Minister to the media, repeatedly expressed its desire to move toward faceless tax scrutiny to ensure no harassment of the assesses. Towards that end, the Finance Minister had proposed that the interface between the tax payers and the revenue be minimized or eliminated and desired that all such interface be electronic to ensure that the use of discretion available to the revenue is eliminated.

The enabling proposal for E-assessment contained in the Finance Act, 2018 have now been formalized by notifying E-assessment Scheme 2019.

The Scheme has done away with personal hearings except in case a show cause notice is issued to the aseessee proposing modification in the draft assessment order. In such a case, the assesee would be entitled to a personal hearing through video conferencing. Considering this, it is important for the taxpayer to focus on the overall assessment strategy e.g. ensuring all relevant facts/ documents are placed on record during the assessment and detailed submissions made in respect of various tax positions adopted.

Currently, during the course of assessment hearings, one is able to...

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Ketan Dalal
(Managing Partner, Katalyst Advisors LLP)

The interface with the tax department has always been difficult due to a variety of reasons; the major reasons are lack of understanding of the tax department of the way business functions, calling for irrelevant information, repeated adjournments and enormous drain of valuable time.  There has also been a tendency on behalf of assesses to avoid taxation.  Things have improved at both ends. At the tax payer end, things have improved significantly, at least in terms of value, if not in terms of number.  The reason for the improvement at the end of the tax payer are many: demonetisation is one, digital traceability is another, GST is the 3rd and in case of larger assessees, recognising the value of being well governed is also a major reason.

As per data of 31st March 2017 (the numbers may not have changed substantially thereafter)

  • the number of returns filed were 5 cr and about 4.67 crs are of individuals, which means that only about 30 lacs is non individual.  Of this, 30 lacs, companies were about 7,92,000 which means that the balance are firms, HUFs etc.
  • in terms of the tax payable by non – individuals, companies were 7,92,000 the balance being firms etc. Out of the...

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Girish Vanvari
(Founder, Transaction Square)

“The e-assessment Scheme is a progressive signal towards the transition towards faceless assessment and tax-payer friendliness. This is a significant milestone under the ongoing policy of e-communication adopted by the tax administration coupled with pilot e assessments in certain cities over the last few years. The Scheme has rightly recognized the need to accommodate circumstances that would need personal intervention and accordingly has left it to the discretion of National e-assessment Centre to transfer cases to Jurisdictional AO if considered necessary. It is expected that this discretion would be utilized judiciously only in complex matters.

The Scheme provides for assignment of cases to Regional e-assessment Centre through automated allocation system. Such automation and less human intervention is expected to reduce red tapism. Also, within few days of notifying the e-assessment scheme, the CBDT has already posted officers in the newly formed Assessment units and has already set-up National e-Assessment Centre to implement the Scheme at the earliest which signals the intent of the government for a speedy implementation of the Scheme.

Given the mechanics of the Scheme one may expect technical anomalies to crop up at the time of actual implementation but the timely redressal of...

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T. P. Ostwal
(Senior Partner, T P Ostwal & Associates)

The e-assessment scheme has been very successful in a number of countries, both developed & developing, like Singapore, UK, Brazil, Mexico, Japan, Germany etc. I have no doubt that the e-assessment scheme will be successful in India and the Government's intentions are very clear in this regard. If the pilot project was initiated in 2015, then why would it not succeed in 2019?

However, I need to know how one will fix accountability in case errors are committed by individuals working in a unit. In my opinion, if mistakes are committed in such cases, the head of the unit should be held responsible. Further, how do you expect the e-assessment scheme to succeed if one is expected to give his phone number in the return of income? If the tax officer wants to interact, though not required or desirable, with the disclosed phone number he can do so. Therefore, faceless assessment requires no contact, including contact on telephone. All communication should be done only through e-mail.

Another thing is that the IT Department should scrap the big buildings and concept of cabins, further no more filing clerks are required for doing clerical jobs. The tax officer...

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K.R. Sekar
(Partner, Deloitte Haskins and Sells LLP)

The government has introduced E assessment with the object of minimising the intreactions between Tax Payer and Tax Officials. While this move is welcome but there are significant challenges in implementing. The government should address those challenges. The challenges are highlighted below:

  • Whether department is equipped enough to complete the assessment through system itself as it calls for lot of data, understanding the business model and understanding the technical issues etc?
  • In the last two years when E assessment was in vogue, the time given to Tax Payer is very less and they are expected to submit the information at short notice and through portal. Due to lack of time in disposal of cases, arbitrary adjustments were made. In fact sometime the tax payer felt a personal hearing could have been better as he could have explained the issues to tax officer. So the real challenge is understanding and appreciating the issues though tax department is entitled to take a different view.
  • The purpose of E assessment is to get qualitative assessments by involving specialist from IT department who understands the Industry and who brings Industry expertise. Without this if E assessment leads to mere...

