The Faceless Assessment Scheme is arguably the biggest tax reforms and a complete paradigm shift from the Income Tax Act, 1961. The concept of the scheme is to streamline the process of filing, bring greater transparency, consistency and accountability into the tax administration. The Income Tax Act has multiple provisions that would place accountability upon the tax administration but this scheme is a step further in the direction of awakening the responsibility and accountability of the tax administration. Chapter XVIII of the Income Tax Act, 1961 stipulates the powers, procedures for search and seizure as well as procedure for appeals.
Originally section 143(3A) was inserted in the Act by virtue of Finance Act, 2018 which was like a fruit for thought as it stated that a scheme by notification of Official Gazette with the aim to impart greater transparency, efficiency and accountability. It also included three clauses which briefly laid out the aim of the scheme. The words accountability and transparency echo the aim of making the process less susceptible to accusations of corruption as there is no direct interaction with the Assessing officers.
Introduction of the scheme and its workings:
The Central Board of Direct Taxes in its notification dated September 12, 2019, had issued E-ASSESSMENT SCHEME 2019 for conducting scrutiny through Faceless assessment of income tax returns (ITR). With the help of this scheme the Government aims to curb face to face assessment and bring in seamless, more efficient way of conducting assessment. This scheme is also known as Faceless Assessment Scheme.
For the purpose of this Scheme, the Government will set up the 6 centres and designate them various tasks for the better and smoother conduct of assessments. The procedure for conducting the e-assessment has been defined in the Scheme. It has laid down the procedure and tasks that needs to be performed by each centre and unit for conducting the e-assessment. The assessment procedure starts from the National E-Assessment Centre (NeAC) where an officer will issue a case for assessment by virtue of Section 143 of the Income Tax Act. The Assessee shall file his response within 15 days of the receipt of the notice. Through an automated allocation system, the NeAC will assign the selected case to the Assessment Unit (AU). The AU may request for additional information on receiving the same the AU will make a draft assessment order (AO) and suggest penalty proceeding to the NeAC. The NeAC will examine it and give an opportunity of being heard to the Assessee which will be duly considered by the AU and upon which the NeAC will pass a final order.
Impact of the scheme on the taxpayers and the tax administration.
On the face of it the scheme seems to be beneficial to the taxpayers as it reduces the interaction with the Assessing officer which is quite a stressful task. Making the filing and assessment electronic gives the assessee the feasibility to access the website from anywhere and anytime. Just like the old saying, it’s just a click away. It will minimize the cost of compliance since most of the taxpayers will be technologically abled and need no assistance because the system is so user-friendly and assistive. One of the most contentious topics is about giving the assessee an opportunity to be heard, the procedure for assessment seems to suggest that the NeAC on receipt of the draft AO may provide opportunity to the Assessee to be heard if not the draft AO will be finalised. This is problematic because as per principles of natural justice “Audi Alteram Partem” an individual must be given an opportunity to be heard or else it shall lead to miscarriage of justice and a violation of fundamental right.
The Department already uses the technology effectively through e-filing of Income Tax Return’s, Implementation of Computer Assisted Scrutiny Selection (CASS), service of e-notice electronically, e-assessment proceedings etc. The E-assessment scheme is just a cherry on the top because with the help of this scheme will make the framework robust and address the issues in performance management. The tax administration will be more organised and transparent because of the division of work between the six units and no human intervention in selection of cases but the only drawback is not making the opportunity to be heard as a right.
Will the scheme lead to greater compliance of taxpayers?
On a first glance the scheme seems to be easy as it is electronic but the complexity in the procedures of the assessment process as well as the interworking of the six units will make it confusing and complex for a non-technical assessee to understand which will give rise to extra cost for compliance but since this is only the case when the assessee does not have hands on experience with technology which is not that common in this era, it is not a serious problem. Overall the scheme aims to ensure transparency, consistency and accountability which will attract more taxpayers to show some keen interest in the scheme. The scheme will definitely see a scope of greater compliance from the taxpayers.
Inherent challenges of the scheme and the suggested changes
- There is no doubt on successful implementation of the scheme but the same may be seen as time-consuming because of the inter-workings between the six units including the NeAC particularly when there are a lot of queries and large volumes of documents need to be scrutinized. The workings of the six units involves human intervention so it may hamper the speed. The CBDT should try to impose less burden on NeAC as it is the inter unit communication till the final assessment, it can shift the burden on the AO to communicate with the Assessee without disclosing any information of the said Assessee. The NeAC is given wide powers and this may result in arbitrariness making the aim of launching the scheme redundant.
- The portal allows an Assessee to attach only 10 documents with 1 attachment of 10MB which is very less in case of large companies or other assessee whose documents are greater than 10MB. This removes the element of feasibility that is highlighted under section 143(3A)(a), the same should be updated by the department.
- An already talked about problem is the non-inclusion of opportunity to be heard as a right of the Assessee. It is a fundamental right and a principle of natural justice, the violation of which will lead to serious miscarriage of justice. Not only that but also the AO will not be able to understand the transactions of the Assessee without a personal hearing which can lead to erroneous assessment.
- The scheme provides for the suggestion by units like Verification, review and technical unit but the same are not considered which is notable because the scheme is also called as a team-based assessment but this does not echo the workings of a team.
- Lastly, being a new scheme the implementation of the same is to be tested and the changes in the process will bring about a smoothly functioning e-assessment scheme.
Conclusion: the e-assessment scheme is a boon to the taxpayers.
The scheme was launched by the government with a dream of corruption-free india with the help of technology and the idea of Digital India. The faceless assessment scheme was brought about with a view to honour the honest tax payers and bring in greater transparency to the tax administration. It is no doubt a massive paradigm shift in the way assessments will be carried out further on, they have been made faceless and organised. The main issue with the previous form of assessment was human intervention for selection of cases for assessment but now that it is addressed with the help of an automated selection by using Artificial Intelligence, the taxpayers will have more faith leading to increase in compliance. Though there are a few hitches it is upon the department and government to identify and address the same to ensure smooth functioning of the scheme. But both the tax department and tax payers need to be ready to adopt and accept the change in the assessment scheme, it needs to be thoroughly studied and implemented and till then we can only wait and watch for it to evolve and adapt to the practical environment. No boundaries, no limit use it anywhere, anytime. Now that more than 99% of the ITRs are filed online, the system will help in assessing the scrutinized ITRs easily.
The Prime Minster had explained the faceless assessment, taxpayers charter, detailed the reallocation and reorganisation aspects of the department’s manpower. He also underlined the fact that the faceless assessment scheme’s implementation would not cause any large-scale movement of officers or officials
Income Tax Employees Federation & Income Tax Gazetted Officers’ Association writing to Modi raising concerns over any large-scale diversion of posts and consequent transfers of promotee officers and officials among different states under the jurisdiction of one principal chief commissioner of I-T charge, may result in complex problems including children’s education, unmanageable operational difficulties in the residual charges, the employees pointed out.