Central Government launches “Faceless e-Assessment” for Income Tax payers; aims to improve efficiency, accountability and transparency

The E-Assessment Scheme, 2019 (“Scheme”) for the income tax payers in India was given a significant boost on Monday, October 7, 2019, when the revenue secretary inaugurated the National E-Assessment Centre (“NeAC”). The Scheme targets to reduce the physical interaction between the tax payers and the tax assessment officers.

The Finance Minister, in her speech during the introduction of the union budget noted that there were instances during the scrutiny assessment of the income tax by the officials in the income tax department, which were undesirable and caused inconvenience to the tax payers. Therefore, in order to simplify the process, the government has launched this Scheme.

In the first phase, the Income Tax Department (“IT Department”) has selected 58,322 cases for scrutiny under the Scheme and the e-notices have been served before September 30, 2019 for the Assessment Year 2018-2019. Under the new Scheme, the scrutiny of income tax returns is supposed to be conducted in a more transparent manner.

NeAC is an independent office that will oversee the Scheme. There are 8 Regional e-Assessment Centres (“ReAC”) which are sub-ordinate to the NeAC and handle the functioning of the Scheme. The ReAC comprises of 4 units:

(i)                    Assessment Unit: Responsible for identifying issues, seeking information and analysing material to frame draft assessment orders.

(ii)                  Verification Unit: Responsible for conducting enquiry, examination of books of account, examining of witnesses and recording of statement (through video conferencing).

(iii)                Technical Unit: Responsible for providing advice on legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics etc.

(iv)                Review Unit: Responsible for reviewing the assessment order – whether material evidence was brought on record, points of facts and law incorporated, consideration of judicial precedents, arithmetic correctness etc.

The IT Department has deputed 2,686 tax officers for implementing the Scheme. The cases selected for scrutiny shall be allocated to Assessment Units of the ReAC in a random manner and the tax payers shall be sent notice via email on their registered e-mail accounts and sms on the registered mobile number, to specify the issues with return and notify that their case has been selected for scrutiny, by the NeAC without disclosing any information about the assessing officer.

The tax payer will then be required to send his/her reply via email or uploading the same on the web portal of the Scheme and the process will then be handled by different units of the ReAC as mentioned above.

Quick View

In a bid to expand the implementation of Digital India concept, the Government has time and again come up with schemes which focus on digitalisation of general transactions which the citizens have to deal with regularly. The E-Assessment Scheme 2019 is one such move to digitalise the scrutiny of income tax returns and reduce burden from the tax payers.

The Scheme is expected to increase transparency and efficiency in the scrutiny process and provide for ease of compliance for the tax payers as it proposes minimum physical interaction between the tax payer and the tax assessment officer. Even the Verification Unit, which is responsible for examining the witnesses, is supposed to do so via video conferencing, making it easier for the tax payer, as they won’t be required to visit the IT Department offices for the same.

The Scheme is also touted to have an improved quality of assessment as the Scheme focuses on systematic and specific verification. The different units of ReAC will function systematically to provide for a better monitoring system and expeditiously dispose off the cases.

One of the main reasons for introduction of the Scheme is to tackle corruption in the scrutiny of tax returns, however, only time will tell, about the success of the Scheme in this regard.

Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.