Advocate V. P. Gupta has explained the scheme of faceless assessments and appeals in a precise manner. He has compared the provisions of the scheme with that prevalent in the USA and pinpointed the advantages and benefits to taxpayers. The ld. author has identified a few issues where clarifications from the Government is desired. He has also offered valuable suggestions on how the scheme can be made better
The Hon’ble Prime Minister on 13th August, 2020 while inaugurating National E-Assessment Centre announced that henceforth there will be transparency in the department and honest tax payers will be honoured.
He made following three announcements:-
Henceforth assessments will be made without personal interaction between Jurisdictional Assessing Officer and the Assessee. This will avoid pain and harassment to assesses and assessment will be finalised on merits.
Taxpayer’s chapter will be issued providing for obligations of the department and also of assesses.
With effect from 25th September all appeals before Commissioner (Appeals) shall also be faceless.
The objective of faceless assessment is to completely eliminate physical contact between the taxpayer and the taxman to make tax administration objective, transparent and corruption-free.
The system will work under the National E-Assessment Centre (NeAC) headquartered in Delhi and eight Regional E-Assessment Centres (ReACs) located in Delhi, Mumbai, Chennai, Kolkata, Ahmedabad, Pune, Bengaluru and Hyderabad. Presently there are about 6 crores income tax assesses in India. Hence, it has been a big job to develop such a strong digital system to undertake this massive assignment. This has been achieved by the department after a long journey of computerisation of the department.
History of Computerization
Journey of computerisation had started in 1982, when DIT (Systems) was appointed in the Directorate of Income-tax (Organization and Management Services) to make co-ordinate efforts in introducing electronic data processing of the returns. Thereafter the process of computerization and adoption of electronic system continued and various activities relating to TDS, filing of returns, grant of refunds etc. were undertaken in digital form. CPC at Bengaluru and TRACES at Gaziabad are effectively working. All returns are filed electronically and are processed by CPC and refunds and demands on the basis of return are granted / raised within a short time without interface. Similarly all TDS statements are filed in electronic mode and same are processed. These steps taken had solved many problems of assesses. Details of all payments made by an assessee, whether directly or by way of TDS are now available in 26AS. Another important issue of assesses has been arbitrary assessments. Once the system for processing of returns and grant of TDS had stabilized the department had thought of expanding the same for assessments through e-proceedings.
Amendments in Income-tax Act to facilitate E-Proceedings.
To facilitate electronic communication by the department as well as by the assessee Sections 282 and 282A were inserted in the Income Tax Act to provide for electronic communication and also authentication by Income-tax authority of any notice, questionnaire or order. Rules 127 and 127A were also inserted in Income-tax Rules pursuant to above sections providing for the procedure etc.
Definition of term “hearing” was inserted in section 2(23C) w.e.f. 01.06.2016 to provide that “hearing” includes communication of data and documents through electronic mode.
Vide Finance Act, 2018 Sub-sections (3A) and (3B) were inserted in Section 143 of the Act. Sub-section (3A) empowered the government to make a scheme by notification in the official gazette for making assessments u/s 143(3) so as to impart greater efficiency, transparency and accountability by:-
(i) eliminating the interface between the Assessing Officer and the assessee.
(ii) optimizing utilization of resources through economies of scale and functional specialization.
(iii) introducing a team based assessment with dynamic jurisdiction.
Sub-section (3B) was inserted to empower the government to notify that any of the provisions relating to assessment shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification.
Vide Finance Act,2020 section 143 (3A) was further amended to extend the scheme to assessment under section 144 and similar amendments were also made in Section 250 of the Act by inserting sub-sections (6B) and (6C) empowering the government to frame scheme for decision of appeals by CIT(A)s without interface with assesses.
Provisions of Section 274 were also amended vide Finance Act,2020 to provide for dynamic jurisdiction and passing of penalty orders also without interface.
Steps Taken to Impliment the Scheme
In the year 2016 CBDT issued a Notification No. 2/2016 dated 03.02.2016 for paperless assessment proceedings in respect of selected non corporate assesses as a part of pilot project in five cities, namely, Ahmedabad, Bangalore, Chennai, Delhi and Mumbai. All communication was through e-mails. Scheme was extended to two more cities, namely Hyderabad and Kolkata Vide Notification dated 25.05.2016. It was also provided that all assesses whose cases were in scrutiny could also opt for e-assessment.
Proceedings commenced through Income Tax Business Application (ITBA) of the department vide Notification No.4/2017 dated 03.04.2017 when it had become functional and all communication was to be made after login under “E-Proceeding” on E-filing website of the department.
