Landscape of tax assessment / scrutiny is going to change dramatically, as age-old assessment procedure is all set to transform with introduction of 'E-assessment Scheme, 2019'. Faceless assessment was announced by Hon'ble Finance Minister in her Budget speech on 5th July 2019 and based thereon E-assessment scheme was notiﬁed on 12th September 2019. India Government is trying its best to infuse greater eﬃciency and transparency in the assessment process by introducing e-assessment procedure in phased manner with objective to reduce the interface between the tax department and the taxpayers.

Taxpayers including Authorized Representatives will have to catch-up with various developments and critically evaluate how the new assessment procedure will work. In subsequent paragraphs, we have summarized some of the salient features of the faceless e-assessment scheme and have listed down key action points for the Taxpayers:

Salient features of the E-assessment Scheme 2019 :

· How the set-up will look like?

To facilitate the conduct of e-assessment proceedings, various set of specialized units would be created by the CBDT both at national and regional level.

National e-Assessment Center (NeAC) would play an important role in a centralized manner and would be based in Delhi headed by Principal CCIT / Principal Director General.

So far Eight Regional e-Assessment Centers (ReACs) are formed at various places which comprises of Assessment, Veriﬁcation, Technical and Review units occupied by revenue authorities with various designation of CCITs, Additional / Joint / Deputy and Assistant CITs.

· Role of NeAC in e-assessment proceeding?

Role and responsibility of NeAC would include the following:

o Specify format, mode, procedure and processes for e-assessment;

o Send all notices / communication to Assessees electronically;

o Assign cases to assessment unit, veriﬁcation unit or technical unit in respective ReACs using technological tools, including artificial intelligence and machine learning, with a view to optimize the use of resources;

o Examine the draft assessment order in accordance with the risk management strategy and applying technological tools, with a view to reduce the scope of discretion;

o Assign the draft assessment order to a Review unit for conducting review of the order;

o Provide an opportunity to the Assessee by serving show cause notice;

o Finalize assessment orders;

o Transfer all electronic records to jurisdictional Assessing Oﬃcer (AO) for post assessment work such as imposition of penalty, collection / recovery of demand, rectification of mistake, etc.

NeAC may at any stage of the assessment, if considered necessary, transfer the case to the AO having

jurisdiction over such case [Para 5 (xxi) of Notification no. 61].

· Role of ReACs in e-assessment proceeding?

Key functions of ReACs include:

o Assessment Unit: identify issues, seek information and analyse details to frame draft assessment orders;

o Veriﬁcation Unit : Conduct enquiry, examination of books of account, examination of witnesses and recording of statement (through video conferencing);

o Technical Unit : Provide advice on legal, accounting, forensic, IT, Valuation, Transfer Pricing, Data Analytics, etc.

o Review Unit: Review of draft assessment order which includes checking whether the relevant and material evidences are considered on record, whether relevant points of fact and law has been incorporated in the draft order, whether judicial decisions are considered appropriately in the draft order, checking arithmetical correctness, etc.

· How will penalty proceedings work?

Under the scheme, any unit may send recommendation for initiation of any penalty proceedings under Chapter XXI of the Income-tax Act, 1961 to NeAC against the Assessee for non-compliance of any notice, direction or order. NeAC thereafter shall issue show cause notice and based on response from the Assessee and feedback from the concerned unit, may levy the penalty and serve the order to the Assessee. Alternatively NeAC may, after completion of the assessment, transfer all the electronic records of the case to the jurisdictional Assessing Officer for imposition of penalty.

· Mode of communication

All communication (internal and external) between NeAC, ReACs, Assessee, authorized representative would be done exclusively by electronic mode and it is important that all electronic record is authenticated by the originator by affixing his / her digital signature.

Every notice or order or any other electronic communication under this scheme shall be delivered to the Assessee by way of (a) placing an authenticated copy in Assessee's registered account; or (b) sending an authenticated copy to the registered e-mail address of the Assessee or authorized representative; or (c) uploading an authenticated copy on the Assessee's Mobile App and most importantly followed by a real time alert.

· Whether personal appearance required in the Centres or Units?

Assessee shall not be required to appear either personally or through authorized representative in connection with any proceedings under this Scheme before the income-tax authority at the NeAC or ReAC or any unit set up under this Scheme. Assessee shall be entitled to seek personal hearing to present the case before the income-tax authorities, however such hearing shall be conducted exclusively through video conferencing. Suitable facilities shall be established by the CBDT to ensure that the Assessee with no access to video conference facility are also benefitted. More announcements are expected in near future.

· What are the expected benefits of e-assessment scheme?

E-assessment Scheme is expected to bring various beneﬁts to the Assessee in terms of ease of compliance, no human interface, transparency, eﬃciency, functional specialization, improvement in quality of assessment, risk based and focused approach, systematic and speciﬁc veriﬁcation, standardization and quality management, better monitoring and more importantly expeditious disposal of cases and less corruption.

What are key action points for Taxpayer?

Government has been moving swiftly to implement the e-assessment scheme and development in this regard is visible almost every day. Revenue oﬃcers are already posted, and we understand manpower of more than 2600 oﬃcers are already designated in the e-assessment ecosystem. Oﬃces are being identiﬁed and allocation of space for various units is already in progress.

As things are evolving, it is also important for the Taxpayers and its authorized representative to gear up and

ensure that the necessary infrastructure, house-keeping and discipline is maintained during the assessment proceedings to avoid any adverse consequences. For ease of reference, following are some of the points for consideration:

· Internal IT risk policies of the MNEs are generally very onerous, stringent and require approvals at various levels considering the inherent risk of data security, etc. Prescribed e-assessment scheme would entail the taxpayer to have registered e-mail account, install mobile app, registered mobile number, video telephony system and more importantly response to the tax authorities queries in time-bound manner. Lengthy voluminous submissions, digitalizing the same, storing of data, server space constraints and various other infrastructure related issues will have to be dealt with. It is imperative to have necessary approvals in place to avoid any last-minute rush. Policies around change of key authorized personnel, e-mail ids, contact details, etc. will have to implemented adequately to ensure any e-communication from the revenue department is not missed. Non-resident assessees facing scrutiny in India, will also have to track e-mails from the Indian revenue officials and ensure timely response.

· Under e-assessment structure, time line to submit the details to the tax authorities would be extremely short, especially when the details to be submitted are mammoth. Collation of Transfer pricing details, TDS / GST Return reconciliation, transaction speciﬁc related details for assessment is generally very time- consuming and requires co-ordination with various stakeholders. It is therefore important to envisage such practical challenges and streamline the process through use of technological tools.

· For assessment cases currently going on, direction has been issued to conduct the assessment proceedings electronically. This circular is peculiar for conduct of assessment proceedings through e- proceeding facility for ﬁnancial year 2019-20 only. Directions issued do provide for cases / circumstances where assessment proceedings through the conventional mode is permissible. Moreover, personal hearing / attendance may take place in certain situations especially when show-cause notice contemplating any adverse view is being issued.

· Document Identiﬁcation Number (DIN) had been introduced via Circular No. 19/2019 dt. 14th August 2019 to curb the practice of issuing the notice or summons or any other letter of correspondence manually without maintaining a proper audit trail of such communication. Hence, it had been decided that no communication would be issued by the income-tax authorities relating to assessment, appeals, orders, penalty, prosecution, approval, etc to the assessee or any other person on or after 1st October 2019 unless a computer-generated DIN has been allotted and is duly quoted in the body of the communication.

· There are various interpretation issues regarding e-assessment scheme and it is expected that necessary clariﬁcation or amendment will be issued in due course. It is important to keep the track of any such material changes. For instance, Para 7 of the notification no. 61 states that an Appeal against an assessment made by NeAC shall lie before the Commissioner (Appeals). Does this mean that DRP route would not be available to the Taxpayer assessed under this e-assessment scheme? May be 'Yes' as the order is being reviewed independently by various units under automated allocation system. However, the Taxpayer may opt for DRP route when revised draft assessment order is shared by NeAC (refer Para 1 of the notiﬁcation no. 62). Necessary clarification in this regard would be required.

· It is important to not lose sight of the time limits for completion of the assessment which has been reduced substantially. Finance Act 2017 had compressed the time limits for completion of assessment for AY 2018-19 from existing twenty-one months to eighteen months from the end of the assessment year. Moreover, for AY 2019-20 onwards, the said time limit shall be twelve months from the end of the assessment year. However, where reference is made to the Transfer Pricing Oﬃcer, the period available for completion of assessment shall be extended by twelve months.

Concluding thoughts

Apprehensions of arbitrary adjustments due to lack of understanding of the business of the taxpayer, disputes, penalty proceedings, lack of coordination between revenue authorities, mounting litigation are not out of the place and will have to be evaluated / monitored by the CBDT on constant basis over the period of time. It is important that the transition to the new process is carried out in phase manner to avoid any negative publicity. CBDT will have to ensure that faceless assessment should not result in arbitrary adjustments and thereby unnecessary litigation.

As the e-assessment procedure evolves, we can naturally expect lot of changes, hiccups, technical glitches, inconvenience, communication gaps, etc. but the need of the hour is to embrace the change and support the Government initiative, with high hope that this new scheme of assessment will bring a paradigm shift in the functioning of the Income Tax department and will yield beneﬁts to India in terms of ease of doing business and check on corruption at every level.

TAX BY MANISH

Friday 1 November 2019

Are you ready for E Assessment.