The writer explains about Faceless Assessments for filing of Income Tax without any human intervention with
the help of state-of-the-art digital technology automated examination tools
Till the late nineties, each and every case of taxpayers were scrutinized for assessment. For this, on the appointed date, he or his representative was required to visit the income tax office with books of accounts and other records (usually tied up in a red cloth) and wait for his turn which could sometimes go up to late in the evening. The Officer would then check the hand-written records and after several hearings would always find faults to reject the books and make additions with large tax demands. The only option available to taxpayers was either to go in appeal with uncertainty and costs or to settle with the assessing officer under- or- over the table depending on maturity and experience of the officer and negotiation skills of the tax consultant. However, there were honourable exceptions of honest intelligent officers who safeguarded the interest of the revenue and also taxpayers who would fight even for small additions suffering heavy legal costs, as a matter of principle.
Transaction Reporting
This scenario started changing slowly. Over the years, with the computerization of the Income Tax Department and the continuous up-gradation of technology. The Income Tax law was also amended simultaneously from time to time making compulsory to quote PAN for bank accounts, investments, mutual funds, high-value cash, and financial transactions, purchase and sale of properties, vehicles, hotel and travel expenses, consumer goods, precious metal; TDS/TCS provisions were introduced for payments and collections; Mandatory furnishing of Annual Information Report (AIR) by various regulatory authorities like Registrar of Immovable Properties, Motor Vehicle Registration Department, Postmaster General, stock exchanges, depositories etc. The information based on PAN, AIR, TDS, and such other sources about different transactions made by a person at different times, at different places, and with different parties is collated and is available in a single database. Based on this, “Individual Transaction Statement” is prepared in respect to each person based on his PAN. These statements are electronically linked with the data of return / assessed income and tax payments of the taxpayer. Based on this data, the Department is able to build a 360-degree profile of every taxpayer with complete information of all his income and assets leaving very little scope for hiding or suppressing income. (In fact, it is believed that in course of time, the Income Tax Department will be in a position to have a completely pre-filled income tax return form for benefit of taxpayers with provision for amendment, if necessary.) Armed with the latest state-of-the- art digital technology, tools of data mining, machine learning, artificial intelligence, a revolutionary change is brought in by the Government of India by introducing Face Less E-Assessment Scheme from 13th August, 2020 which does not require taxpayer to visit Income Tax Office or meet Income Tax officials for the purpose of assessment. Personal assessment hearings, harassments, and bribery should now be history.
New Faceless Assessment Procedure
As soon as the tax return is filed by a taxpayer electronically, it is automatically processed and accepted, if there are no discrepancies (u/s143(1)). In case of any apparent mistakes in a tax return and Form 26AS, adjustments are made after giving opportunity to assesee for online clarification before raising demand/ refund.(143(1)(a). However, in case a discrepancy is noticed for underreporting of income, or omission of transactions, or for any abnormality, the case is automatically selected for investigation or best judgment assessment. (143(3) & 144) Under the new Faceless Scheme, assessments of such cases selected for investigation or best judgment assessment will be made in a very transparent seamless, painless and faceless manner without any human intervention with the help of state-ofthe-art digital technology automated examination tools without any human intervention, artificial intelligence, and machine learning.
Framework for Faceless Assessment
For the purpose of faceless assessment, the Central Board of Direct Taxes (CBDT) has set up:
• A National e-Assessment Centre(NEAC): For facilitating e-assessment and central control.
• Regional e-Assessment Centers (REAC): To conduct an assessment.
• Assessment units: For identifying points or issues, materials for determining any liability (including refunds), analysis of information, and other such functions.
• Technical Units: For technical support including legal, accounting, forensic, information technology, valuation, auditing, transfer pricing, data analytics, the management, or any assistance or advice on any other technical matter for technical units.
• Verification Units: For inquiry, cross verification, examination of books of accounts, witness, and recording of statements, and such other functions.
• Review Units: For reviewing the draft assessment order to check whether the facts, relevant evidence, and law and judicial decisions have been considered in the draft order.
All communications between the above units will be through the National e-Assessment Center for the purpose of evaluation under this scheme.
Process of the Faceless Tax Assessment
The Scheme will work as under:
The selected case with an identification number will be assigned to officers in different locations through an automated allocation system without human intervention. For example, the case of a Goa assessee identified with
a specific number can be assigned to an Assessment Unit in Assam for legal support; to a Technical Unit in Bangalore for examination; to the Verification Unit at Pune; and the draft assessment order may be reviewed by Calcutta Unit. In the entire process, no one will know the name or see the face of the Income Tax Officer of the Units, thereby preventing any possibility of influence or corruption. In short, Faceless Assessments means dynamic jurisdictions, random allotment of cases, use of artificial intelligence and data analytics, team-based assessments, reply to notice electronically, no visits to the income-tax office, review before final order, and speedy completion. Thus, all scrutiny cases will be completed in a faceless way in a faceless environment, without any chance of bribery, thus providing giving relief to honest taxpayers and thereby helping ease of doing business and encouraging taxpayers to file tax returns voluntarily which at present is just 4% of the population.
(The columnist is a senior chartered accountant and a published author of various books on accountancy and taxation Email: verlekar@bsnl.in)