On 12th September 2019 a Notification No.61/2019 was issued by CBDT notifying E-assessment Scheme, 2019 pursuant to powers vested in it by sub-section (3A) of section 143 of the Act. Another Notification No. 62/2019 was also issued pursuant to powers vide Sub-section (3B) of Section 143 providing that sections specified therein shall stood modified so as to be applicable to E-assessment Scheme, 2019.
Two Notifications Nos. 60 and 61 of 2020 dated 13th August, 2020 have been issued making certain modifications in the Scheme introduced vide Notification No. 61 /2019 dated 12th September, 2019 and also modifying Notification No. 62/2019 dated 12th September, 2019 in regard to applicability of certain provisions of the Act to the Scheme. Modified Scheme has been brought in force with effect from above date. One important modification made in the Scheme vide above notifications is that Scheme shall now be called “Faceless Assessment Scheme, 2019”. Further, as per the modified Scheme, assessment under section 144 of the Act is also covered in the Scheme and order for levy of penalty is also to be passed by NeAC under the Scheme.
An order dated 13th August 2020 has also been issued by CBDT to provide that all the assessment orders shall herein after be passed by NeAC through the Faceless Assessment Scheme, 2019, except as provided hereunder:
1. Assessment orders in cases assigned to Central Charges.
2. Assessment orders in cases assigned to International Tax Charges.
Any assessment order which is not in conformity shall be treated as non-est and shall be deemed to have never been passed.
Applicability / Modification of certain sections of the Act to the scheme
Vide Notification No.62/2019 dated 12.09.2019 read with Notification No. 61/2020 dated 13.08.2020 following sections of the Act have been made applicable to the Scheme and also stands modified in view of the scheme pursuant to powers vested in the government vide sub-section (3B) of section 143 of the Act.
Sections 2(7A), 92CA, 120, 124, 127, 129, 131, 133, 133A, 133C, Chapter XIV and Chapter XXI of the Act, which deals with jurisdiction of the Assessing Officer and the procedure for passing the assessment order, stands modified so as to make the procedure provided in the scheme applicable and accordingly all the authority under the scheme shall be empowered to frame the assessment in the manner provided in the scheme in case of an assessee and any hearing to the assessee or to his representative shall also be though video conferencing only in the circumstances to be prescribed. Further, any statement of the assessee or of any other person shall also be recorded only though video conferencing.
Section 246A of the Act governing the filing of appeal before Commissioner (Appeals) also stands modified to the extent that an appeal against an assessment order or penalty order passed by NeAC under the Scheme shall lie before Commissioner (Appeals) having jurisdiction over the jurisdictional Assessing Officer.
Sections 140, 142 and 282A of the Act stands modified so as to provide that authentication of any electronic record or submissions shall be though digital signature by the Income Tax Authority as well as by the Assessee or his representative.
Chapter XXI of the Act governing the levy of the penalty and procedure and powers provided in respect thereto under various sections of the Chapter also stands modified so as to provide that notice can be issued by NeAC and order for levying penalty can also be passed in terms of the scheme
Sections 282, 283 and 284 governing the service of notice to the Assessee and filing of documents etc. by the Assessee also stands modified so as to provide that service of the notice, order or any other communication by the Department as well as submission of replies by the Assesses and maintenance of record shall be governed as provided in the scheme.
Structure Formed To Impliment The Scheme
A National e-Assessment centre (NeAC) to facilitate and centrally control the e-assessment.
Regional e-Assessment Centres (ReAC) under the jurisdiction of the regional Principal Chief Commissioner for making assessment.
‘Assessment Units’ for identifying points or issues, material for the determination of any liability (including refund), analysing information, and such other functions.
‘Verification Units’ for enquiry, cross verification, examination of books of accounts, witness and recording of statements, and such other functions as may be required for the purposes of verification.
‘Technical Units’ for technical assistance including any assistance or advice on legal, accounting, forensic, information technology, valuation, audit, transfer pricing, data analytics, management or any other technical matter.
‘Review Units’ for reviewing the draft assessment order to check whether the facts, relevant evidence and law and judicial decisions have been considered in the draft order.
All the communications between all the units mentioned above, for the purpose of making an assessment under this scheme would be through the NeAC.
The overall manpower strength of the NeAC / ReACs consists of 30 CCsIT, 154 PCsIT, 565 Addl./Jt., 645 DCs/ACsIT and 2830 ITOs. The Office orders for setting up of NeAC and ReACs have already been issued. Total number of Officers posted for the function is 4224 and they will be assisted by 17193 subordinate staff members. Above strength is about 2/3 of total strength of the department. Accordingly, balance 1/3 of staff strength will manage jurisdictional charges. Jurisdictional charges are being restructured accordingly.
