Income Tax 01 Feb,2020
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Union Budget 2020: ‘e-Appeals’ & ‘e-Penalty’- One more Step towards Digital Transformation of Indian Tax Administration
Mayank MohankaFCA

Introduction

1.  The newest and brightest feather in the 'Digital Indian Tax Administration Cap' is the introduction of the 'New Scheme of Faceless e-Assessments 2019.'

In order to impart greater efficiency, transparency and accountability to the assessment process under the Act, the Finance Act 2018, has already incorporated the enabling provisions for enacting the 'New Scheme of Faceless e-Assessments' in the Legislature, by way of inserting three new subsections viz. (3A), (3B) and (3C) in section 143 of the Income Tax Act, 1961. Accordingly, in exercise of the powers conferred by sub-section (3A) of section 143 of the Income-tax Act, 1961, the Central Government has incorporated a new scheme of assessment known as "E-Assessment Scheme 2019" by way of Official Gazetted Notifications No. SO 3264 or 61/2019 dated 12.9.2019. In the first phase, the Income-tax department has selected 58,322 cases for scrutiny under the 'New Scheme of E-assessment-2019', for the AY 2018-19, which are getting time barred on 30.9.2020.

Insertion of Legislative Provisions in Finance Bill 2020 for 'Faceless e-Appeals & e-Penalty'

2.  The Finance Bill 2020, presented by the Hon'ble FM Smt. Nirmala Sitharaman in the Parliament on 1.2.2020, has inserted the enabling provisions in the Income Tax Act, so as to facilitate the incorporation of the 'new scheme of faceless e-appeals and e-penalty', to be notified in near future.

2.1 Faceless e-Appeal:

With the advent of the e-assessment scheme, most of the functions/processes under the Act, including of filing of return, processing of returns, issuance of refunds or demand notices and assessment, which used to require person-to-person contact between the taxpayer and the Income-tax Department, are now in the electronic mode. This is a result of efforts by the Department to harness the power of technology in reforming the system. All these processes are now not only faceless but also very taxpayer-friendly. Now a taxpayer can manage to comply with most of his obligations under the Act without any requirement for physical attendance in the offices of the Department.

The filing of appeals before Commissioner (Appeals) has already been enabled in an electronic mode. However, the first appeal process under the Commissioner (Appeals), which is one of the major functions/processes that is not yet in full electronic mode. A taxpayer can file appeal through his registered account on the e-filing portal. However, the process that follows after filing of appeal is neither electronic nor faceless. In order to ensure that the reforms initiated by the Department to eliminate human interface from the system reach the next level, it is imperative that an e-appeal scheme be launched on the lines of e-assessment scheme.

Accordingly, it is proposed to insert sub-section (6A) in section 250 of the Act to provide for the following: —

  •  Empowering Central Government to notify an e-appeal scheme for disposal of appeal so as to impart greater efficiency, transparency and accountability.

  •  Eliminating the interface between the Commissioner (Appeals) and the appellant in the course of appellate proceedings to the extent technologically feasible.

  •  Optimizing utilization of the resources through economies of scale and functional specialisation.

  •  Introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals).

It is also proposed to empower the Central Government, for the purpose of giving effect to the scheme made under the proposed sub-section, by notification in the Official Gazette, to direct that any of the provisions of this Act relating to jurisdiction and procedure of disposal of appeal shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. Such directions are to be issued on or before 31st March 2022. It is proposed that every notification issued shall be required to be laid before each House of Parliament.

This amendment will take effect from 1st April, 2020.

2.2 Provision for e-penalty

Section 274 of the Act provides for the procedure for imposing penalty under Chapter XXI of the Act. In response to a show-cause notice issued by the Assessing Officer (AO), assessee or his authorised representative is still required to visit the office of the Assessing Officer. With the advent of the E-Assessment Scheme-2019 and in order to ensure that the reforms initiated by the Department to eliminate human interface from the system reaches the next level, it is imperative that an e-penalty scheme be launched on the lines of E-assessment Scheme-2019.

Therefore, it is proposed to insert a new sub-section (2A) in the said section so as to provide that the Central Government may notify an e-scheme for the purposes of imposing penalty so as to impart greater efficiency, transparency and accountability by,—

(a) eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible;

(b) optimising utilisation of the resources through economies of scale and functional specialisation;

(c) introducing a mechanism for imposing of penalty with dynamic jurisdiction in which penalty shall be imposed by one or more income-tax authorities.

It is also proposed to empower the Central Government, for the purpose of giving effect to the scheme made under the proposed sub-section, for issuing notification in the Official Gazette, to direct that any of the provisions of this Act relating to jurisdiction and procedure of imposing penalty shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. Such directions are to be issued on or before 31st March, 2022. It is proposed that every notification issued shall be required to be laid before each House of Parliament.

This amendment will take effect from 1st April, 2020.

Concluding Remarks:

3.  In order to make these path-breaking, radical and revolutionary initiatives of the 'faceless' and 'jurisdiction-less' 'e-assessments, e-appeals and e-penalty', effective and taxpayer friendly, it is essential and crucial to issue appropriate clarifications with regard to the exact modus operandi of the functionality of such schemes and to take suitable measures and steps to overcome the initial bottlenecks and hurdles by way of ensuring the commensurate and supporting IT infrastructure to enable seamless and smooth data transfer, incorporating standardization in the conduct of assessments, appeals and penalty proceedings by Income Tax authorities, by implementing Standard Operating Procedures (SOPs) to do away with the subjectiveness and arbitrariness, and fixing proper and effective accountability in cases of high pitched assessments.

So, all the stakeholders involved i.e. the taxpayers, the tax professionals, the assessing authorities, the regulatory body CBDT, the Finance Ministry and the Government should embrace these radical, revolutionary and path-breaking reforms of 'Faceless e-Assessments, e-Appeals and e-Penalty' in good and positive spirits and should work collectively and cohesively to make this initiative a grand success.

It is only then perhaps that these reforms and initiatives aimed at digital transformation of Indian Tax Administration, will really live up to their true potential, and taxpayers as well as the tax administration authorities will reap the benefits that these are supposed to provide.

Useful Reference: For More Details and Complete Understanding of the nitty-gritties and nuances of the New Scheme of Faceless e-Assessments 2019, the recently published Book titled "Guide to e-Assessment with Real-time Case Studies & Suggestive e-Submissions", authored by the author of this article and published by Taxmann Publications, may be referred, which is a ready referencer and user manual to help and assist the assessees and the assessing authorities in their 'e-Assessment pursuits'.

"No Body Can Stop an Idea Whose Time Has Come!!"- Victor Hugo