The Finance Minister while presenting the Finance Bill, 2019, stated that existing system of scrutiny assessments in the income tax department involves a high level of personal interaction between the taxpayer and the tax department, which leads to certain undesirable practices on the part of tax officials. To eliminate such instances and bring more transparency in the assessment system, a scheme of faceless assessment is launched in phased manner. This new scheme of assessment is a significant game-changing moment in direct taxation assessment and litigation.
Finance Act, 2018 has brought new enabling Section 143(3A) to effect a PAN India E-Assessment. Thereafter, CBDT releases E-assessment Scheme, 2019 vide N/N 61/ 2019 dated 12-Sep-19 providing for its scope, procedure, powers etc. Also, 58,322 cases has been selected after launch of scheme for scrutiny assessment for AY 2018-19.
It is a scheme made in accordance with Section 143(3A) of Income Tax Act, focused towards eliminating the physical appearance and interface between the assessing officer and the assesse so as to impart greater efficiency, transparency, and accountability in assessment procedures.
No. The scheme obtains its powers from Section 143(3A) of Income Tax Act, which clearly states that scheme is applicable for assessment under Section 143(3) of Income Tax Act, 1961. Thus, as of now, the Scheme is not applicable for assessment under Section 147/ 148 (Income escaping assessment), Section 153A/ 153C (Search or requisition), Section 271/ 270A (Penalty assessment) etc.
Section 143(3B) of Income Tax Act, 1961 empowers Central Government for purpose of giving effect to scheme, to direct that any provisions of the Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified. Accordingly, the Central Government has issued N/N 62/ 2019 dated 12-Sep-19 which entails the supremacy of Scheme over various provisions of Income Tax Act including Section 120 (Jurisdiction), Section 282/ 283/ 284 (Service of Notice), Chapter XXI (Penalty) etc.
CBDT may set up following units/ centre for smooth conduct of e-assessment proceedings and specify their respective jurisdiction:
All communication among AU, VU, TU, RU, assesse or any other person shall be done through NeAC with respect to information or documents or evidence or any other details and thus, no communication is directly done between them.
(a) obtaining such further information, documents or evidence from the assesse 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;
(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 noticecalling upon him to show cause as to why the assessment should not be completed as per the draftassessment order; or
(c) assign the draft assessment order to a review unit, for conducting review of such order.
(a) in case no modification prejudicial to the interest of the assessee is proposed, finalise the assessment as per the specified procedure; or
(b) in case a modification prejudicial to the interest of the assessee is proposed with reference to the draftassessment order,provide an opportunity to the assessee,
(c) the response furnished by the assessee shall be dealt with as per the prescribed procedure
√ Imposition of penalty
√ Collection and recovery of demand
√ Rectification of mistake
√ Giving effect to appellate orders
√ Submission of remand report etc. or any representation to be made before CIT(A), ITAT or Courts
√ Proposal seeking sanction for launch of prosecution and filing of complaint before the Court
Appeal against E-assessment order shall lie with Commissioner (Appeals) having jurisdiction over the jurisdictional AO.
(a) placing an authenticated copy thereof in the assessee’s registered account; or
(b) sending an authenticated copy thereof to the registered email address of the assessee or his authorised representative; or
(c) uploading an authenticated copy on the assessee’s Mobile App; and followed by a real time alert.
As per existing provisions of Income Tax Act, 1961, jurisdiction over assessee resides with local Income Tax Authority and service of notice can be made through various modes as prescribed. However, this scheme over-rules such provisions and gains much liberty and power in terms of exercise of jurisdiction and validity of service of notice. The assessment can be done by any officer allocated through System and further, service of notice can be done at various addresses on record. To enable so, Section 143(3B) has been introduced by Finance Act, 2018 and further notification has been brought by Central Government in Sep’19.
The Madras High Court in the case of Salem Sree Ramavilas Chit Company Vs DCIT [W.P. No. 1732 of 2020] has opined that the faceless tax-assessment system “can lead to erroneous assessement, if officers are not able to understand the transactions and statement of accounts of an assessee without a personal hearing”. At the same time, the Hon’ble Court has said that “it is laudable steps taken by the Income Tax Department to pave way for an objective assessment without human interaction”.
The Hon’ble Court finally made observations and held as follows:
“In my view, the petitioner has prima-facie demonstrated that the assessment proceeding has resulted in distorted conclusion of facts.” It sets aside the department’s order and asked the AO to pass fresh order within 60 days.
In view of above judgment and inherent shortcoming in E-assessment scheme, it may face further litigation in times to come.
As all communication flows in the form of electronic records, filing of bulky submission files may pose challenge before the taxpayer as well as tax authorities. Taxpayer may be required to prepare, scan and upload various submission/ supporting documents and on the other hand, tax authorities may face problem in verification of such electronic files.
Also, as assessee has the power to make oral submissions through video conference etc., the success of the scheme will depend mainly on the availability of video conferencing facility including telecommunication application software which supports video telephony. Board may set-up these facilities as earliest to ensure smooth functioning of the Scheme.
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