Presently 95 AU, 35 VU, 20 RU and 4 TU have been set-up and following norm has been adopted for creation of hierarchy in each Unit:
Each ReAC (AU) will have 1 PCIT, 4 Addl./Jt.CsIT, 4 DCs/ACsIT and 20 ITOs
Each ReAC (VU) will have 1 PCIT, 4 Addl./Jt.CsIT, 4 DCs/ACsIT and 20 ITOs
Each ReAC (RU) will have 1 PCIT, 3 Addl./Jt. CsIT., 6 DCs/ACsIT and 9 ITOs
Each ReAC (TU) will have 1 PCIT, 3 Addl./Jt.CsIT, 6 DCs/ACsIT and 9 ITOs
Procedure for faceless assessment under the Scheme
The assessment under this Scheme shall be made as per the following procedure, namely: —
(i) the National e-Assessment Centre shall serve a notice on the assessee under sub-section (2) of section 143, specifying the issues for selection of his case for assessment;
(ii) the assessee may, within fifteen days from the date of receipt of notice referred to in clause (i), file his esponse to the National e-assessment Centre;
(iii) where the assessee –
(a) has furnished his return of income under section 139 or in response to a notice issued under subsection (1) of 142 or sub-section (1) of section 148; and a notice under sub-section (2) of section 143 has been issued by the Assessing Officer or the prescribed income-tax authority, as the case may be; or
(b) has not furnished his return of income in response to a notice issued under sub-section (1) of section 142 by the Assessing Officer; or
(c) has not furnished his return of income under sub-section (1) of section 148 and a notice under subsection (1) of section 142 has been issued by the Assessing Officer;
the National e-Assessment Centre shall intimate the assessee that assessment in his case shall be completed under this Scheme;
(iv) the National e-assessment Centre shall assign the case selected for the purposes of e-assessment under this Scheme to a specific assessment unit in any one Regional e-assessment Centre through an automated allocation system;
(v) where a case is assigned to the assessment unit, it may make a request to the National e-assessment Centre for:
(a) obtaining such further information, documents or evidence from the assessee or any other person, as it may specify;
(b) conducting of certain enquiry or verification by verification unit; and
(c) seeking technical assistance from the technical unit;
(vi) where a request for obtaining further information, documents or evidence from
the assessee or any other person has been made by the assessment unit, the National e-assessment Centre shall issue appropriate notice or requisition to the assessee or any other person for obtaining the information,
documents or evidence requisitioned by the assessment unit;
(vii) the assessee or any other person, as the case may be, shall file his response to the notice referred to in clause (vi), within the time specified therein or such time as may be extended on the basis of an application in this regard, to the National e-Assessment Centre;
(viii) where a request for conducting of certain enquiry or verification by the verification unit has been made by the assessment unit, the request shall be assigned by the National e-assessment Centre to a verification unit in any one Regional e-assessment Centres through an automated allocation system;
(ix) where a request for seeking technical assistance from the technical unit has been made by the assessment unit, the request shall be assigned by the National e-assessment Centre to a technical unit in any one Regional e-assessment Centres through an automated allocation system;
(x) the National e-assessment Centre shall send the report received from the verification unit or the technical unit, based on the request referred to in clause (viii) or (ix) to the concerned assessment unit;
(xi) where the assessee fails to comply with the notice referred to in clause (vi) or notice issued under subsection (1) of section 142 or with a direction issued under sub-section (2A) of section 142, the National e-Assessment Centre shall serve upon such assessee a notice under section 144 giving him an opportunity to show-cause, on a date and time to be specified in the notice, why the assessment in his case should not be completed to the best of its judgment;
(xii) the assessee shall, within the time specified in the notice referred to in clause (xi) or such time as may be extended on the basis of an application in this regard, file his response to the National e-Assessment Centre;
(xiii) where the assessee fails to file response to the notice referred to in clause (xi) within the time specified in the notice or within the extended time, if any, the National e-Assessment Centre shall intimate such failure to the assessment unit;
(xiv) the assessment unit shall, after taking into account all the relevant material available on the record make in writing, a draft assessment order or, in a case where intimation referred to in clause (xiii) is received from the National e-Assessment Centre, make in writing, a draft assessment order to the best of its judgment, either accepting the income, or sum payable by, or sum refundable to, the assessee as per his return or modifying the said income or sum, and send a copy of such order to the National e-assessment Centre;
(xv) the assessment unit shall, while making draft assessment order, provide details of the penalty proceedings to be initiated therein, if any;
(xvi) 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, whereupon it may decide to, —
(a) finalise the assessment as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, alongwith the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; or
(b) provide an opportunity to the assessee, in case a modification is proposed, 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
(c) 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;
(xvii) the review unit shall conduct review of the draft assessment order, referred to it by the National e-assessment Centre whereupon it may decide to, —
