Income Tax E-Proceedings -An Aurora of New Era

A. Introduction

– India is playing a significant role in development of digital economy. Whether its e-commerce, digital payment services, digital identification services or digital advertisements, the digital economy in India has been on an upward growth trajectory and is playing a major role in increasing the employment, escalating revenues from export and providing better products and services to the customers through increasing internet and smart phone penetration. For example, e-commerce has improved logistics and supply chains; digital payment services have provided flexibility and transparency; digital identification services have enabled de-duplication and prevention of fraud etc.

Also Read- Income Tax E-Proceedings | An Aurora of New Era (Part-II)

– In this era of technical development, where the use of technology is at its rising pace, the Central Board of Direct Taxes (‘CBDT’) is also taking the initiatives to make the income tax proceedings paperless, faceless, nameless and jurisdiction-less to bring about transparency and accountability in assessments under the Income-tax laws. E-proceeding is a part of e-governance initiative to facilitate a simple way of communication between the department and the taxpayer, through electronic means, eliminating the need of the taxpayer to visit the Income Tax Office.

– In this regard the Hon’ble Finance Minister in his budget speech for the year 2019 has stated that, “The Income Tax Department now functions online. Returns, assessments, refunds and queries are all undertaken online. Last year, 99.54% of the income-tax returns were accepted as they were filed. Our Government has now approved a path breaking, technology intensive project to transform the Income-tax Department into a more assessee friendly one. All returns will be processed in twenty-four hours and refunds issued simultaneously. Within the next two years, almost all verification and assessment of returns selected for scrutiny will be done electronically through anonymised back office, manned by tax experts and officials, without any personal interface between taxpayers and tax officers.”

– Therefore, the need of the hour for the professionals is to abandon the historic way of conducting the assessment proceedings and quickly get thorough with the new methods of E-proceedings. Let’s have a look at the chronology of events in respect of E-proceedings:

Date	Particulars
October 2015	The CBDT initiated the concept of using email-based communication for paperless scrutiny proceedings. It was decided to launch a pilot project, comprising non corporate taxpayers in 5 cities, namely, Delhi, Mumbai, Bengaluru, Ahmedabad and Chennai. It was decided that initially 100 taxpayers would be identified in each of the cities from the cases which have been selected for scrutiny and with the consent of the selected taxpayers, tax officials would conduct the e-hearing through emails. The initiative was launched to reduce visits by taxpayers to I-T offices and their interface with the taxman, thereby curbing corruption
02 December 2015	CBDT issued notification by which it amended the Income-tax Rules, 1962 to provide that for purposes of section 282(1) of the Act, service of notice,summons, requisition, order and other communication may be done by email. [Notification No.89/2015/ F. No. 133/79/2015-TPL]
03 February 2016	CBDT notified the procedures and the standards to be followed to ensure secured transmission of electronic communication vide Notification no. 2/2016
03 April 2017	CBDT further notified the procedures and the standards to be followed to ensure secured transmission of electronic communication vide Notification no. 4/2017
29 September 2017	CBDT issued Instruction No.8/2017. In the said instruction, the Board stated that its Income-Tax Business Application (lTBA) project was available, which provides an integrated platform to conduct various tax proceedings electronically through the ‘e-Proceeding’ facility available on it, in an end to end manner. Accordingly, it decided to utilize it in a widespread manner for conduct of proceedings in scrutiny cases getting time barred on 31.12.2017
Budget 2018	The Hon’ble Finance Minister stated in his budget speech that “We had introduced e-assessment in 2016 on a pilot basis and in 2017, extended it to 102 cities with the objective of reducing the interface between the department and the taxpayers. 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”
12 February 2018	Instruction no. 1/2018 was issued by the CBDT to direct that except for search related assessments, proceedings in other pending scrutiny assessment cases shall be conducted only through the ‘E-Proceeding’ functionality in ITBA/E-filing. However, in cases where the concerned assessee objects to conduct of assessment proceedings electronically through the ‘E-Proceeding’ facility, such cases, for the time being, may be kept on hold
20th August 2018	Instruction no. 3/2018 was issued by the CBDT for conduct of assessment proceedings through ‘E-Proceeding’ facility during 2018-19

B. Let’s understand the E-Proceedings through Question and Answer manner

Q1. What are the salient features of ‘E-Proceedings’?

