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Faceless tax assessments — A paradigm shift

Faceless tax assessments — A paradigm shift

No one can imagine their lives today without technology, more so amidst the Covid-19 pandemic. Over the past few months, technology has changed the work styles in all sectors — be it private enterprise, the academic world, the government, non-governmental organisations, or in the society at large. The income-tax department, too, has adapted to these changes and has been gradually digitising all areas of compliances and interactions with taxpayers. One such new addition is faceless tax assessments and appeals.

The process of conducting tax assessments has been evolving since the last few years. Initially, the assessments procedure was a face-to-face interaction between the taxpayer (either in person or through their authorised representatives) and the tax authorities. All submissions and related documents were submitted in hard copy during the physical hearings.

In September 2019, the Central Board of Direct Taxes (CBDT) launched the e-Assessment Scheme to carry out regular assessment proceedings electronically for a limited class of taxpayers. The scheme was designed to bring efficiency, transparency and accountability into assessment proceedings.

Taking a step further in this direction, the government on August 13, 2020, launched the ‘Transparent Taxation — Honouring the Honest’ platform, the main features of which are faceless assessment, faceless appeal, and the Taxpayers’ Charter. The government passed the Taxation and Other laws (Relaxation and Amendment of certain Provisions) Act, 2020 on September 29 to incorporate the Faceless Assessment Scheme under the provisions of Income Tax Act, 1961.

ALSO READ: Faceless Assessments — Tax system for the 21st century

Automated process

Under the faceless assessment process, assessment will be carried out by various centres set up at national and regional levels. The e-assessment scheme also involves specialised technical units, verification units and review units to facilitate smooth conduct of assessment proceedings. The National e-Assessment Centre (NEC) will be the face between the taxpayers and all the units, to facilitate the assessment proceedings in a centralised manner.

The NEC will issue notices to the assessee specifying the basis for selection of his case for assessment. The taxpayer needs to file his response within 15 days from the date of receipt of notice from his income tax online portal.

Upon the issue of a notice, the NEC shall assign the case to a specific assessment unit (AU) through an automated allocation system, ensuring absence of human interface.

The NEC gets the documents/data as required by the AU from the taxpayer and passes the same to it. The AU, based on information available, makes an initial draft assessment order along with the details of penalty proceedings to be initiated (if any). It could either be a clean order or an adverse order, which will then be examined by the NEC in accordance with the risk management strategy by way of an automated examination tool. The NEC will then finalise the assessment and serve the order, or issue a show cause notice, to the taxpayer.

The NEC can even assign the draft order to the review unit through the automated system, if required. The review unit will study the draft assessment order and intimate the NEC of its concurrence or suggest suitable modifications. In case of variation suggested by the review unit, the NEC will send the modifications suggested to a different AU through its automated system.

The new AU after considering the variations suggested by the review unit, will prepare and send the final draft assessment order to the NEC, to issue it to the taxpayer.

ALSO READ: After faceless assessment, IT Dept brings in faceless appeal

Potential glitches

Faceless assessment is expected to usher positive changes to the assessment system as the taxpayer complies with the process without the need for physical attendance or hard copy submissions with the I-T department. However, it may also pose challenges to taxpayers, such as:

Technical glitches, network connectivity, etc.

The size of the files to be uploaded.

Taxpayers who are not tech-savvy may be reluctant to respond online or would require assistance from a professional consultant.

In absence of face-to-face interaction with tax authorities, submissions are required to be well drafted and error-free to allow the tax officer to understand taxpayer’s submissions and claims correctly.

This may also result in tax additions, especially on issues involving interpretation which are open to divergent views in case taxpayers are not able to articulate well in the submissions. Currently, these issues get addressed during the face-to-face hearings before the officer.

The scheme focusses on bringing transparency in the tax system. However, its effective and seamless implementation is of utmost importance to achieve the desired objectives.

Divya Baweja is a Partner, Preeti Gupta is a Senior Manager and Amanpreet Kaur is a Deputy Manager with Deloitte Haskins & Sells LLP

This article is auto-generated by Algorithm Source: www.thehindubusinessline.com

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