(a) concur with the draft assessment order and intimate the National e-assessment Centre about such concurrence; or
(b) suggest such modifications, as it may deem fit, to the draft assessment order and send its suggestions to the National e-assessment Centre;
(xviii) the National e-assessment Centre shall, upon receiving concurrence of the review unit, follow the procedure laid down in sub-clause (a) or sub-clause (b) of clause (xvi), as the case may be;
(xix) the National e-assessment Centre shall, upon receiving suggestions for modifications from the review unit, assign the case to an assessment unit, other than the assessment unit which has made the draft assessment order, through an automated allocation system;
(xx) the assessment unit shall, after considering the modifications suggested by the review unit, send the final draft assessment order to the National e-assessment Centre;
(xxi) The National e-assessment Centre shall, upon receiving final draft assessment order, follow the procedure laid down in sub-clause (a) or sub-clause (b) of clause (xvi), as the case may be;
(xxii) the assessee may, in a case where show-cause notice under sub-clause (b) of clause (xvi) has been served upon him, furnish his response to the National e-assessment Centre on or before the date and time specified in the notice or within the extended time, if any;
(xxiii) the National e-assessment Centre shall,-
(a) in a case where no response to the show-cause notice is received, finalise the assessment as per the draft assessment order, as per the procedure laid down in sub-clause (a) of clause (xvi); or
(b) in any other case, send the response received from the assessee to the assessment unit;
(xxiv) the assessment unit shall, after taking into account the response furnished by the assessee, make a revised draft assessment order and send it to the National e-assessment Centre;
(xxv) the National e-assessment Centre shall, upon receiving the revised draft assessment order,—
(a) in case no modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, finalise the assessment as per the procedure laid down in sub-clause (a) of clause (xvi); or
(b) in case a modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, provide an opportunity to the assessee, by serving a notice as per the procedure laid down in sub-clause (b) of clause (xvi);
(c) the response furnished by the assessee shall be dealt with as per the procedure laid down in clauses (xxii), (xxiii), and (xxiv);
(xxvi) The National e-assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act;
Notwithstanding anything contained hereinabove, the Principal Chief Commissioner or the Principal Director General, in charge of National e-assessment Centre, may at any stage of the assessment, if considered necessary, transfer the case to the
Assessing Officer having jurisdiction over such case, with the prior approval of the Board.
Important features of the Scheme
Interaction at all stages will be between the Assessee and National E-Assessment Centre through electronic mode only. Assessee will not know which Assessment Unit, Verification Unit, Review Unit or Technical Unit is working on his case.
Assessment for the purpose of the Scheme would be assessment under section 143(3) and 144 of the Act. It is stated that:-
Since, provisions of Section 143 are also applicable to return furnished pursuant to notice under section 148 of the Act, assessment under section 147 is also covered under the Scheme.
Section 132 of the Act, which govern the search is not subject to Scheme and therefore, assessment in case of search has to be made in terms of section 153A or 153C of the Act, by the jurisdictional Assessing Officer.
All pending assessments shall also be proceeded with under the scheme in view of order of CBDT dated 13.08.2020 except cases which are assigned to Central Charges and International Tax Charges
Every notice or order or any other electronic communication under this Scheme to the assessee shall be delivered by way of placing an authenticated copy thereof in the assessee’s registered account or by sending to registered email address of the assessee or his authorised representative or by uploading on the assessee’s Mobile App and followed by a real time alert.
Registered e-mail address for this purpose means:
(a) the email 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 case of addressee being an individual who possesses the Aadhaar 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 e-mail 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.
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;
– Every notice or order or any other electronic communication under this Scheme to any other person shall be delivered by sending an authenticated copy thereof to the registered email address of such person, followed by a real time alert.
– The Assessee shall file his response to any notice or order or any other electronic communication, under this Scheme, through his registered account, and once an acknowledgement is sent by the National e-assessment Centre containing the hash result generated upon successful submission of response, the response shall be deemed to be authenticated.
– An electronic record shall be authenticated by the originator by affixing his digital signature in accordance with the provisions of sub-section (2) of section 3 of the Information Technology Act, 2000. Such authentication may also be done by electronic signature or electronic authentication technique in accordance with the provisions of sub-section (2) of section 3A of the said Act:
– The time and place of dispatch and receipt of electronic record shall be determined in accordance with the provisions of section 13 of the Information Technology Act, 2000. The aforesaid section provides that:
Despatch of any electronic record occurs when it enters a computer resource outside the control of the originator and time of despatch shall be as soon as the originator places the communication on the computer resource of the addressee.
