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TAX LAWS DURING COVID-19: THE IMPORTANCE OF E-ASSESSMENT

As all forms of business and activities are switching to online interfaces to ensure adequate social distancing. State duties that will befall several citizens such as responding to tax assessments can be done online since last year, when the central government launched the visionary 2019 E-Assessment Scheme. The following questions deal with the purpose, procedure and benefits of the scheme.

1. What is the 2019 E-Assessment scheme introduced by the government?

The 2019 E-Assessment scheme was brought in by the Union Government during the 2019 Budget Session. It aims at a faceless electronic assessment of taxes for individuals, effectively eliminating human interface between the taxpayer and the income tax department.

The Central Board of Direct Taxes has set up a National e-Assessment Centre, along with Regional Centres to control the overall functioning of the scheme. Verification, technical and Review Units have been set up in each region for such functions, and even eight Assessment Units are present for identifying liabilities and analysing the information provided. With this structure, an elaborate system of e-Assessments has come into operation since last year, and will be very useful in present times. [Formed under sub-section (3A) of section 143 of the Income-tax Act, 1961 (43 of 1961), Dept. of Revenue, Ministry of Finance, S.O. 3264(E), dt. September 12, 2019].

The 2019 E-Assessment scheme is thus, an online system of tax assessment that minimises human interface between the taxpayer and the Income Tax Department.

2. Why was the E-Assessment scheme brought in place?

The Scheme was launched in October 2019. It is part of the government’s efforts to reduce human discretion in the assessment and scrutiny of tax returns that in turn could help eliminate possibilities of corruption, by minimising personal interaction between the taxpayer and the authorities.

Another aspect in which the e-Assessment scheme aims to be more fair is, cases will be referred to eight different e-assessment units across the country that have been discussed above, automatically. The purpose of this is to ensure more transparency and reduce grievances related to over-pitched assessments, and reduce litigation as a consequence. [See Revenue Secretary Inaugurates National e-Assessment Centre, Press Information Bureau, Ministry of Finance, dt. October 7, 2019].

The Scheme was therefore introduced to ensure transparency, correct assessments, corruption and human discretion, making the assessment process as fair as possible for the taxpayer.

3. What is the procedure to be followed for E-Assessment?

The Government has directed that the following procedure has to be followed:

Notice and Response: A notice under section 143(2) would be served by the National e-Assessment Centre to the taxpayer’s about his case for assessment, to which the taxpayer must respond in fifteen days.

Automated Assignment to Assessment Unit: An assessment unit and a Regional e-Assessment Centre will be assigned through the automated allocation by the National e-Assessment Centre, which will then provide that Unit with the appropriate documents, verifications and technical assistance, as needed.

Draft Assessment Order: The Assessment Unit shall evaluate all the relevant material gathered and pass a draft assessment order either accepting the returned income of the taxpayer or modifying the returned income of the taxpayer, as the case may be, and send a copy of such order to the National e-Assessment Centre. While making the draft assessment order, The Unit must provide details of the penalty proceedings to be initiated therein, if required in the case.

Examination of Draft Assessment Order: The National e-Assessment Centre shall carry out this examination and may then either: a) Finalise the assessment as per the draft assessment order and serve a copy of the same to the taxpayer, specifying the sum payable by, or refund of amount due to the taxpayer accordingly; or b) in case of modification, Provide an opportunity to the taxpayer 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.

Review: The review unit may either concur or suggest modification, and accordingly inform the National e-Assessment Centre of its decision:

• In case of concurrence, the National e-Assessment Centre shall finalise the draft assessment order or provide an opportunity to the taxpayer in case a modification is proposed.

• In case of suggestions for modifications, the National e-Assessment Centre shall communicate the same to the assessment unit, which will then accordingly send the final draft assessment order to the National e-Assessment Centre.

Finalisation of Assessment Order: Upon receiving final draft assessment order, the National e-Assessment Centre shall finalise it, or provide an opportunity to the taxpayer in case a modification is proposed, as the case may be.

[See Clause 5, E-Assessment Scheme 2019]. *The National e-Assessment Centre has the power, at any stage, to transfer the case to the Assessing Officer [Clause 5(xxi)].

4. Can there be penalties imposed on the taxpayer during the process?

Aside from the obligations at the end of the assessment, penalties may be imposed on the taxpayer for non-compliance of the procedure. Any unit may, in the course of assessment proceedings, for non-compliance of any notice, direction or order issued under this scheme on the part of the taxpayer or any other person, send recommendation for initiation of any penalty proceedings under the income tax law, against such taxpayer or any other person, as the case may be, to the National e-Assessment Centre, if considered necessary. The National E-Assessment Centre then serves notice and imposes the penalty. [Clause 6, E-Assessment Scheme 2019]

Therefore, the taxpayer must carefully comply with the procedure established, else penalties may also be levied for non-compliance.

5. What happens after the National E-Assessment Centre has completed the assessment process?

Once the National e-Assessment Centre has completed the assessment, the matter is transferred before the Assessing Officer under whose jurisdiction the case falls so that he may impose a penalty, make recovery of demand, rectify mistakes, give effect to appellate orders, submission of any relevant reports to the Commissioner/Appellate Tribunal/Court, as the case may be, or seek proposal for launch of prosecution. [Clause 5(xx), E-Assessment Scheme 2019]

Thus, after the National E-Assessment Centre has completed the assessment process, the case is transferred to the Assessing Officer who takes appropriate action based on the outcome of the E-Assessment.

6. Can the e-assessment be challenged by the taxpayer?

Under the E-Assessment Scheme, the order of assessment made by the National e-Assessment Centre can be challenged in appeal before the Commissioner (Appeals) having jurisdiction over the jurisdictional Assessing Officer. [Clause 7, E-Assessment Scheme 2019]

Thus, there exists a provision for appeal.

7. How will the E-Assessment scheme become vital in times of the COVID-19 pandemic?

The spread of the novel coronavirus is through human contact. Large parts of the world remain in lockdown with vast losses to the economy, in attempts to ensure social distancing and curb the spread of the virus. It is evident that even when lockdowns are lifted, people will not be able to freely move about and visit crowded places, till not just when the virus is fully wiped out, but a vaccine is developed.

This implies that for a long period, human interaction has to be limited. Government offices are places people are compelled to often visit as part of their duties as citizens, but if the system of E-Assessment is promoted further and made available for a larger number of people, personal interaction between the taxpayers and the department can be significantly reduced, which will ensure adequate social distancing.

Further, with time, people had anyway begun preferring online systems and procedures for completing their various liabilities towards the governments from the comfort of their home, saving on the costs and harassment of repeatedly having to travel to the designates government office.

In these ways, the E-Assessment Scheme is actually the future of tax assessment, ensuring transparency, reduced corruption, and assessment without human interaction, all from the safety of the taxpayer’s home.

By Shiv Mangal Sharma

Advocate Supreme Court