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Uday Ved
(Partner, KNAV)

The Union Government has remained true to its heritage in easing the process of doing business in India. The Ministry of Finance vide Central Board of Direct Taxes (‘the Board’) notified the E-assessment Scheme, 2019 (‘scheme’) in exercise of the powers conferred upon it through Budget 2019-20. First glimpse of the e-assessment proceedings was heard in the budget speech 2019-20 given by the Finance Minister Nirmala Sitharaman, though the first stone was laid in October 2015, where the Board initiated paperless assessment proceedings on a pilot basis in few locations. The Board traversed almost for four years, rolling down various processes in parts before finally, notifying the scheme on September 19, 2019.

Key points:

  • The scheme aims at eliminating human intervention between the taxpayers and the revenue authorities and setting up a centralised cell, which will allocate cases based on the artificial intelligence, machine learning capabilities, etc. thereby, moving from erstwhile system of manual allocation. This will inculcate an atmosphere of transparency among the stakeholders. Further, the Board understands the complexities of the modern-day taxpayers and therefore, have provided a window to transfer suitable cases to the file of the Assessing Officer.
  • What remains to...

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Simachal Mohanty
(Chartered Accountant)

E-assessment scheme is a novel step by Govt. which will give impetus to technology based tax assessment. Initially this will be a challenge for the assessee as well as the Regional e-assessment centers which will conduct the tax assessments. The assessee will have to prepare the submission documents in a detailed and lucid manner so that the tax officer understands his reply and takes suitable action. What the assessee is going to miss is the impact of the personal articulation skill of its own or its authorized representatives before the tax officer. In view of this, the demand for ‘right presentation’ in the written format will be the key to a successful representation.

At the other end, the tax officer will have to act very judiciously since the scope of asking the queries in the last minute will be limited. Further, e-assessment may not give rise to the demand cases due to lack of personal interaction & submission by the assessee. The tax officer will act very judiciously to ensure that the assessment order remains sustainable before the appellate authorities.

Now the focus will shift to qualitative assessment from the quantitative assessment approach. Tax officer used...

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K. R. Girish
(K. R. Girish & Associates)

Faceless e-assessment

Scrutiny assessment systems until now required lots of personal interaction between the taxpayer and the tax department. It was the vision of the existing Government to eliminate undesirable practices under the existing system and introduce a scheme of faceless assessment in electronic mode.A very welcome move that needs to be complimented.

It is evident from the first day of this Government that it is inclined more towards digitization in the Indian economy. As announced by the Finance Minister in this year’s budget, the e-assessment scheme involving no human interface was introduced by the Central Board of Direct Tax (“CBDT”) vide Notification No. S.O. 3264(E) dated 12-09-2019.

The process of e-assessment commenced from the year 2015 as ‘e-proceedings’ wherein, it was introduced only in 5 cities as a pilot project. In a couple of years, it was made applicable to majority of India and a format for scrutiny assessment notices where changed and specifically for e-assessment. Further, in the year 2018, CBDT mandated e-proceedings for all with certain exceptions.

In the e-assessment scheme which is now introduced, the CBDT intends to use ‘Automated allocation system’ for randomized allocation of cases,...

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Sudhir Kapadia
(National Tax Leader, EY India)

A revolution always leads to disruption in the short term, however, evolves into a steady, future state once the dust settles in.  The scheme[1] recently notified by the Central Board of Direct Taxes (“CBDT”) to implement faceless assessment under the Income Tax Act is also expected to travel through this evolution journey and may cause some disruption in the short term. However, in the longer run, this will advance to a progressive system of assessment, providing greater consistency in tax assessments nationally and offer ease to tax payers.

As per the scheme announced by the Government, National e-assessment Centre can assign scrutiny of any case to an Assessment Unit in any Regional e-assessment Centre through an Automated Allocation System.  If the Regional Centre requires additional information or clarification, the same will be requested through the National Centre only.  After considering inputs received, Assessment Unit will pass a draft order, which will be examined by National Centre and reviewed by Review Unit before a final order is provided to the tax payer with or without modifications.

Considering the above, the scheme does envisage a robust process to achieve the objectives of transparency, accountability and efficiency.  However, that...

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