Time of receipt of an electronic record by the addressee shall be at the time the electronic record enters in the designated computer resource. In case there is no designated computer resource, receipt shall occur at the time when electronic record is retrieved by the addressee.
An electronic record shall be deemed to be dispatched at the place where the originator has his place of business and shall be deemed to be received at the place where the addressee has his place of business. Where there are more than one places of business, the principal place of business shall be the place of business for this purpose. In case of persons who have no place of business, his usual place of residence shall be the place of business. Further, it has been provided that in case of a body corporate usual place of business would mean the place where it is registered.
In case of an assessee, his designated computer resource will be the registered account on the e-filing website. Accordingly, the date of first appearance of notice under E-proceedings tab in assessee’s official login on e-filing portal shall be the date of dispatch as well as date of service of notice in accordance with provisions of Section 13 of Information Technology Act, 2000 and place of service will be the place of business or place of residence in case of assesses other than corporate assesses. In case of corporate assesses the place of registered office shall be the place of service.
NeAC in the notice to be issued shall specify the issues on the ground of which case has been selected for assessment and accordingly, the assessee will be required to give details / reply only on those particular issues. Hence, general short of questionnaire as is issued by the Assessing Officer presently will not be issued.
The assessee is required to give reply to the issues mentioned in the notice within a period of 15 days from the date of receipt of the notice. There is no provision for extension of time in this regard though there is a provision for extension of time when show cause notice is given to the Assessee pursuant to draft assessment order making certain additions.
Assignment of the case by NeAC to AU, RU, VU, or TU shall be by automated allocation system and there will be no discretion of NeAC or any other Authority under the scheme.
Notice issued under the scheme or order passed shall be signed by a designated Officer in NeAC and same shall be deemed to be issued or passed by the Assessing Officer since the relevant provisions of the Act stand modified.
NeAC is only a coordinating authority and it has, as such, no powers of its own to modify the assessments or take any other action. In other words, it has to act only as per draft assessment order or report of other units setup under the ReAC.
As per the scheme there is no provision to provide another opportunity to the assessee for furnishing details as per notice issued under section 143(2) or in response to show cause notice pursuant to draft order of assessment and accordingly, the assessee is required to immediately act on receipt of the notice and furnish details / reply within the time provided. So far it was the general practice that the Assessing Officer was providing repeated opportunities to the assessee. It is not clear whether as a procedure NeAC would provide second or third opportunity.
When the draft assessment order is received by the NeAC from AU, it will be examined in accordance with risk management strategy though automated examination tool. It would mean that in case there is an exceptional issue, such as, high pitched assessment etc., case will be sent to review unit.
In case as per the draft assessment order returned income has been accepted NeAC would pass the assessment order and will serve the same on the assessee along with demand notice etc. In case there is a modification proposed in the draft order a show cause notice shall be issued to the assessee to show cause as why the assessment should not be completed as per the draft assessment order.
In case, draft assessment order was sent to review unit and it has suggested modifications in the draft order, the case for further proceedings shall be assigned to an assessment unit, other than the assessment unit which had prepared the draft assessment order earlier and such assessment unit shall prepare revised draft assessment order considering the modification suggested by the review unit. The use of the word “considering” suggests that Assessment Unit may not concur with the modifications suggested by the review unit.
In case show cause notice was issued to the assessee on the draft assessment order and the assessee has submitted reply thereto, NeAC will send the reply to the same Assessment Unit which had prepared the draft for consideration of the reply and prepare revised draft assessment order. The revised draft assessment order will be sent to NeAC and as per clause xxv of the scheme NeAC would provide another opportunity to the assessee in case modification in the revised draft assessment order is prejudicial to the interest of assessee. It is not clear from the language of the clause whether another opportunity is to be provided for the same additions, which were proposed in the initial draft assessment order or it would mean that while preparing the revised draft assessment order the Assessment Unit can make any other or further addition and show cause notice is to be issued with reference thereto.
As per the scheme assessment unit has to mention in the draft assessment order penalty proceedings to be initiated in the case of the assessee. NeAC will issue show cause notice to the assessee. Reply of the assessee will be sent to assessment unit and draft order of penalty will be prepared. Penalty order shall be passed by NeAC. As per para 6 of notification dated 12 September 2019 any unit can recommend initiation of penalty proceedings for non-compliance of any notice, direction or order issued under this scheme. Accordingly penalty proceedings can be initiated only for non-compliance of any notice, direction or order. As per the notification notifying the Scheme penalty proceedings cannot be initiated for any other defaults, including for under-reporting or misreporting of income under section 270A of the Act. It is, therefore, not clear, who will initiate penalty proceedings for such defaults and who will impose the penalty.