A1. Features of E-Proceeding are as below:

• As a part of e-governance initiative to facilitate conduct of assessment proceedings electronically, Income tax department has launched e-proceeding facility. It is a simple way of communication between the Department and assessee, through electronic means, without the necessity to visits Income-tax office for conduct of assessment proceedings. This taxpayer friendly measure would substantially reduce the compliance burden for the assessee
• On the e-proceedings platform, all the letters, income tax notices, questionnaires, order and other communication from the Assessing Officer would be directly sent to the taxpayers e-filing account. The taxpayer would also be able to submit the response online by uploading the same along with attachments on the ‘e-Filing’ portal. The response submitted by the assessee would be viewed by the Assessing officer electronically in Income-Tax Business Application (lTBA) module. This would, besides saving precious time of the assessee, would also provide a 24X7 anytime/ anywhere convenience to submit response to the departmental queries in course of assessment proceedings
• By completing the entire assessment online, the taxpayer would have access to the e-proceedings at all time and have access to all documents and information submitted in the process.
• This initiative is environment friendly as assessment proceedings would become paperless.

Q2. What is Income-Tax Business Application (lTBA)?

A2. The Income Tax Department developed an integrated platform i.e. Income Tax Business Application (ITBA) for electronic conduct of various functions/proceedings including assessments. This is integrated with the e-filing portal which is used by the assessee to electronically communicate with the Income Tax Department. During the course of assessment proceeding, assessing officer is required to send communications through the ‘Assessment Module’ of ITBA which is delivered in e-filing account of the concerned assessee. Upon receipt of departmental communication, assessee is able to submit the response along with the attachments by uploading the same through his e-filing account on the e-filing portal (www.incometaxindiaefiling.gov.in). The response submitted by the assessee is viewed by the assessing officer electronically in ITBA. This communication of data and document between the Income Tax Department and assessee through electronic mode is termed as ‘E-Proceeding’.

Q3. What are the cases where E-Proceeding shall not be mandatory where assessment is required to be framed during the year 2018-19?

A3. As per instruction no. 3/ 2018 issued by CBDT, E-Proceeding shall not be mandatory in following cases:

a. where assessment is to be framed under section(s) 153A, 153C, 147 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 concerned assessee does not have an ‘E-filing’ account yet;

e. in all cases at stations connected through the VSAT or with limited capacity of bandwidth (list of such stations shall be specified by the Pr. DGIT (System));

f. in cases where substantial hearing had already been placed in the conventional mode prior to issue of instruction number 1/ 2018 dated 12th February 2018. Assessing officer may complete such cases with prior administrative approval of the concerned Pr. CIT/CIT;

g. in cases where the jurisdictional Pr. CIT/CIT, in exceptional circumstances such as complexities of the case or administrative difficulties in conduct of assessment through ‘E-Proceeding’, has permitted conduct of assessment proceedings through conventional mode.

Q4. In assessment proceedings being carried out through the ‘E-Proceeding’ facility, when a proceeding may take place manually?

A4. As per instruction no. 3/ 2018 issued by CBDT, a proceeding may take manually in following cases:

a. where books of accounts have to be examined;

b. where assessing officer invokes provisions of section 131 of the Act ;

c. where examination of witness is required to be made by concerned assessee or the department;

d. where show-cause notice contemplating any adverse view is issued by the assessing officer and assessee requests through their ‘E-filing’ account for personal hearing to explain the matter

Q5. What is the procedure for electronic communication under E-Proceeding?

A5. The CBDT vide notification no. 4/2017 has explained the procedure, formats and standards for ensuring secured transmission of electronic communication:

a. All the notices/ questionnaire/ letters/ orders issued from ITBA modules by any Income Tax Authority will be visible to Assessee after login under ‘E-Proceeding’ tab in the E-filing website of the department inhttps://www.incometaxindiaefiling.gov.in, and may also be sent by the designated e-mail address to the registered e-mail address of the Assessee.

b. A text message alerting the Assessee may also be sent on the mobile number registered on the e-filing website

c. The notice/ questionnaire/ letter available over E-filing website to the assessee or sent by E-mail to the assessee will be authenticated in the manner prescribed in Rule 127A of Income-tax Rules, 1962 (‘the Rules’)

d. Assessee will have the facility to opt out of E-proceeding and such option has to be communicated to the Department through the e-filling website.

