E-Assessments – Paving Way For Pioneering Tax Reforms!

One of the subjects for discussion at the 22nd National Convention of the AIFTP which was held at Mumbai on 14th December 2019 was “e-assessments – paving way for pioneering tax reforms”. Dr. K. Shivaram, Sr.Advocate chaired the session and Mr. Mukesh Patel, Advocate, Ahmadabad, addressed on the subject. The subject, being new, involved a number of issues. For the benefits of tax professionals, a detailed article is published and video of the session is also hosted. Authors have also included the amendments proposed in the Finance Bill, 2020 regarding e-assessment and e-appeal before CIT(A). The authors have also made various suggestions

1. Introduction:

1.1. One of the suggestions made by the All India Federation of Tax Practitioners (AIFTP) from time to time is to introduce the Accountability provision in the Income -tax Act,1961(Act). Dr. Raja J. Chelliah in his committee report (1992) 197 ITR 99 (St) (112) on accountability had recommended that, “The Assessing Officers should be made accountable for their actions. If the percentage of demands not up held by the Tribunals is higher than a reasonable figure, say 50 percent, the officer should be given a blank mark and reprimanded. On the other hand, an Assessing Officer should be protected and defended if he has obeyed instructions of the Board and followed case laws even though audit might raise about his actions”

1.2. Present Government under the leadership Honourable Prime Minister of India  Shri  Narendra Modi with a view to help honest taxpayers and impart greater efficiency, transparency &accountability in the assessment process, faceless assessment (e-assessment) was first introduced in the year 2015 on pilot basis in five cities viz. Ahmedabad, Bangalore, Chennai, Delhi and Mumbai, which was extended to two more metros in year 2016. In the Annual Conclave of Tax  Administrators  and senior officials of the revenue called “Rajawasa Gyan Sangam” which was held at New Delhi on June 16, 2016, the Honourable Prime Minister Shri Narendra Modi had expressed the desire to bring reforms in tax administration in the form of an approach of ‘RAPID’ should be five  pillars of tax department ,  which stands for Revenue , Accountability ,Probity , Information and Digitalisation. Tax Practitioners of India highly appreciate the initiative by the Honourable Prime Minsterfor making a sincere and honest attempt to bring accountability and transparency in the tax administration.

1.3. In the year 2017, the Income-tax Department had developed an integrated platform, i.e., Income Tax Business Application (ITBA) for electronic conduct of various functions/proceedings including assessments. This is revolutionary and path-breaking initiative which is available 24X7 anytime to the tax payers. This may work, as a similar initiative of e-banking system was very successful in India. The e-assessment scheme has been very successful in a number of countries, both developed & developing, like Singapore (‘Leveraging Analytics Design & Digitalisation’ aka LEA:D), UK (Advanced Digitised Approval based Assessment), Brazil (2 SPED), Mexico (Servicio de Administracion Tributataria aka SAT), Korea (Big Data and Artificial Intelligence System) Japan, Germany etc.

1.4. Honourable Finance Minister in the Budget speech for 2018 -2019 (February1, 2018) (2018) 401 ITR 1 (St) (at 29)on E-Assessment stated as under, para 157. “We had introduced e -assessment in 2006, extended it to 102 cities with the objective of reducing the interface between the department and the tax payers. With the experience gained so far, we are now ready to roll out the E. assessment across the country, which will transform the age old assessment procedure of the income-tax department and the manner in which they interact with taxpayers and other stakeholders. Accordingly, I propose to amend the Income -tax Act to notify a new scheme for assessment where the assessment will be done in electronic mode which will almost eliminate person to person contact leading to greater efficiency and transparency”

1.5. ‘Faceless Assessment’ involves creation of e-assessment centres at national and regional levels; auto-allocation of cases among these centres. The scheme marks a significant modification in the manner in which tax assessments will be undertaken. Dr Ajay Bhushan Pandey , Revenue Secretary  while inaugurating ‘ National e- Assessment Centre ‘  has explained the advantages of the scheme and stated that the assesses will be getting refund directly in their Bank account. E-assessment is a landmark in the history of assessment and shoulders a lot of expectations from the tax payers and thus, will be a great challenge in terms of execution.

Under the new scheme, taxpayers would not be required to appear either personally or through authorised representative in relation to the proceedings related to the scheme before any income tax authority. All the communication between the department and taxpayer would be done electronically. Even all the internal communication within the income tax department will be electronic.

The Government has proposed its intention of curbing corruption, eliminating face time with Assessing Officers allowing time and energy to be saved, to ensure greater transparency by recording of all the communications and digitalisation of the documentary evidences, ultimately resulting in greater efficiency through this method of faceless assessment. This is a major step in the era of digitalization. As evident from the introduction of e-filing, although there were minor hurdles in the beginning, at present majority of the filings are done online. In the long run these schemes will prove beneficial to the honest tax payers.

2. Sections:

2.1. Finance Act, 2018 (2018) 402 ITR 37 (St)(66), had inserted three new sub-sections (3A), (3B) & (3C) in Section 143 of the Act, after sub section (3) which stipulates that the Central Government may make a scheme for the purpose of improving the efficiency, accountability and transparency by eliminating the interface between the taxman and taxpayer by introducing an assessment team with dynamic jurisdiction.[ Finance Bill  2018) 401 ITR 36) (St) (64), Notes on clauses ( 2018) 401 ITR 91 (St)  (117) , Memorandum Explaining the provisions ( 2018) 401 ITR 123 (St) (149)]

S. 143(3A):The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) so as to impart greater efficiency, transparency and accountability by—

(a) eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible;

(b) optimising utilisation of the resources through economies of scale and functional specialisation;

(c) introducing a team-based assessment with dynamic jurisdiction.

S.143(3B):The Central Government may, for the purpose of giving effect to the scheme made under sub-section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:

Provided that no direction shall be issued after the 31st day of March, 2020.

S.143(3C): Every notification issued under sub-section (3A) and sub-section (3B) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.

3. E-Assessment Scheme:

On the basis of the announcement the CBDT has notified an ‘E-Assessment Scheme, 2019’(2019) 417 ITR(St.) 12vide Notification no. 61/2019 & 62/2019, dated 12-09-2019(Scheme) for the purpose of conducting e-assessments. The scheme shall come into force, with effect from September 12, 2019. Thus, any scrutiny assessment carried out on or after September 12, 2019 shall be governed by this ‘E-assessment Scheme, 2019’. E-assessment scheme is a code by itself with respect to assessment specified in the scheme, however with respect to limitation, reopening of assessment, revision appeal etc normal provisions of the Act is applicable.  

4. Information Technology Act, 2000 and E-Assessment Scheme.

4.1. Section 81 of the Information technology Act, reads as under:

“The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force:

Provided that nothing contained in this Act shall restrict any person from exercising any right conferred under the Copyright Act, 1957 (14 of 1957) or the Patents Act, 1970 (39 of 1970).”

Accordingly, if there is any conflict between the provision under the Income-tax Act and Information Technology Act, the Information Technology Act, being latter provision, the latter provision will provide for the earlier provision. Within the definitions of the e-assessment scheme, number of definitions references are made to the Information Technology Act, 2000. Accordingly, the understanding of the provisions of Information Technology Act is very essential to make better representation in the e-assessment proceedings.