Power to specify format, mode, procedure and processes.
The Principal Chief Commissioner or the Principal Director General, in charge of the National e-assessment Centre shall, with the prior approval of the Board, lay down the standards, procedures and processes for effective functioning of the National e-assessment Centre, Regional e-assessment Centres and the unit set-up under the said Scheme, in an automated and mechanised environment, including format, mode, procedure and processes in respect of the following, namely:-
(i) service of the notice, order or any other communication;
(ii) receipt of any information or documents from the person in response to the notice, order or any other communication;
(iii) issue of acknowledgment of the response furnished by the person;
(iv) provision of “e-proceeding” facility including login account facility, tracking status of assessment, display of relevant details, and facility of download;
(v) accessing, verification and authentication of information and response including documents submitted during the assessment proceedings;
(vi) receipt, storage and retrieval of information or documents in a centralised manner;
(via) circumstances in which provisions of sub-paragraph (1) of paragraph 8 of the said Scheme shall not apply;
(vib) circumstances in which personal hearing referred to in sub-paragraph (3) of paragraph (11) of the said Scheme shall be approved;
(vii) general administration and grievance redressal mechanism in the respective Centers and units.
Benefits of the scheme:
It will provide greater efficiency, transparency and accountability as envisaged in sub-section (3A) of section 143.
The department will be able to introduce functional specialization and will optimize utilisation of resources, so as to reduce harassment to the assesses and will save on time and cost to the Government as well as to the assesses.
Elimination of interface and dynamic jurisdiction will eradicate corruption in the present system.
Since whole system will be governed by automated allocation system, there will be no discretion of any authority. Therefore, system will work fairly and there will be no prejudice or harassment in any case.
Since now all the documents, details and submissions of the assessee will be on record, officers examining the case have to look into the same and can not ignore. Therefore, officers will be acting in more responsible manner and will be accountable.
Case of the assesses will be selected for assessment only on the basis of specific issues and notice will also be issued to the assessee for giving details and explanation on specific issues. Therefore, assessee will be required to give details only on those issues.
Assessment unit on receipt of the reply of the assessee in respect to the issues raised in the notice will consider only those issues and hopefully, reply will be considered objectively and in case reply is found satisfactory, no addition or disallowance will be proposed by the assessment unit. Further, as the additions proposed in the draft assessment order by the assessment unit would not be final and the draft order can be sent by NeAC to review unit, the assessment unit will not be tempted to make additions which are not factually or legally warranted.
Since verification of details and information will be carried out by verification unit and not by the assessment unit, it is expected that verification will be done in objective manner and without any prejudice. Further, officers having specialized knowledge of accounting etc. are likely to be posted in verification unit and they will be able to carry out the job in effective manner, which will be in the interest of assesses and also of the department.
Setting up of technical units, shall be of great advantage to the department as well as to the assesses. In many cases it is required that officer examining the case is supposed to understand technical issues, particularly industry related issues or manufacturing process. Since, officers in Technical Unit will be having specialized knowledge, proper examination of issues would be possible and it would be in the interest of assesses and also of the department.
It is expected that technical unit will express legal opinion on any provision of law in a co-ordinated manner and there will be standardization in the approach. It is also expected that based on the view expressed by technical units on legal issues, department will issue internal instructions to assessment units to take a particular view on the particular legal issue. It will substantially reduce litigation.
Responsibility of Assesses
Assesses have to maintain proper record and books of account and returns have to be filed correctly so as to avoid mis-match with any information likely to be received by the department from some other source.
Assesses or their representative will have to submit proper, complete, systematic and to the point details in reply to notice received for assessment.
Explanation to be submitted by assesses or their representatives on factual and legal issues has to be effective and to the point so as to be easily understandable.
Details and documents to be submitted by the assesses to substantiate their claims or explain the issue should be properly indexed and page numbered and preferably be submitted in paper book form and reference to all the documents being submitted should be made in reply / submissions alongwith their page numbers so that same can be easily referred by the officer examining the case.
Assesses have to furnish details within the time limit provided in the notice or within the time extended on making application by the assessee. Failure of the assessee to submit timely details will result in taking adverse view by the department while framing the assessment order and can also result in best judgement assessment under section 144 of the Act. Hence, assessee can not adopt casual approach in this regard.
Suggestions / Clarifications required on the scheme
As per the scheme there is no provision for extension of time limit beyond 15 days for submitting details by the assessee in response to the notice issued under section 143(2) of the Act whereas there is provision for extension of time for submitting reply to show cause notice issued on draft assessment order. There should be provision for extension of time since 15 days time is too short to reply the first notice and submitting details, documents and explanation to the issues raised in the notice.
In many cases in order to substantiate the claim it is necessary to submit voluminous documents / details. There are likely to be practical difficulties to assesses or their representatives to scan the same and load on the system There may also be limit to load documents on the system. It is suggested that department should frame the system in this regard and notify the same. Department should also provide facility to upload replies / documents through their facilitation centers, which should be set up at each office of the department. It is stated that:-
Proper system and format for loading the documents with proper index and page numbers would also make easier for the concerned officers to examine the reply and appreciate the submissions and voluminous documents and details.
Problem of assesses not having access to computer system or are not computer savvy will also be resolved.
It is not clear for re-opening the case in terms of section 147 of the Act, who will record the reasons and will issue the notice under section 148 and who will pass the order on objections filed by an assessee. Jurisdiction of NeAC commences from issue of notice under section 143(2) of the Act, which will be necessary only after notice under section 148 is issued, return is filed, copy of reasons is made available to assessee and objection filed by the assessee are disposed of by passing a speaking order.
Section 132 is outside the Scheme. Further, cases assigned to Central Charges are also not in the Scheme. It is therefore, Clear that Scheme is not applicable to search and seizure cases. In order to bring more clearity in this regard it should be clarified that who will conduct the search, who will record satisfaction, who will issue notice for filing return and who will issue notice for assessment. How the cases will be centralized and at what stage. In fact action for search should now be taken by a central wing, may be Investigation Department only and after the search case should automatically be deemed to be under the Jurisdiction of Central Charge, but the issue of which Central Charge will be there, as assesses located in different jurisdiction might be searched and will have to be assessed together.
It also needs to be clarified how the provisions of section 144A can be invoked by the assessee. Above section provides for reference to Additional CIT by the assessee for directions to AO. This section may not now be applicable in the cases processed under the Scheme. But notification states that Section will be applicable to assessment made under the Scheme, subject to the exceptions, modifications and adaptations provided in the Scheme. There is no mention in the Scheme of above Section.
Similarly procedure for applicability of provisions of section 144BA, holding an arrangement as impermissible avoidance arrangement, needs to be specified.
It also needs to be clarified that reference to Technical Unit for the purpose of determination of arm’s length price will be deemed to be reference to Transfer Pricing Officer for all purposes under the Act and report of technical unit will be considered to be order of TPO and consequences will follow. Further, draft order in such a case has to be served on assessee and procedure for filing objections before DRP can be followed.
Process of proceeding before Dispute Resolution Panel is not clear. Since transfer pricing cases, except those assigned to International Tax Division are to be done under the Scheme, procedure in this regard should be clarified and jurisdiction of DRP should also be specified.
Who will take-up the set-aside cases pursuant to order passed by ITAT, High Court or the Supreme Court should also be clarified.
Jurisdiction of NeAC to pass the penalty orders under the Scheme should also be clarified. In terms of para 6 of Notification dated 12.09.2019 read with notification dated 13.08.2020 any unit can only recommend for initiating penalty proceedings for non-compliance of any notice, order or communication of NeAC under the Scheme. Hence, penalty can only be levied for such default and not for any other matter.
Actions to be taken by Jurisdictional Officer
Notification dated 13.09.2019 had provided that The National e-assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over such case., for –
(a) imposition of penalty;
(b) collection and recovery of demand;
(c) rectification of mistake;
(d) giving effect to appellate orders;
(e) 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;
(f) proposal seeking sanction for launch of prosecution and filing of complaint before the Court;
Notification dated 13.08.2020 has modified this clause and now it is provided that the National e-assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act.
It appears on the basis of above that:
All the actions to be taken under the law will be by the Jurisdictional Assessing Officer after the order of assessment has been passed by NeAC in the cases to be assessed under the Scheme; and
All actions required to be taken under law will be taken in other cases starting from beginning by the Jurisdictional Assessing Officer.
The powers of Jurisdictional Assessing Officer are quite wide. There are, however, certain doubts in regards to actions to be taken by the Jurisdictional Assessing Officer and in this regard it may be stated that:
Jurisdiction to pass penalty orders under different sections need to be clarified as discussed herein above.
Once the order has been passed by NeAC on the basis of draft order prepared by the Assessment unit after fully examining the issues on facts and also on law and also after having report of Verification Unit or Technical unit and such order also might have been passed through the test of Review Unit, can the Assessing Officer take a view that there is a mistake on facts or on law, warranting rectification under section 154 of the Act. Such power to AO will frustrate whole process of Scheme.
Similarly, once the order has been passed after the whole process provided in the Scheme, should action be taken by Commissioner under Section 263 of the Act?
