On the lines of PM motto of Maximum Governance and Minimum Government, the Government has launched the much-deliberated scheme of E-Assessment in Direct Tax bringing paradigm shift in the Tax Administration. The CBDT on 12th September 2019, notified the much talked about e-assessment procedure vide Notification no. 61/2019. The stakes were high, as it was expected to reduce the red-tapism in the country, during an assessment proceeding.

This notification was quickly followed up by another notification vide 62/2019, giving effect to the Income Tax E-Assessment Scheme, 2019.

The scheme involves the creation of e-assessment centres at national and regional levels; auto-allocation of cases among these centres. Further, all communication with taxpayers and among assessment centres etc will be purely electronic; communications to be digitally authenticated, and most importantly assessees will not to make a personal appearance at centres.

The scheme marks a significant modification in the manner in which tax assessments will be undertaken. Both the taxpayers and the tax department will need to strengthen their systems to adapt to the scheme. 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.”

One of the significant advantages of e-assessment is the time saved. A taxpayer need not travel to the income tax office and await his turn in the corridor to meet the tax officer (at times, that wait would stretch to a few hours). Even if one is not in the same city, one can still respond to the notices. Thus a lot of savings in terms of manhour cost of not only professionals but also of clients can be envisaged. It shall save the national scarce resources in terms of paper and printing.

The second significant advantage shall be no doubt the reduction in chances of potential corruption of a tax officer, who earlier used to openly threaten additions with hush up money. This is indeed a big relief for honest taxpayers, and which our worthy PM has been stressing on.

Needless to mention that this scheme shall be feather in cap for Ease of Doing Business and shall enhance the Global Rating of India in Ease of Business Index likely to be announced shortly.

There are, however, very significant disadvantages as well to the current system of e-assessment. In addition to connectivity, storage size issues, the problem of loading heavy documents shall remain. The site capacity for uploading documents under e-assessment proceedings is limited to only 20MB of data. In many cases, the size of the soft copy of such bulky documents exceeds this limit.

The other significant disadvantage is the lack of understanding of the nuances of commercial transactions on the part of tax officers. Almost all tax officers are career bureaucrats (non-commerce background) are, therefore, not exposed to how commercial transactions are carried out and have little understanding of the commercial reasons for a transaction being structured in a particular manner. Often, this lack of understanding culminates in their seeking to make an addition to the returned income.

Currently, during the course of assessment hearings, one is able to explain to the tax officer the commercial rationale and is able to clear his doubts about a transaction. Most tax practitioners would testify to the fact that tax officers do not get convinced merely by written submissions, however eloquent they may be, but when the same issue is explained to such officers orally in a manner which they can understand, the issue is understood much better. Tax officers’ arguments can be countered on the spot, clearing their misgivings.

The author can be contacted at rnath@rnaca.com

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By Rakesh Nath Srivastava

Graduate from SRCC, Delhi and a Chartered Accountant, Rakesh has over 22 years of experience in Taxation, Audit and Estate Planning. His stronghold is taxation and estate planning through WILLs and Trusts.

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