5. Scheme

5.1. An attempt has been made to analyse the clause wise explanation of the Scheme. There is a total of24 definitions under the Scheme.To understand the Scheme, one may have to study the definitions and likely its interpretations.

5.2. Definitions- Clause 2.

2 (1) In this Scheme, unless the context otherwise requires – 

(i) ‘Act’ means the Income-tax Act, 1961.
Issue: Under the Wealth-tax Act, the scheme is not applicable.

(ii) ‘addressee’ shall have the same meaning as assigned to it in clause (b) of sub-section (1) of section 2 of the Information Technology Act.
i.e. Section 2 (1) (b) of the of Information Technology Act, 2000, ‘addressee’ means a person who is intended by the originator to receive the electronic record but does not include any intermediary.

(iii)‘assessment’ means assessment of total income or loss of the assessee under sub -section (3) of section 143 of the Act.  
Issue: Assessment under Section 143(1), i.e. Summary assessment without calling the assessee, Best judgement assessment under Section 144, Income-escaping assessment 147, read with 148 of the Act, Search and seizure under Section 132, and block assessments under Section 153A, 153A of the Act are not mandatory. 

(iv) ‘authorised representative’ shall have the same meaning as assigned to it in sub-section 288 of the Act.

(v)‘automated allocation system ‘means an algorithm for randomised allocation of cases using suitable technological tools, including artificial intelligence and machine learning, with a view to optimise the use of resources.

(vi) ‘automated examination tool’ means an algorithm for standardised examination of draft orders, by using suitable technological tools, including artificial intelligence and machine learning, with a view to reduce the scope of discretion.

(vii)‘Board’ means Central Board of Direct Taxes constituted under the Central Board of Revenue Act, 1963.

(viii) ‘Computer resources’ shall have the same meaning as assigned to them in clause (k) of sub-section (1) of section 2 of the information Technology Act, 2000. 
i.e. Section 2 (1) (k) of the of Information Technology Act, 2000, ‘computer resources’ means computer, computer system, computer network, data, computer data base or software.

(ix) ‘computer system’ shall have the same meaning as assigned to them in clause (l) of sub -section (1) of section 2 of the information Technology Act, 2000.;
i.e. Section 2 (1) (l)of Information Technology Act, 2000, ‘computer system’  means a device or collection of devices, including input and output support devices and excluding calculators which are not programmable and capable of being used in conjunction with external files which contain computer programmes, electronic instructions, input data and output data that performs logic, arithmetic, data storage and retrieval, communication control and other functions.

(x) ‘computer resources of the assessee’s shall include assessee’s registered account in designated portal of the Income-tax Department, the Mobile App linked to the registered mobile number of the assessee, or the e mail account of the assessee with his email service provider.

(xi) ‘digital signature’ shall have the same meaning as assigned to it in clause (p) of sun section (1) of section 2 of the Information Technology Act.
i.e. Section 2(1)(p) of Information Technology Act, 2000,‘digital signature’ means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of section 3.

i.e. Section 3 of Information Technology Act, 2000: Digital Signature and Electronic signature  

3. Authentication of electronic records.-  (1) Subject to the provisions  of this section any subscriber may authenticate an electronic record by affixing his digital signature .

(2) The authentication of the electronic record shall be effected by the use of asymmetric crypto system and hash function which envelop and transform the initial electronic record in to another electronic record.

Explanation– For the purpose of this sub-section, “hash function” means an algorithm mapping or translation of one sequence of bits in to another, generally smaller, set known as “hash result” such that an electronic record yields the same harsh result every time the algorithm is executed with the same electronic record as its input making it computationally infeasible-

(a) to derive or reconstruct the original electronic record from the hash result produced by the algorithm;

(b) that two electronic records can produce the same hash result using algorithm.

(3) Any person by the use of a public key of the subscriber can verify the electronic record.

(4)  The private key and the public key are unique to the subscriber and constitute a functioning key pair. 

(xii) ‘designated portal’ means the web portal designated as such by the Principal Chief Commissioner or Principal Director General, in charge of the National e. Assessment Centre.

(xiii) ‘e. Assessment’ means the assessment proceedings conducted electronically in ‘e-Proceedings’ facility through assessee’s registered account in digital portal.’ 

(xiv) ‘electronic record ‘ shall have the same meaning as assigned to clause (t) of  sub clause (1) of section 2 of the Information Technology Act.

i.e. Section2(1)(t) of the of Information Technology Act, 2000, “electronic record” means data, record or data generated,image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche.

(xv) ‘electronic signature ‘shall have the same meaning as assigned to in clause (ta) of sub -section (1) of section 2 of the Information Technology Act 2000.
i.e. Section 2(1)(ta) of the of Information Technology Act, 2000, “Electronic signature” means authentication of any electronic record by a subscriber by means of the electronic technique specified in the Second Schedule and include digital signature.

(xvi) ‘email’ or ‘electronic mail’ and ‘electronic message’ means a message or information created or transmitted or received on a computer, computer system, computer resources or communication device including attachments in text, image, audio video and any other electronic record, which may be transmitted with the message.

View: Section 282 of the Act specifically provides notice can be served in the form of any electronic record as provided in chapter IV of the Information Technology Act, 2000. Explanation to section 282(2) provides that the expressions “Electronic Mail” and “Electronic Mail Message” are assigned the meaning as in explanation to section 66A of the Information Technology Act, 2000. The notification in its definition Clause 2(xvi) expands the scope so as to include even ‘messages on Whatsapp’.

(xvii) ‘hash function’ and ‘hash result’ shall have the same meaning as assigned to them in the Explanation to sub -section (2) of section 3 of the Information Technology Act.
(Note. Refer Section2.(xi) (Supra)

(xviii) ‘Mobile app’ shall mean the application software of the Income -tax Department developed for mobile devices which is down loaded and installed on the registered mobile number of the assessee.

(xix) ‘originator’ shall have the same meaning as assigned to it in clause (za) of sub -section (1) of section 2 of the Information Technology Act.  
i.e. Section2(1)(za) of the of Information Technology Act, 2000, “originator” means a person who sends, generates, stores or transmits any electronic message or cause any electronic message to be sent, generated, stored or transmitted to any other person but does not include an intermediary.

(xx) ‘real time alert’ means any communication sent to the assessee by way of Short Messaging Service on his registered mobile number, or by way of update on his Mobile App, or by way of an email at his registered email address, so as to alert him regarding delivery of an electronic communication.

(xxi) ‘registered account’ of the assessee means the electronic filing account registered by the assessee in designated portal.

(xxii) ‘registered e. mail address’ means the e/mail address at which an electronic communication may be delivered or transmitted to the addressee, including –
(a) the e- mail address available in the electronic filing account of the addressee registered in designated portal ; or
(b) the e-mail address available in the last income -tax return furnished by the addressee ; or
(c) the e- mail address available in the Permanent Account Number database relating to the addressee; or
(d) in the addressee being an individual who possesses the Aadhar Number, the e-mail address of addressee available in the database of Unique Identification Authority of India; or
(e) in the case of addressee being a company, the email address of the company as available on the official website of Ministry of Corporate Affairs; or
(f) any e -mail address made available by the addressee to the income- tax authority or any person authorised by such authority.

(xxiii) ‘registered mobile number ‘of the assessee means the mobile number of the assessee or his authorised representative, appearing in the user profile of the electronic filing account registered by the assessee in designated portal;

(xxiv) ‘video telephony’ means the technology solutions for the reception and transmission of audio -video signals by users at different locations, for communication between people in real -time.

5.3. Scope of the scheme -Clause 3:The scope of the Notification has been highlighted that such Scheme shall be made in respect of such territorial area, or persons or class of persons, or incomes or class of incomes, or cases or class of cases, as may be specified by the CBDT(Board).

5.4. E-assessment Centres –  Clause 4: The Board shall also set-up four separate units which shall be responsible to facilitate conduct of e-assessment. The names and functions of such units shall be as follows:

(a) Assessment Units -It shall perform the function of making assessment which includes identification of points or issues which may be material for determination of any liability (including refund), seeking information or clarification on any point, analysis of material furnished by assessee, etc.

(b) Verification Units – It shall perform the function of verification which include enquiry, cross verification, examination of books/witness and recording of statements, etc.

(c) Technical Units – It shall perform function of providing technical assistance which include any assistance or advice on legal, accounting, forensic, valuation, TP, etc.

(d) Review Units – It shall perform function of review of the draft assessment order which includes arithmetical checking, review of relevant material brought on record, law and fact duly incorporated in draft order, etc.

All communication among the assessment unit, review unit, verification unit or technical unit or with the assesse/any other person for the purposes of making an e-assessment shall be through the ‘National e-assessment Centre’.

View: The scope of the Notification has been explained in Clause 3 where it has been highlighted that such scheme shall be made in respect of such territorial area, or persons or class of persons, or incomes or class of incomes, or cases or class of cases, as may be specified by the board.

5.5. Procedure for assessment -Clause 5:

A ‘National e-assessment Centre’ and ‘Regional e-assessment Centres’ shall be set-up by the CBDT with a view to facilitate the the e-assessment proceedings. ‘National e-assessment Centre’ shall be responsible to conduct proceedings in a centralized manner and the ‘Regional e-assessment Centres’ shall be responsible to conduct proceedings in the jurisdiction under the control region of a Principal Chief Commissioner of Income-tax.

‘Assessment’ for the purpose of this scheme shall means assessment of total income or loss of the taxpayer under Scrutiny Assessment (S. 143(2) of the Act) Therefore, the following types of assessments shall be outside the purview of this scheme only for the Financial Year 2019-20:

(a) Income escaping assessment (S. 147 of the Act)

(b) Best judgment assessment (S. 144 of the Act)

(c) Search assessment (S. 153A of the Act)

Further, all communications will be conducted electronically. Tax Payers or their representatives shall not be physically present. Where necessary, video conferencing may be allowed.

The e-assessment shall be carried out in the following manners:

(1) ‘National e-assessment Centre’ shall issue a notice under section 143(2) of the Act to the taxpayer specifying the issues for selection of his case for e-assessment;

(2) Pursuant to the Notice, the taxpayer is required to file his reply to the ‘National e-assessment Centre’ within 15 days from the date of receipt of such Notice;

(3) The case shall be then assigned to a specific assessment unit in any one Regional e-assessment Centre through an automated allocation system;

(4) ‘National e-assessment Centre’ may issue appropriate notice to assessee for obtaining information, documents or evidence as required by the assigned assessment unit for the purpose of conducting e-assessment;

(5) After taking into consideration all the relevant material available on record, the assessment unit shall prepare a draft assessment order and a copy of such order shall be forwarded to National e-assessment Centre;

(6) National e-assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board and it may decide to:

(i) Finalise the assessment as per the draft assessment order and serve a copy of such order to the assessee along with the demand notice or refund of any amount due to him;

(ii) Provide an opportunity to the assessee by serving a notice calling upon him to show cause as to why the assessment should not be completed as per the draft assessment order; or

(iii) Assign the draft assessment order to a review unit in any one Regional e-Assessment Centre, through an automated allocation system, for conducting review of such order.

(7) In a case where no response to the show-cause notice is received, the National e-Assessment Centre shall finalize the assessment as per the draft assessment order. If a response is received by the National e-Assessment centre, the same shall be forwarded to assessment unit;

(8) The Assessment Unit shall make a revised draft assessment order after taking into account the response furnished by the assessee;

(9) The National e-assessment Centre shall transfer all the electronic records of the case to the jurisdictional Assessing Officer after the completion of assessment for the purpose of:

(i) Imposition of penalty

(ii) Collection and recover of demand

(iii) Rectification of mistake

(iv) Giving effect to appellate orders

(v) Submission of remand report, or any other report to be furnished, or any representation to be made, or any record to be produced before the Commissioner (Appeals), Appellate Tribunal or Courts, as the case may be

(vi) Proposal seeking sanction for launch of prosecution and filing of complaint before the Court

5.6. Penalty proceedings on non-compliance – Clause 6:

Any unit under this scheme may send recommendation to the National e-assessment Centre for initiation of any penalty proceedings against assessee for non-compliance of any notice, direction or order issued to assessee or any other person under the Scheme.

A penalty shall be levied after considering the response furnished by assessee against the show-cause notice issued by National e-assessment Centre on receipt of such recommendation.

5.7. Appellate Proceedings-Clause 7:

An appeal against an assessment made by the National e-assessment Centre under this Scheme shall lie before the jurisdictional Commissioner (Appeals).

5.8. Exchange of communication exclusively by electronic mode
Clause 8:

This clause stands to state that, all conversation between the National e-assessment Centre and the assessee/ authorized signatory shall be exclusively by electronic mode and all internal communications between the National e-assessment Centre, Regional e-assessment Centre and various units shall also be exclusively by electronic mode.

This is vital so as to not defeat the purpose of the Scheme.

View: Electronic mode here may mean that all documents would be digitalized and uploaded on a certain server. In case of a personal hearing, which may be requested by the assessee, a video conference may take place so that the Assessee would be able to give an oral submissions or explanations etc.

5.9. Authentication of electronic record-Clause 9:

This Clause pertains to authenticating various electronic records by way of digital signature or electronic signature or electronic authentication, as the case may be.

5.10 Delivery of electronic record-Clause 10:

Every notice or order or any electronic communication under this Scheme shall be delivered to the assessee by way of placing and authenticated copy in the assessee’s registered account or registered email address or on the assessee’s Mobile App.

Further, the assessee shall file their response to any of the communications mentioned above via the registered account and once an acknowledgement containing the hash generated upon successful submission is sent by the National e- assessment centre is generated, the response shall be deemed to be authenticated.

5.11 No personal appearance in the Centres or Units- Clause 11:

For the success of the Scheme it is pertinent to ensure that there is no personal appearance caused by the tax payer or the authorized representative before the National e- assessment centre or Regional e- assessment centre or any Unit under the Scheme.

Further, where personal representation or oral submissions or cross examinations are required, the same has to be mandatorily done via video conferences.

The Board is responsible to establish suitable facilities including application software for the purpose of this Scheme

View: All communications will be conducted electronically. Tax Payers or advocates shall not remain physically present. In some cases, video conferencing may be allowed.