In regards to stay of demand, once order has been passed by NeAC, will AO consider contention of assessee that stay is warranted since additions are not sustainable and prima facie case is in his favour?
System of assessment in US.
In US tax returns filed by the assesses are also examined and in a very limited number of returns, about 1%, further examination is made. On examination IRS call for additional information from the tax payer by mail, in person at IRS local offices or at the business location of the tax payer. On gathering the additional information or going through the audit IRS may accept the return as filed or proposed adjustments to the return.
The system is working very effectively. It is expected that in India also the system will work, though considering number of assesses and volume involved it may take some time to establish the effective system.
In conclusion it is stated that whole Scheme is quite effective. In initial stage there would be certain difficulties. Over period of time same will be resolved and system will work quite effectively. It is also stated that professionals should not have any doubt or reservation in respect of the scheme. They should also prepare themselves to make effective submissions. The Scheme will be in the interest of all.
Commitment of the Department
Provide fair, courteous, and reasonable treatment
Provide prompt, courteous, and professional assistance in all dealings with the taxpayer.
Treat taxpayer as honest
Treat every taxpayer as honest unless there is a reason to believe otherwise.
Provide mechanism for appeal and review
Provide fair and impartial appeal and review mechanism.
Provide complete and accurate information
Provide accurate information for fulfilling compliance obligations under the law.
Provide timely decisions
Take decision in every income-tax proceeding within the time prescribed under law.
Collect the correct amount of tax
Collect only the amount due as per the law.
Respect privacy of taxpayer
Follow due process of law and be no more intrusive than necessary in any inquiry, examination, or enforcement action.
Not disclose any information provided by taxpayer to the department unless authorized by law.
Hold its authorities accountable
Hold its authorities accountable for their actions.
Enable representative of choice
Allow every taxpayer to choose an authorized representative of his choice.
Provide mechanism to lodge complaint
Provide mechanism for lodging a complaint and prompt disposal thereof.
Provide a fair & just system
Provide a fair and impartial system and resolve the tax issues in a time-bound manner
Publish service standards and report periodically
Publish standards for service delivery in a periodic manner.
Reduce cost of compliance
Duly take into account the cost of compliance when administering tax legislation.
Expectations from Tax Payer
Be honest and compliant
Expected to honestly disclose full information and fulfil his compliance obligations.
Expected to be aware of his compliance obligations under tax law and seek help of department if needed.
Keep accurate records
Expected to keep accurate records required as per law.
Know what the representative does on his behalf
Expected to know what information and Submissions are made by his authorised representative.
Respond in time
Expected to make submissions as per tax law in timely manner.
Pay in time
Is expected to pay amount due as per law in a timely manner.
In view of Taxpayer Charter notified by the government it is expected that department will act with positive attitude and assesses will get due respect and assessments will be finalised without prejudice. Simultaneously, assesses have also to act honestly and as per expectation of the department. It is hoped that over a time thing will improve and atmosphere of trust between the assesses and department will develop and ligation will substantially reduce.
APPEALS BEFORE COMMISSIONER (APPEALS)
Provisions relating to appeals before Commissioner (Appeals) have also been amended and it is proposed that appeals will also be decided in faceless manner without personal interaction. In this regard it is stated that:-
Vide Notification No.62/2019 dated 12th September, 2020 provisions of Section 246A of the Act stands modified and it has been provided that an appeal against an assessment made by the National e-assessment Centre under this Scheme shall lie before the Commissioner (Appeals) having jurisdiction over the jurisdictional Assessing Officer and any reference to the Commissioner (Appeals) in any communication from the National e-assessment Centre shall mean such jurisdictional Commissioner (Appeals). Accordingly, appeal needs to be filed against the order passed by NeAC with the Commissioner (Appeals) having jurisdiction with reference to Jurisdictional Assessing Officer.
Section 250 of the Act has been amended vide Finance Act, 2020 and sub-sections (6B), (6C) and (6D) have been inserted. Sub-section (6B) is similar to Sub-section (3A) of section 143 and it reads as under-
“(6B) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of disposal of appeal by Commissioner (Appeals), so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the Commissioner (Appeals) and the appellant in the course of appellate proceedings to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals).”
Vide Sub-section (6C) government has been empowered to notify the Scheme for the purpose of decision in appeals in terms of Sub-section (6B) without interface. The Scheme is yet to be notified, but intention is quite evident that appeals will be decided without interaction and there will be dynamic jurisdiction.
It has been announced by the Prime Minister that Scheme for disposal of appeals by Commissioner (Appeals) in faceless manner without interaction will come in force from 25th September, 2020. It is, therefore, expected that Scheme will be notified shortly.
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