E-assessment: A step towards Modi’s Digital India campaign

The paperless assessment framework was introduced for the first time in the Finance Act 2016 with the object of ensuring issuance of notices in electronic form as well as conduct of tax hearing through communication of data in electronic format. This also gave birth to Income-Tax Business Application (ITBA) project, instrumental in supporting e-assessment initiative of the government. ITBA provides an integrated platform to conduct various tax proceedings electronically. Towards this end, the Central Board of Direct Taxes (CBDT) also formulated guidelines on what constitutes a valid email address to be used for communication by tax authorities, authentication of documents, format of communication that can be sent by tax authorities to tax payers and the maximum size of files that can be sent by tax payers via email, etc. Under the ITBA project, the process of electronic communication of documents is configured with the e-filing account of the assessee on the Income-tax e-filing website. This feature enables the assessee to submit online responses in respect of notices issued by the tax authorities.

In order to gain some experience on the use of electronic platform for issuance of notices and processing of responses received electronically, the concept of electronic assessment (e-assessment)was introduced on a pilot basis in seven metro cities - Ahmedabad, Bengaluru, Chennai, Kolkata, Hyderabad, Delhi and Mumbai. This pilot project was applicable to assessments which were getting time barred during the financial year 2017-18.

The CBDT has issued instructions dated 12 February 2018 in relation to conduct of e-assessment. Significant features of e-assessment framework as emanating from the earlier instructions dated 29 September 2017 as well as the current instructions are as under:



♦ Enquiry before assessment in terms of section 142(1)(ii) of the Income tax Act, 1961 (Act) shall be issued in electronic mode and delivered to the assessee in his 'e-filing' account.
♦ All departmental orders/communications /notices being issued to the assessee through the `e-proceeding' facility are to be signed digitally by the Assessing Officer(AO).
♦ Online submissions can be made till the office hours on the date stipulated for compliance.
♦ The facility for electronic submission of documents through 'e-proceeding' shall be automatically closed seven days before the time barring date.
♦ In cases other than time barring, upon completion of proceedings, before passing the final order, the concerned AO, on his volition, shall close the e-submission facility after mentioning that 'hearing has been concluded' in the electronic order sheet
♦ If required, in exceptional circumstances, the concerned AO may enable further filing of submissions electronically under intimation to the Range Head in ITBA.
♦ Case records as well as note sheet of proceedings shall be maintained electronically.
The scheme also provides manual proceedings in the course of conduct of e-assessment in the following situations:

At the instance of tax authorities

♦ Where manual books or original documents have to be examined
♦ Where Assessing Officer is carrying out third party investigations
At the instance of assessee

♦ Where assessee requests for cross examination of witness relied upon by the Assessing Officer
♦ Where a show-cause notice contemplating any adverse view is issued by the Assessing Officer and the assessee requests for personal hearing to explain the matter
The instructions dated 29 September 2017 enabled manual issuance of notices/ letters/ communications in exceptional situations. However, such enabler is absent in the instructions issued on 12 February 2018. This indicates that the government is ready and confident about the efficacy of the ITBA.



The current instructions provide some relief to the scrutiny cases which are getting time barred on 31 December 2018. Owing to limited bandwidth, some stations will be required to complete only 10% of the scrutiny cases which are getting time barred on 31 December 2018 electronically. The remaining scrutiny cases can be completed by way of manual assessment. These stations will be notified in due course. The other stations however are mandatorily required to complete all the scrutiny cases electronically only.

The search proceedings are currently kept out of e-assessment framework. Also, the cases where assessee objects to conduct of assessment proceedings electronically will also be kept on hold.

In its wake towards the e-assessment regime, the CBDT has recently notified Centralised Communication Scheme 2018 vide Notification No. 12/2018/F.No. 370142/22/2017-TPL dated 22 February 2018. The scheme has been announced in exercise of powers conferred by section 133C of the Act for centralized issuance of notice and for processing of information or documents and making available the outcome of the processing to the AO.

The scheme provides for issuance of notice to any person requiring him to furnish information or documents for the purpose of verification of information in his possession by the Centralised Communication Centre. It is further provided that the Centralised Communication Centre may prescribe a machine readable structured format for furnishing the information or documents by the person in response to the notice and that there will be no personal appearance before the designated authority at the Centralised Communication Centre in connection with any proceedings. It is also contemplated to set up call centre to answer queries and provide support services including outbound calls and inbound calls seeking information or clarification as well as a grievance redressal mechanism in the Centralised Communication Centre.

All the above measures adopted by the authorities are a clear indication of the determination of the government to move towards electronic proceedings in most of the correspondences between the tax payers and tax authorities.

The introduction of e-assessment is a positive move as it seeks to enhance transparency, efficiency, accountability, eradicate corruption and promote paperless and environment friendly assessment. A point to ponder is whether the option of implementing in a gradual manner could have been considered. For instance, UK HM Revenue and Customs (HMRC) Real Time Information (RTI) programme, a biggest change to PAYE, implemented digitisation in a phased manner since 1944. RTI began with a pilot involving some 300 employers and pension providers. The small employers were not forced to comply until RTI had been tried and tested. This approach allowed extra time for the less digitally-aware to adjust to the new regime. The pilot project enabled HRMC to learn lessons in a controlled way with a relatively small segment of the employer population and put in place measures to address emerging issues, prior to full roll-out. While the current scheme does provide a leeway to assessees to object to the e-assessment, the qualitative selection of assessees at the instance of CBDT for subjecting to e-assessment could have helped government achieve its objective more efficiently.

While moving to paperless economy is the demand of the day, one will need to take a more pragmatic view as assessment proceedings are much more than collection of documents. The most crucial part of assessment is the validation of assessees legal interpretations of income-tax provisions. The current provision of personal hearings at the instance of assessee may require him to first have show-cause notice issued and also such notice could contemplate adverse view to be taken against the assessee. In view thereof, while there is a window for the assessee to meet the tax officer, the effectiveness of this window will need to be tested.

It may be worthwhile to note that a new scheme on the electronic assessment procedures with pan-India applicability may be announced which will have blessings of both Houses of Parliament. We hope that the new scheme is more exhaustive and provides a clear road map of how manual process will be transformed to electronic process. We hope that whatever little privileges are available under the current manual scheme are not taken away from the assessee and the regime is not a burden for the assessees, all of whom may not be technology savvy.

Here, it may also be relevant to note that as per the report 'Internet in India 2017' issued by Internet and Mobile Association of India (IMAI) and Kantar IMRB on 20 February 2018, the overall internet penetration in India is only 35% of total population as on December 2017. As per the report, India was estimated to have 481 million Internet users in December 2017 and the number of Internet users is expected to reach 500 million by June 2018. Considering such statistics, the effectiveness of e-assessment regime to be implemented across India is something that one will have to wait and watch.

India has embarked on the path of revolutionary reforms to usher in ease of doing business and e-governance. We are progressing in the right direction. It only needs to be seen that final implementation attains the desired outcome. Further, the government should consider the deficiencies of the current regime, address apprehensions of the taxpayers while releasing the new scheme such that it leads to a win-win situation for both the taxpayer and the department.

To conclude, the e-assessment will change the landscape of assessment proceedings and the future of tax litigation.