5.12. Power to specify format, mode, procedure and processes:

The Principle Chief Commissioner or the Principle Director General, in charge of the National  e – assessment Centre shall lay down the standards , procedures and process for effective functioning of the National e-assessment Center , regional e-assessment Centres and the unit set-up under this Scheme , in an authenticated and mechanised environment , including format , mode , procedure and process in respect of the following  namely :- (i)Service of notice,(ii) receipt of information,(iii) issue of acknowledgement,(iv)  provision of ‘e -proceeding ‘ facility, (v)  accessing, verification, authentication of information, (vi)  receipt, storage and retrieval,(vii)  general administration and grievance redressal mechanism in the respective Centers and units.    

6. New Scheme v. Old Scheme

6.1. The CBDT had issued three instructions viz Instruction No. 8/2017 dated 29.09.2017 (2017) 398 ITR 10 (St), instruction No. 1/2018 dated 12-02-2018 (2018) 401 ITR 176 (St) & Instruction No. 03/2018, dated 20-8-2018, for conducting assessment electronically during the financial years 2017-18 and 2018-19. Pursuant to that, for the purpose of conducting e-assessment, the Income-tax Department had developed an integrated platform, i.e., Income Tax Business Application. This was integrated with the ‘E-filing’ portal which was used by the assessee to electronically communicate with the Income-tax Department.

6.2. During the course of e-assessment, the Assessing Officer was required to send communications through the ‘Assessment Module’ of ITBA which was delivered in the ‘E-filing’ account of concerned assessee.

6.3. As per the ‘E-assessment Scheme, 2019’, (2019) 417 ITR(St.) 12,e-assessment shall be carried through ‘e-assessment Centres’. A ‘National e-assessment Centre’, ‘Regional e-assessment Centres’ and four units shall be set-up by the board to facilitate the conduct of e-assessment proceedings.

6.4. It may  be noted that, earlier, the e-assessment was carried by the Assessing Officer but now the role of Assessing Officer shall be limited to only imposition of penalty, collection and recovery of demand, rectification of mistake, etc. and e-assessment shall be carried out only by the ‘e-assessment centres’.

7. Centres:

7.1. National E-Assessment Centre(NEC):

The purpose of setting up the NEC has been stated to be facilitation of the conduct of e-assessment proceedings in a centralized manner. However, it may be noted that the constitution of the NEC has not been specified under the notification.

7.2. Regional E-Assessment Centre (REC):

To facilitate the conduct of e-assessment proceedings in the cadre controlling region of a Principal Chief Commissioner.

7.3. Assessment Units:

To facilitate the conduct of e-assessment, to perform the function of making assessment.

7.4. Verification Units:

To facilitate the conduct of e-assessment, to perform the function of verification.

7.5. Technical Units:

To facilitate the conduct of e-assessment, to perform the function of providing technical assistance which includes any assistance or advice on legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics, management or any other technical matter which may be required in a particular case or a class of cases, under this Scheme.

7.6. Review Units:

To facilitate the conduct of e-assessment, to perform the function of review of the draft assessment order, which includes checking whether the relevant and material evidence has been brought on record, whether the relevant points of fact and law have been duly incorporated in the draft order, whether the issues on which addition or disallowance should be made have been discussed in the draft order, whether the applicable judicial decisions have been considered and dealt with in the draft order, checking for arithmetical correctness of modifications proposed, if any, and such other functions as may be required for the purposes of review, and specify their respective jurisdiction.

8. Functions of various Centre and units:

8.1. The National E-Assessment Centre(NEC) would, in select cases, serve a notice on the Assessee under section 143(2) specifying the issues. Thereafter, the NEC would assign the cases selected to specific Assessment Units in any one Regional e-assessment centre through an automated allocation system.

8.2. The Assessment Unit may request NEC for a certain enquiry or verification by the verification unit or request NEC for seeking technical assistance from the technical unit. After considering the documents on record, the Assessment Unit would make a draft assessment order which would be examined by NEC for finalization processes.

8.3. NEC may also send it to the Review Unit, if it deems it necessary, which in turn would provide its inputs and suggestions to NEC.

8.4. The Draft Assessment Order would then be finalized and forwarded to the jurisdictional AO.

8.5. The AO may, based on such assessment, proceed to impose penalty, launch prosecution, etc.

9. Post Assessment –Rectification, recovery, penalties, appeal, revision, etc. 

9.1. At the end all e-assessment proceedings are  transferred to the AO having jurisdiction for the purpose of imposition of penalty, collection and recovery of demand, rectification of mistake, giving effect to appellate orders, submission of remand report, or any other report to be furnished, or any representation to be made, or any record to be produced before the Commissioner (Appeals), Appellate Tribunal or Courts,  Revision , as the case may be, proposal seeking sanction for launch of prosecution and filing of complaint before the Court.

9.2. Question may arise when an order is received from NEC, the Assessing Officer having jurisdiction signs and issues the order. Whether it would be legally justifiable for the AO to initiate penalty proceedings especially when he has not participated in the assessment proceedings? Also, it would have to be evaluated as to how far the prosecution launched by the Assessing Officer is valid when he has not participated in the assessment proceedings? Though the Assessment units have been proposed for initiation of penalty proceedings, whether the Assessing Officer has the power not to levy the penalty after considering the explanation of the assessee?  These are the issues for consideration, which the delegates may debate.

9.3. Issue for consideration is when an appeal is filed before the CIT(A), as to who would send the remand report? Whether the CIT(A) can call on his own entire proceedings of e-assessment for his satisfaction before If there is an appeal by the assessee? Is it possible for the assessee to get the entire certified copies of various submissions made before the e- assessment units? Can the assessee get the copy of video recorded by the e-assessment units?  If there is violation of natural justice can the CIT (A) allow the assessee right of cross examination of witness?  These are issues which require to be debated.

10. Document Identification Number(DIN)

Document Identification Number(DIN) had been introduced via Circular No. 19/2019 dt. 14.08.2019 (2019) 416 ITR 140 (St)to curb the practice of issuing the notice or summons or any other letter of correspondence manually without maintaining a proper audit trail of such communication. Hence, it had been decided that no communication would be issued by the income-tax authorities relating to assessment, appeals, orders, penalty, prosecution, approval, etc. to the assessee or any other person on or after 1st October 2019 unless a computer generated Document Identification Number(DIN) has been allotted and is duly quoted in the body of the communication.

Issue which arises for consideration is that section 282B of the Act is a section specifically for Allotment of Document Identification Number. This section was omitted by Finance Act, 2011 w.e.f. 1.4.2011. Thus, as the law stands to date, there is no mechanism under the Income-tax Act for Allotment of DIN. It is interesting to note that before the issuance of the Scheme, Circular No. 19/2019 dated 14-08-2019 (2019) 416 ITR 140 (St) was issued with subject “Generation/Allotment/Quoting of Document Identification Number in Notice/Order/Summons/letter/correspondence issued by the Income-tax Department”, wherein at para 2, towards the end, it is specifically mentioned, “DIN has been allotted and is duly quoted in the body of such communication”. Thus, it is pointed out that the erstwhile section 282B needs to be revived/reintroduced. Also, it must be clarified that the DIN would apply for each Assessment Year or it would be continuously for all Assessment Years.

11. Exceptions: Circular No. 27/2019, dated. 26.09.2019 (2019) 417 ITR 64(St)

11.1. This circular is peculiar for conduct of assessment proceedings through e-proceeding facility for financial year 2019-20 only.

11.2. It has been stated, in all cases(other than the cases covered under the ‘e-Assessment scheme, 2019’ notified by the Board), where assessment is to be framed under section 143(3) of the Act during the Financial Year 2019-20, it is hereby directed that such assessment proceedings shall be conducted electronically subject to exceptions mentioned below:

a. Where assessment is to be framed under section(s) 153A, 153C and 144 of the Act.

b. In set-aside assessments;

c. Assessments being framed in non-PAN cases;

d. Cases where Income-tax return was filed in paper mode and the assessee concerned does not yet have an ‘E-filing’ account;

e. In respect of assessments to be framed under section 147 of the Act, any relaxation from e-proceeding due to the difficulties in migration of data from ITO to ITBA etc. shall be dealt as per clause (f) below;

f. The jurisdictional Pro CIT/CIT, in extraordinary circumstances such as complexities of the case or administrative difficulties in conduct of assessment through ‘E-Proceeding’, can permit conduct of assessment proceedings through the conventional mode.

11.3. The circular seems to be an addendum to the current Notification which has been released by way of circular No. 27/2019,dt 26.09.2019417 ITR 64(St). The circular mentions exceptions to e-proceedings i.e. it has mentioned certain cases where ‘E-Proceeding’ shall not be mandatory.

11.4. The circular specifically mentions that it is applicable to the year 2019-20, making it clear that the list of exceptions thereunder would not be applicable in later years. This may also mean that such changes may be incorporated by way of amendments through the next budget session and Finance Act.

11.5. In the above exceptional cases, where e-assessment is not feasible, there is room for flexibility and NEC may refer the case to the Jurisdictional AO. In such cases, there is no more faceless assessment. The entire assessment before the AO would be carried out in the traditional manner and hence the purpose of the Notification may not be achieved.

11.6. Further, as per Circular No. 27/2019 dated 26-9-2019 on Conduct of assessment proceedings through e-proceeding facility during FY 2019-20 provides for jurisdictional Pr. CIT/CIT to provide relaxation from e-assessment on account of administrative difficulties and complexities after recording reasons. The frequency and grounds for such relaxations need to be understood.

12. Administrative Issues

12.1. Time Consuming Process:

The Assessment unit may ask the NEC for further information as required. A question may arise that where assessment unit requires further information/details, it may approach the NEC. This procedure of the Assessment Unit asking further information may at times be time consuming and thereby unnecessarily prolonging duration and the allocation of Assessment.

12.2. National E-Assessment Centre to assign cases to specific assessment units [Clause 5(iii)]:

It has been mentioned that the National E-Assessment Centre would be set up by the CBDT for the purposes of making assessments as per the procedure laid down by the scheme.

Here the NEC has been given vide powers where the selection of the cases and assignment of the same to various assessment units are held by it. This may incorporate some arbitrariness where sole power has been provided to the NEC, where no check would be there such NEC, more particularly when the composition of NEC has not been specified.

12.3. Risk Management Strategy [Clause 5(x)]:

Clause 5(x) states, ‘the National e-assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool’. Risk Management Strategy has not been defined in the notification. The paragraph further mentions that there would be an automated examination tool as well for examining the draft assessment order. A question may arise as to what is the objective of Risk management Strategy, no indication is given anywhere in the notification.

12.4. Lengthy Submissions:

At any level of the Assessment Proceedings, the submissions would have to be communicated through the registered account. In such a case, the assessee may be expected to digitalize the paper documents first and then upload the same on the site. This may cause great problems if such documents run into a number of pages since digitalizing each page and then uploading the same may be a tedious task.

This further raises the issue of whether adequate infrastructure in terms of appropriate servers be provided which would be able to handle volumes of data of millions of assessees pouring in everyday for the next foreseeable future. Whether such data would be secured? And hacking of such data may cause losses to many if businesses are involved. Whether confidentiality would be affected?

12.5. Access to Submissions:

All submissions are supposed to be communicated electronically as per Clause No.8 of the notification. It is desirable that documents/materials be made accessible to the Assessee for the purpose of availing the same at a future date. Such access may be required, as a proof before the higher authorities that documents were submitted to the Assessment unit.

12.6. Duty to provide Video conferencing facility [Clause 11(4)]:

The notification casts a duty on the Board where appropriate facilities at appropriate locations would be provided for video conferencing with the income-tax authority, by the assessee.

There is no mention of the Locations where such video conferencing would take place. Further, what would be the fate of the assessee if the location for such video conferencing would be too far away from such assessee’s residence? Validity a statement made by an authorized representative? Manner of cross examination of an assessee or their authorized representative? Further, locations and Logistics have not been specified and the same may have to be worked out in a way that it does not cause hardship to the assessee.

12.7. Infrastructure:

The quality of the online tools, support systems, and level of comfort of all the stakeholders to adhere to the new E-Scheme would be another major challenge. For instance, reflecting back on the bottlenecks that were faced during the implementation of the new GST regime, it is urged that this time proper infrastructure and online support is first put in place before implementing the new E-Scheme.

12.8. Language Barriers:

A question still remains unanswered is that in which language would the proceedings be conducted in. In rural areas, people can only speak the local language, they cannot plead in other language. Earlier the local officer knew their language so as to ensure the conduct of proceedings. Further, in the event of bringing a necessary document such as property records etc on record which are in regional language, will the same be requiredto be translated and then upload. This would only increase the cost of assessment to the tax payers. Further, It is also possible that certain submissions are better communicated/explained verbally than in a written form, this proposes a disadvantage to such taxpayers.

Further, while recording of the statement of the assessee or representative or any other person, would the procedure laid down under the Oath Act, 1969 be followed and the sanctity of the statement in the event there is a discrepancy arising out of Oath not being administered in the regional language or a language known to the person making the statement. 

12.9. Technical Knowledge

It is a known fact that, although there has been a lot of ease offered to the tax-filings over the years, online proceedings still require a definite amount of technical knowledge of computer skills. There are still cases of non-working servers, non-uploading of documents and other glitches that occur from time to time. To add to this, filling a utility form and uploading it as required isn’t known to every lay man. There are cases of additional tax offered by a taxpayer on account of a mistake committed by their respective qualified accountants.

12.10. Access to information & documents by higher Authorities

Keeping in view the purpose of faceless and paperless assessment, it would be necessary to understand as to whether during proceedings before the Appellate Authorities such as Commissioner of Income Tax (Appeals), The Income Tax Appellate Tribunal etc., all the documents furnished during an assessment under the scheme would require to be refurnished and whether there is a mechanism for smooth transition of an all records in the course of assessment before higher authorities.

12.11. Deficiency in the services of the Authorized Representative

In PCIT v. NRA Iron & Steel Pvt. Ltd. (2019) 418 ITR 449/ 311 CTR 263 (SC),www.itatonline.org Apex court dismissed a review petition to accept the contention that the Consultant (Authorized Representative) was constrained to inform the assessee regarding a Notice received from the Income Tax Department.  As per the E. Assessment scheme  S. 2.1(iv) : ‘ authorised representative ‘ shall have the same meaning as assigned to it in sub -section 288 of the Act .  Advocates are governed by the Rules and Regulations of the respective State  Bar Associations  as per the Advocates Act , Chartered Accountants are governed by the Chartered Accountant Act. As regards the tax portioners are  concerned  those who are members of the AIFTP are governed by the code of conduct prescribed by the AIFTP . However there are number of tax practitioners who may not be the members of the AIFTP , who are eligible to practice under S. 288 of the Act . Issue for consideration is what could be the remedial action against the authorised representative who is not governed by  any statutory regulations? This does constitute a thought for debate .  