e. On receipt of notice/questionnaire under E-proceeding tab the Assessee will be able to submit his response along with attachments by uploading the same, on e-Filing portal.

f. In order to facilitate a final date and time for E-submission, the facility to submit a response will be auto closed 7 days prior to the Time-Barring (TB) date, if any. If there is no Time Barring date, then the Officer or AO can on his volition close the E-submission whenever the final order or decision is under preparation to avoid last minute submissions. However, Income tax authority can also re-enable the E-submission by taxpayer in both TB and non TB situations.

g. Once the proceeding is closed or completed in ITBA, there will be no e-submission allowed from Assessee.

h. Relevant proceedings in the manual mode can also be conducted in ITBA modules, if an assessee chooses not to opt for E-Proceeding

i. In case the assessee opts for manual mode in the middle of e-proceedings on the E-filing website, further proceedings shall be conducted in manual mode.

Q6. In case of electronic communication what would be the address for service of notice or any other communication as prescribed under section 282 of the Income-tax Act, 1961 (the Act)?

A6. Rule 127 of the Income-tax rules, 1962 prescribes the addresses to which the notice or any other communication may be delivered or transmitted. Sub-rule (2) of rule 127 defines the addresses for communication delivered or transmitted electronically as:

(i) e-mail address available in the income-tax return furnished by the addressee to which the communication relates; or

(ii) the e-mail address available in the last income-tax return furnished by the addressee; or

(iii) in the case of addressee being a company, e-mail address of the company as available on the website of Ministry of Corporate Affairs; or

(iv) any e-mail address made available by the addressee to the income-tax authority or any person authorised by such income-tax authority.

Q7. What would be the designated e-mail address of the Income Tax Authority?

A7. The designated e-mail address of the Income Tax Authority will be based on his designation under the domain @incometax.gov.in

Q8. In case of electronic communication what would be the time and place of dispatch and receipt?

A8. The time and place of dispatch and receipt of electronic record or electronic communication shall have the same meaning as provided under section 13 of the Information Technology Act, 2000 (No. 21 of 2000). Further the registered account of the assessee on the e-filing website is deemed to be computer resource designated by the assessee in accordance with section 13 of the Information Technology Act, 2000 (No. 21 of 2000).

Section 13 of The Information Technology Act, 2000:

“Time and place of dispatch and receipt of electronic record.-

(1) Save as otherwise agreed to between the originator and the addressee, the dispatch of an electronic record occurs when it enters a computer resource outside the control of the originator.

(2) Save as otherwise agreed between the originator and the addressee, the time of receipt of an electronic record shall be determined as follows, namely:-

 (a) if the addressee has designated a computer resource for the purpose of receiving electronic records,-

(i) receipt occurs at the time when the electronic record enters the designated computer resource; or

(ii) if the electronic record is sent to a computer resource of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee;

(b) if the addressee has not designated a computer resource along with specified timings, if any, receipt occurs when the electronic record enters the computer resource of the addressee.

(3) Save as otherwise agreed to between the originator and the addressee, an electronic record is deemed to be dispatched at the place where the originator has his place of business, and is deemed to be received at the place where the addressee has his place of business.”

Q9. What challenges the party will face during the E-Proceeding?

A9. The following issues may arise during the E-Proceedings:

a. What would be the legality of submission filed on e-portal when e-proceedings are still open, however, the Income-tax Authority has passed the order?

b. The size of documents that can be attached on the e-portal is less, due to which there could be an issue of document being blurred or not being readable

c. Problems may arise where the assessee has not named the file uploaded in e-assessment module

d. What would be the legality of notice issued on an e-mail mentioned in the return filed for the subject assessment year, however, which by the time of assessment has already been changed and mentioned in the latest return filed?

C. Conclusion

As the whole world is moving towards digitization, E-Proceeding is a good initiative undertaken by the Indian government. However, there are many issues which the Income-tax department may face in the near time. As there are lots of places in our country where there is either no internet or if available, the connectivity is very poor. Further, as technology improves and proliferates, risks too multiply and the department need to have the right systems in place to avoid unauthorised infiltration. Since, success of digitization depends upon a country’s infrastructure, therefore, there is need to augment the infrastructure facility in India else, the purpose of bringing e-proceedings will become infructuous.

DISCLAIMER: The views expressed in this article are strictly of the author. The contents of this article are solely for information purpose. It does not constitute professional advice or recommendation by the author. The author does not accept any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon