Understanding Faceless Income Tax E-Assessment Scheme

The Finance Ministry on Friday notified the central government’s e-assessment of Income Tax Return (ITR) scheme, under which a taxpayer will not be required to appear personally before the assessing officer for assessment of his ITR. The scheme, which was declared by the Central Board of Direct Taxes (CBDT), wants to end face to face interaction of the taxpayer and the assessing officer, at the level of income tax office. Tax experts say this will bring in more transparency in the entire ITR filing process. This marks a significant shift in the manner in which tax assessment or scrutiny is usually done by the taxmen. Under the scheme, e-assessment centre will be set up across regional levels. Besides, there will be a national e-assessment unit. 

Rishi Kapadia, Partner, Dhruva Advisors LLP, said, “The Central Board of Direct Taxes (CBDT) has notified E-assessment Scheme, 2019.  The objective of the Scheme is to reduce interface between the taxpayer and the tax department, impart greater transparency and accountability.  The scheme marks a significant modification in the manner in which tax assessments will be undertaken.”

According to Kapadia, both the taxpayers and the income tax department will need to gear up their systems to adapt to the new scheme. He said personal representation by a taxpayer will be limited and will be allowed only through video conferencing. “Considering that there is a limited window of interaction, taxpayers will need to focus on submitting detailed documentation to explain a tax position,” he said. 

What is income tax assessment?

The Income Tax Department conducts a through scrutiny of every income tax return (ITR) filed. The process is called income tax assessment. The department then starts dispatching notices to the taxpayers under relevant sections for relevant acts of omissions. It compares details shown in the ITR by the taxpayer with the details it has arrived at after doing its own calculation. According to Rahul Singh, Manager, Taxmann.com, income tax assessment is a process to verify the claim made by the taxpayer in the income tax return. “Or if the income tax department has any doubt with respect to the claim made by the taxpayer in the ITR then the same is cleared through income tax assessment,” Singh said.

What is the scheme how it will affect taxpayers? 

1. All communications between taxpayer and assessing officer will purely be electronic. It will be done either through email, text message or any other electronic form. In some cases, the officer can hold a video conference call with the taxpayer. All the process will be fully automated.

2. In case if a taxpayer receives notice from the income tax department he will have to give a reply within 15 days of getting such notice. 

3. Under the scheme there will be two assessment offices — National e-Assessment Centre and respective regional assessment centres. The national unit will have authority to allot scrutiny cases to regional units. This process will be fully automated. 

4. The regional assessment centre will need to get in touch with the national unit if it wants more or additional documents from the taxpayer. 

5. The regional assessment unit, after scrutinising the ITR, will prepare a draft assessment order and then would send it to the national centre for further action. The whole idea is to do away with the need of in person appearance before the income tax department.