13. Legal Issues

13.1. Scope of the Notification:

The scope seems to be flexible where the application of such scheme can be extended or restricted to certain classes, sections, places or all of them. This could also imply that the Board could decide that the scheme be applicable to a class of persons like builders or persons receiving foreign remittances or those receiving gifts or class of persons dealing in hawala transactions, suspected Benami transactions etc. Thus, there is reasonable classification and justification towards class of persons, income and territory. However, an issue can arise whetherthe power of classification with regard to territory, persons and income be bestowed upon by the Board on itself through a Notification, or should a Legislation be introduced. This gives rise to Constitutional validity and the issue of delegated legislation, when such a notification is issued.

13.2 Time Limit to reply to notice u/s. 143(2) – [Clause 5(ii)]:

The scheme has proposed the time limit of 15 days within which a taxpayer has to respond to a notice under Section 143(2) of the Act. However, under section 143(2) of the Act, no such limitation has been prescribed. The Notice would mention a time limit within which the information sought for may be provided by the taxpayer.

Now the notification imposes a duty on the taxpayer where the taxpayer may reply to such notice within 15 days. One may have to question as to whether such a duty cast upon the taxpayer can be done through a notification, which permanently supersedes the provision of the Act, or whether an amendment has to be brought in giving effect to the notification? A further question which could arise is whether CBDT has the power to change/amend the procedure as laid down under the legislature. Such an act may require legislative approval.

13.3 Review – [Clause5(x)(c)]:

Clause 5(x)(c) states, ‘assign the draft assessment order to a review unit in any one Regional e-assessment Centre, through an conWhen sub-paragraph (c) is read with paragraph (x) & (xii) in Clause no. 5, there seems to be a second review in terms of examination of the draft assessment order.

Clause 5, para (x) mention that that NEC would examine the draft assessment order first and only then, finalize the draft assessment order or assign the draft order to a review unit for review.

Review system is a welcome move, as it would give reasonable perfection to the assessment order and would also deal with technical, legal and expert views. Thus, with such a precise and well covered assessment order which is in many cases reviewed, there would be few chances of the taxpayer going in appeal. Under such circumstances, it is suggested that the appeal should lie directly to the Income Tax Appellate Tribunal and that the whole mechanism of going through the CIT(A) should be done away with. It is emphasized that when an order is prepared with the approval of the assessment unit, technical unit and is subject to review and inputs, then the assessment order is reasonably certain and strong and appeal should lie exclusively to the Income tax Appellate Tribunal. The filling of appeal with the CIT(A) should be done away with as it would be only procedural and it would be difficult for the CIT(A) to overturn the orders issued by NEC which have undergone the process of review. Thus, eliminating the stage of CIT(A) would go a long way in rendering speedy and easy justice.

13.4. Sanction for Prosecution – [Clause 5(xx)(f)]:

It has been mentioned all documents would be transferred to the AO having jurisdiction over the case after completion of the assessment for reasons mentioned therein. Such reasons include a case where the AO would have to seek sanction for launch of prosecution. Clarification may need to be given as to whether NEC would be consulted before initiation of prosecution proceedings.

13.5. Initiation of Penalty:

Initiation of Penalty proceedings stems from the recording contained in the Order of the Assessing Officer. Under this scheme, the National e-assessment Centre shall transfer all the electronic records of the case to the jurisdictional Assessing Officer after the completion of assessment for the purpose of Imposition of penalty.

Further, any unit under this scheme may send recommendation to the National e-assessment Centre for initiation of any penalty proceedings against assessee for non-compliance of any notice, direction or order issued to assessee or any other person under the Scheme.

A penalty shall be levied after considering the response furnished by assessee against the show-cause notice issued by National e-assessment Centre on receipt of such recommendation.

This indicates two authorities for initiation of penalty proceedings.

13.6. Assessment to be done by Jurisdictional AO [Clause 5(xxi)]:

Power is given to the NEC to transfer any case directly to the jurisdictional AO without compliance of clauses of notification, if it deems necessary. Such powers may be termed as arbitrary and if it is optional upon the NEC to determine and refer any case to the AO, then following the entire process till the finalization of draft assessment order may be regarded as arbitrary and biased.

Can this mean that e-assessment is not mandatory? It could also mean that in certain cases where e-assessment is not feasible, there is room for flexibility and that NEC refers the case to the Jurisdictional AO. There is no more faceless assessment, the entire assessment before the AO would be carried out in the traditional manner and hence the purpose of the Notification is not achieved. Now a circular is issued carving certain exceptions which is applicable for financial year 2019-20. This requires more clarity and in the next Finance Act, more provisions and clarity with exceptions be provided.

The Jurisdiction of the Notified Income Tax Authority, their powers and functions have been notified vide Notification No. SO 3279 (E) dated 13-9-2019, Notification No. SO 3435 (E) dated 23-9-2019, (2019) 418 ITR 24 (St) and Notification No. SO 3597 (E) dated 3-10-2019.

13.7. Recordings – [Clause 11(2 & 3)]:

No clarification on whether such video conference would be recorded, is provided. Recording of video conferences would help the taxpayer as well as the department in understanding the questions asked and the submissions made during the assessment proceedings. Recording of such video conferences would also be vital evidences before the higher authorities to understand as to what had transpired before the lower authorities. It is suggested that a paragraph may be inserted for recording of such video conferences as proof and evidence.

Connected with it would be the issue of cross-examination. Whether the cross examination would involve all three parties and whether a record of cross examination would be submitted to the taxpayer for purpose of evidence before higher authorities.

Whether re-examination would be permitted and whether NEC/any other Unit under the scheme/representative of any unit, would have any right to ask questions to both the parties?

13.8. Issue Based Assessment or a General Assessment -[Clause 5(i)]:

Under clause 5 paragraph (1), a notice would be served under section 143(2) specifying the issues for selection of the case for assessment. Would this mean that the selection of cases for assessment, be issue based? Can the Assessment Units or the Assessing Officer go beyond such issues raised or would they be restricted to completing the assessment based on the issues raised only, since it is specifically mentioned in clause 5(i) that ‘specifying the issues for selection of his case for assessment’ implying thereby that specific issues only are required to be considered. Under such circumstances, would the authorities have jurisdiction to travel beyond the specified issues? In such cases, the Assessee has a right to challenge the other issues by way of writ petition analogous to reassessment proceedings.

13.9. Prescribed Authority u/s. 143(2) :

Whether NEC can be considered as a prescribed authority as per section 143(2) of the income tax act? As per section 143(2) of the Act, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary, shall serve on the taxpayer a notice requiring him, to attend the office of the Assessing Officer or to produce any evidence on which the taxpayer may rely in support of the return. Prescribed authority under rule 12E is income-tax authority not below the rank of an Income-tax Officer.

