Homi Mistry
Over the past few months, technology has been widely used to carry out varied tasks remotely, be it work, shopping, banking, training or schooling. The Income tax department is not far behind in technology usage and is moving rapidly toward digitisation. In addition to filing of income tax returns or filing of forms, collection of information from the taxpayer, collection of tax, filing rectification applications which were being done online for a few years, the processes of income tax assessments and appeals will also now be completed through the online mode.
Assessments in the past
Traditionally, the assessments procedure was a face-to-face interaction between the taxpayer and the tax authorities. The tax authorities would typically send a notice to taxpayers at their address or registered email ID. The notice would contain the details that the income tax authorities wish to examine and they would allot a date of hearing when the taxpayer was required to attend the tax office and produce the requested documents. On the appointed date, the taxpayer or his authorised representative had to physically visit the jurisdictional Income tax office, submit the details and offer explanations as requested by the tax officer. As most assessment proceedings require multiple submissions and hearings with the tax officer, the taxpayer had to spend considerable time, effort and money to travel to the tax office to attend the hearings.
New Era of Faceless Assessments
With the aim of bringing efficiency, transparency and accountability in the assessment proceedings through online systems, the Central Board of Direct Taxes (CBDT) had notified the E-assessment Scheme, 2019 in September 2019. Thereafter, the CBDT issued notifications to align the ‘E-assessment Scheme 2019,’ with the ‘Transparent Taxation-Honouring the Honest’ platform, which was launched on August13, 2020 (including renaming the ‘E-assessment Scheme 2019’ as ‘Faceless Assessment Scheme 2019’).
The government has now passed the Taxation and Other laws (Relaxation and Amendment of certain Provisions) Act, 2020 on September 29, 2020 to incorporate the Faceless Assessment Scheme under the provisions of Income Tax Act, 1961 (‘Act’).
Key features of the faceless assessment procedure are as follows:
-The National Faceless Assessment Centre (NFAC) will serve a notice to the taxpayer under section 143(2) of the Act. The taxpayer should file his/her response to the notice within 15 days of receipt of the notice from the NFAC.
-The NFAC will assign the case selected for the purpose of faceless assessment to a specific assessment unit in any one Regional Faceless Assessment Centre (RFAC) through an automated allocation system (AAS).
-The assessment unit may make a request to NFAC for: obtaining information, documents, evidences as required from the taxpayer; and / or; conducting enquiry or verification by verification unit; and / or; seeking technical assistance from technical unit.
-The NFAC shall issue communication to the respective person to obtain the documents as requested by the assessment unit.
-Thereafter, the NFAC shall send the documents / information or evidence received from the taxpayer or report received from the verification unit / technical unit to the concerned assessment unit.
-After considering the material available on record, the assessment unit will prepare draft assessment order either accepting or modifying the returned income of the taxpayer and send it to NFAC along with the details of penalty proceedings to be initiated (if any).
-The NFAC will examine the draft assessment order in accordance with the risk management strategy by way of an automated examination tool. NFAC will then finalise the assessment and serve the order to the tax payer or issue a show cause notice to the taxpayer. NFAC can even assign the draft order to the review unit through AAS if required.
-The review unit will review the draft assessment order and intimate the NFAC of its concurrence with it or suggest suitable modifications. In case of variation suggested by the review unit, the NFAC will send the modifications suggested by the review unit to a different assessment unit through an AAS. The new assessment unit, after considering the variations suggested by the review unit, will prepare and send the final draft assessment order to the NFAC to issue it to the taxpayer.
Now that a taxpayer has to comply with assessment without requirement for physical attendance in the offices of the Income tax Department, faceless assessment is expected bring positive changes to the assessment system, thereby saving travel time and cost for the taxpayer, being environment friendly as there will not be any submission made physically, review by more than one assessment unit for a single assessment making the entire assessment process more transparent and objective.
Challenges which may be faced in faceless assessments
Although the faceless assessments program has been launched with a view to provide ease to the taxpayer and the tax authorities, a taxpayer may face challenges such as:
-Taxpayers who are not tech-savvy may be reluctant to respond online or they will have to appoint a professional to assist in the online responses. Further, since there is no face-to-face interaction, the online submission should be well drafted, precise for the tax officer to understand taxpayer’s submissions and claims correctly.
-Technical glitches, non-availability of internet connection, power failure, speed of the network, etc. could result in delays.
(The writer is a Partner with Deloitte India. Mousami Nagarsenkar, Director, Prachi Phansikar, Deputy Manager, and Nikita Malkan, Assistant Manager with Deloitte Haskins & Sells LLP, also contributed)
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