With the new notification, can the NEC be considered to be the prescribed authority? If the NEC is supposed to be considered as the prescribed authority, whether any amendment is required to be made in the Income-tax Act/Income-tax Rules to make an addition of such words to provide for the inclusion of NEC under the umbrella of a Prescribed authority, more particularly when the composition of NEC is not specified.

13.10 Applicability of S. 136 of the Income-tax Act:

Section 136 provides that any proceedings under the income tax act before an income-tax authority shall be deemed to be a Judicial proceeding within the meaning of provisions of Indian Penal Code and every income-tax Authority shall be deemed to be a Civil Court. Question arises for consideration is, whether the authorities and NEC would be regarded as falling within the parameters of section 136. To what extent, these proceedings are deemed to be judicial proceedings within the meaning of sections 193, 228 and 196 of Indian Penal Code will be required to be considered, as the notification only prescribes the mechanism and the modality more particularly the procedure is prescribed.

13.11 Goods and Service tax (GST) – E-assessment.

There could be difference in the figures of turnover in the return of GST and in the regular books which may lead to selection of the assessment for scrutiny under e-assessment scheme.  In the notes to account or in the audit report if proper  information is furnished which may help to the authorities to decide whether the assessment requires scrutiny assessment or not . A thought for consideration.

13.12 Constitutional Remedies:

Question arises that whether a writ petition could be filed on the ground that adequate opportunity is not accorded to the assessee. A Writ petition may also lie where the time limit of 15 days is not extended to give replies or where cross-examination is not allowed. A Writ petition could also lie challenging that the technical Unit or the Review Unit should disclose in advance their points and grievances so that they could be adequately challenged. These are some of the issues under which a Writ petition would lie.

A Vexed question would arise that technically where would the Writ petition be filed, since at the time of issuance of the notice no jurisdiction of AO is mentioned. However, it is clarified that the Writ would lie exclusively where the person is regularly assessed.

13.13 Technical Knowledge

With the introduction of this scheme, the location of the AO will be centralized. The AOs may not be updated with the recent changes in the industry and other industry specific changes that occur in the jurisdiction of the assessee. 

Further, there is uncertainty with respect to AOs situated in rural areas being updated with the latest judicial pronouncements and positions of law.

13.14 Revision and Reassessment

 

Since, there are several units including a verification unit and a review unit, working on every assessment. It can be construed that a thorough and fair perusal of documents have been carried out by the units.

In such a situation, it becomes imperative to curtail the powers of the Department with regards to reassessment proceedings under section 147 of the Act and revision proceedings under section 263 of the Act.

13.15 Transfer Pricing litigations

The Scheme of Transfer Pricing as envisaged under the scheme of Income tax, has a peculiar litigation process, wherein the AO issues a draft Assessment order and the option is given to the assessee to approach the Dispute Resolution Panel with objections against the draft order or wait for the same to finalize beyond a period of 30 days and then prefer an appeal against the same before the CIT(A)

The implications of the scheme on transfer pricing assessments is still uncertain.

13.16 Possible redundancy of section 144A of the Act

Section 144A of the Act, allows an assessee to approach the concerned office of the JCIT requesting for an interference in the assessment and issue necessary directions to the AO. With this new scheme of assessment wherein the assessment is centralized, this pro-assessee provision is virtually redundant.  

13.17 Audit under section 142 (2A) of the Act

Section 142(2A) of the Act envisages that where the AO at any stage during assessment has doubts pertaining to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts or specialised nature of business activity of the assessee, with appropriate approval from high authority may direct the assessee to get his accounts audited by an accountant.

The scheme currently does not have a scope for any such cases where a special audit is required.

13.18 Transfer of assessment S.127 .

In the current assessment proceedings where the file of an assessee is transferred to another AO for assessment, a notice is issued under section 127 of the Act.

Currently, the scheme does not envisage a position where, assessments would be required to be transferred, and with respect to intimation of assessee in such a scenario. When the jurisdiction is changed even under e .assessment issue of notice u/s 127 may be mandatory.

13.19 Revision. S.263 / 264 

When the e. assessment is done by the various technical scheme, the revision power u/s 263 may not be desired . It is therefore suggested that the revision power u/s  263  may not be exercised .      

As regards jurisdiction u/s 264 although the assessment is centralized, it must be understood that the jurisdictional AO exists and therefore the revisional power for both the assessee and the Department will be according to the jurisdiction of the AO hence , jurisdictional Commissioner can exercise the jurisdiction u/s 264 of the Act .   

14. Suggestions:

14.1. This ‘Man to Tech’ approach has to be identified as a proactive change in the assessment proceedings and in the long run will only prove beneficial for the stakeholders.

14.2. A duty is cast upon the Department to educate its officials, taxpayers and representatives for a smooth implementation of the scheme. The Department should bring out Q&A to address most frequent queries of stakeholders. Further, it is vital that the Department interacts with professionals from non-metropolitan cities and small towns to understand the concerns from the other side. 

14.3. Clause 12, (vii) of the Scheme has given the power to PCIT and PDG who are in charge of the National e- assessment Centre, general administration and grievances redressal mechanism in the respective Centres and Units.  AIFTP is holding seminars in every quarter at different parts of the Country, it may be desirable to invite the PCIT or PDG to one of the sessions and interact with the tax professionals and address on the administrative and legal issues. This will benefit the tax payers and tax consultants as well as tax administration to better implementation of the scheme. E.g. Section 199 of the Income -tax Act states that the credit for deduction at source is to be given in the year when the income is offered for taxation. There is mismatch when the recipient is following the cash basis accounting and the deductor is following the mercantile basis.       

14.4. Article 265 of the Constitution of our country mandates that “no tax should be collected without the authority of law”. Further, CBDT has come out with the Circular No. 14 (XL . 35) 11-4-1955. stating that ‘it is the duty of the assessing Officer to bring to the notice of the assessee that any deduction which he is entitled but not claimed and assist him in attaining the deduction’. The scope of the Circular is explained in Dattatraya Gopal Shette v. CIT (1984) 150 ITR 460 (Bom) (HC) 463-464. Therefore, it is suggested that, for the success of the Scheme, the Technical Unit may suo motu suggest for deductions which the assessee has mistakenly unclaimed. This would improve taxpayer’s faith in the Scheme, thereby improving compliance. The term ‘issue’ for the purpose of issuance of Notice under Section 143(2) of the Act should be widened to include, an ‘issue’ which would result in assessed income being lower than the returned income.    

14.5. Further, due to the complexity and technical expertise required under this Scheme, the Department should be merciful in levying of penalty under the scheme on account of ant technical error until the entire process is streamlined.

14.6. The Hon’ble Bombay High Court in the case of CIT v. TCL Ltd. (2016) 241 Taxman 138 (Bom) (HC) has passed a detailed order asking the Chief Commissioner of Income Tax to host the details of matters admitted before the Bombay High Court, matters accepted by the Revenue, etc. online. It is suggested that under the Scheme the Department may take similar steps in providing the details of assessments done under the Scheme. This will ensure transparency in the Scheme.

14.7. Another important issue to be addressed is the mismatch that occurs between the details furnished by assessee and details shown in Form uploaded by deductor, resulting in rejection of claims. The advent of technology and e-filing has not quite been able to tackle this issue. For example, where deduction is made during the last quarter of a financial year and the same is reflected in the return filed for the first quarter of the subsequent year, keeping in view of the Instruction No. 5/2013, dated July 8, 2013, (2013) 356 ITR 2(St) the appropriate Unit/Centre under Clause 4 of the Scheme should be in a position to reconcile the accounting position of the assessee so as to warrant unnecessary mismatches. 

15. Finance Bill, 2020:   Face less appeals .(2020)  420 ITR  145/164 /221  (St)]

15.1. Provision for e-appeal (Clause 95) 420 ITR 221 (St)

With the advent of the e-assessment scheme, most of the functions/ processes under the Act, including of filing of return, processing of returns, issuance of refunds or demand notices and assessment, which used to require person-to-person contact between the taxpayer and the Income-tax Department, are now in the electronic mode. This is a result of efforts by the Department to harness the power of technology in reforming the system. All these processes are now not only faceless but also very taxpayer-friendly. Now a taxpayer can manage to comply with most of his obligations under the Act without any requirement for physical attendance in the offices of the Department.

The filing of appeals before Commissioner (Appeals) has already been enabled in an electronic mode. However, the first appeal process under the Commissioner (Appeals), which is one of the major functions/ processes that is not yet in full electronic mode. A taxpayer can file appeal through his registered account on the e-filing portal. However, the process that follows after filing of appeal is neither electronic nor faceless. In order to ensure that the reforms initiated by the Department to eliminate human interface from the system reach the next level, it is imperative that an e-appeal scheme be launched on the lines of e-assessment scheme.

Accordingly, it is proposed to insert sub-section (6A) in section 250 of the Act to provide for the following: — 

a Empowering Central Government to notify an e-appeal scheme for disposal of appeal so as to impart greater efficiency, transparency and accountability. 

b Eliminating the interface between the Commissioner (Appeals) and the appellant in the course of appellate proceedings to the extent technologically feasible. 

c Optimizing utilization of the resources through economies of scale and functional specialisation. 

d Introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals).

It is also proposed to empower the Central Government, for the purpose of giving effect to the scheme made under the proposed sub-section, by notification in the Official Gazette, to direct that any of the provisions of this Act relating to jurisdiction and procedure of disposal of appeal shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. Such directions are to be issued on or before 31st March 2022. It is proposed that every notification issued shall be required to be laid before each House of Parliament.

15.2. Provision for e-penalty (clause 100)(2020)  420 ITR 223 (St)

In order to impart greater efficiency, transparency and accountability to the assessment process under the Act a new e-assessment scheme has already been introduced.

Section 274 of the Act provides for the procedure for imposing penalty under Chapter XXI of the Act. In response to a show cause notice issued by the Assessing Officer, assessee or his authorised representative is still required to visit the office of the Assessing Officer. With the advent of the E-Assessment Scheme-2019 and in order to ensure that the reforms initiated by the Department to eliminate human interface from the system reaches the next level, it is imperative that an e-penalty scheme be launched on the lines of E-assessment Scheme-2019.

Therefore, it is proposed to insert a new sub-section (2A) in the said section so as to provide that the Central Government may notify an e-scheme for the purposes of imposing penalty so as to impart greater efficiency, transparency and accountability by,— 

a eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible; 

b optimising utilisation of the resources through economies of scale and functional specialisation; 

c introducing a mechanism for imposing of penalty with dynamic jurisdiction in which penalty shall be imposed by one or more income-tax authorities. 

It is also proposed to empower the Central Government, for the purpose of giving effect to the scheme made under the proposed sub-section, for issuing notification in the Official Gazette, to direct that any of the provisions of this Act relating to jurisdiction and procedure of imposing penalty shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification.

Such directions are to be issued on or before 31st March, 2022. It is proposed that every notification issued shall be required to be laid before each House of Parliament. This amendment will take effect from 1st April, 2020.

15.3. Comments: Finance Bill, 2020 – (2020) 420 ITR  145/ 221 ( St)  faceless appeals  

The new scheme of faceless assessment is well appreciated and its extension to e-appeals and e-penalty will only aid in its successful implementation.

It is proposed that this e-appeals should also extend to e-revision as well. This will completely eliminate face to face interaction between the assessee/authorized representatives with the Department. The days of an authorized representative being appreciated based on his connections in the Department will be long gone and a tax practitioner will be appreciated on the basis of his/her merit.

However, during the initial period of e-appeals and e-assessment, to avoid any administrative inconvenience, an option may be granted to the parties to opt in or opt out of the scheme. (Similar to E-courts – ITAT’s practice note) 

16 Conclusion:

16.1. Article 51 A of the Constitution of India refers various fundamental duties of the citizens of this great country.  On 26th November our Country celebrated 70 the Constitution day. Various functions were held across the Country. ITAT Mumbai, Delhi and Benches across the country celebrated the Constitutional day. The honourable members of the ITAT and tax professionals across the Country taken a pledge to perform fundamental duties referred in Article 51 A of the Constitution of India.  We are of the opinion that the tax professionals always send their suggestions objectively considering the interest of the nation. We believe, it is the responsibility of the tax professionals to support the e-assessment scheme by sending objective suggestions by compiling various data as regards difficulties faced in implementation of the scheme and suggestions for the improvement.  If there is no response the Constitution of India provide judicial remedy by approaching High Court under Article 226 of the Constitution of India and use of Right of Information Act.  We are having a very proactive judiciary, which in  Yashpal Sahni v. ACIT (2007) 293 ITR 539 (Bom) (HC)has noted the difficulty faced by taxpayers in the matter of credit of TDS and held that even if the deductor had not issued a TDS certificate, still the claim of the assessee has to be considered on the basis of the evidence produced for deduction of tax at source. The Revenue is empowered to recover tax from the person responsible if he had not deducted tax at source or after deducting failed to deposit with Central Government. One may appreciate that when there was mismatch of the TDS and giving the credit for tax deduction at source  the Honourble le Delhi High Court in  on Its Own Motion v. CIT (2013) 352 ITR 273(Delhi)(HC) directed the department to ensure that credit is given to the assessee even where the deductor had failed to upload the correct details in Form 26AS on the basis of evidence produced before the department. It is also worth referring hear that on the basis the editorial published in the AIFTP Journal enclosing the editorial as annexure the PIL was filed before the Apex Court and the Apex court had entertained the PIL.     

16.2. All the stakeholders involved, i.e., the taxpayers, the tax professionals, the assessing authorities, the regulatory body CBDT, the Finance Ministry and the Government should embrace this radical, revolutionary and path-breaking reform of ‘E-Assessments’ in good and positive spirits and should work collectively and cohesively to make this initiative a grand success. There could be initial difficulties in implementations of the scheme, tax professionals act as bridge between the asseseee and the taxpayers. If tax administration takes very positive step interacting with the tax professionals and time bound remedial action, the scheme will become a success and all honest taxpayers will be benefited. 

16.3. Publication committee of the AIFTP may consider a publication on the E-assessments analysing clause by clause, case studies, difficulties faced and suggestions. This may be very useful to all tax payers. It can be in English, Hindi, and all other regional languages. it will serve as very useful to tax payers of our Country which is rendering the duty to the Nation as envisaged under Article 51A of the Constitution of India.  

16.4. Readers may send their valuable suggestions on the subject of the e. assessment scheme to  aiftpho@gmail.com  

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