Income Tax e-assessment

The Ministry of Finance (MoF) notified the e-assessment scheme to conduct faceless assessments to review or evaluate income-tax returns through online process. As this scheme applies to all national and regional centres, the physical appearance of the taxpayers is not required. The evaluation can be in the form of scrutiny or persuing to collect details from the taxpayer. The MoF notified on the faceless e-assessment scheme on 12th September 2019. The e-assessment scheme shall be monitored by National e-assessment (NEC) for verification, modification and assigning cases. Any notices from the NEC to the assessee will be served under sub-section(2) of Section 143.

Reasons for Scrutiny from the Income-tax Department

As per the Income-tax act of 1961, the assessment is set to carry out to identify errors and misfilings. The following are the reasons for conducting scrutiny from the I-T department:

A discrepancy in TDS credit
Irregular income levels
Failing to file income tax returns
Contradicting value among the transactions
Mismatch in income tax payments

Click here to read about income tax scrutiny

Types of Notices from the I-T Department

If the tax filings match with any of the irregularities above, the taxpayer will receive the following notices from the I-T department:

Limited Scrutiny
Complete Scrutiny
Manual Scrutiny

For suggestions to avoid irregularities on filing tax returns, click here

Format of e-assessment Scheme

Previously, the taxpayer should visit the I-T department in-person with all the required documents upon receiving notice. The format of providing documents/details in-person have ceased to exist. Hence the taxpayer shall henceforth provide all the documents online, through the registered account.

Objectives of the e-assessment scheme

To remove any form of human interference for the Income-tax assessment procedure
Create specified assessment units to review the returns by the automated allocation system
Create a platform for complete anonymous online process
Eliminate the process of requiring physical presence at IT departments for verification

Flowchart of NEC

The following flowchart explains the process of NEC

Income Tax eAssessment

e-assessment Centres

The following centres will be established to conduct e-assessment proceedings

National e-assessment Center (NEC)

The NEC will act as a regulatory committee to implement rules and regulations and monitor regional centres. It also assesses, verifies, modifies and send show-cause notices to the assessee if necessary.

Regional e-assessment Centers

The regional e-assessment centres will be established to implement the actions as informed by the NEC. The Principal Chief Commissioner shall monitor the division to assess regulation and process.

Assessment Unit

The following are the critical functions of Assessment Units:

To verify the modifications in the draft,
Suggest and assess modifications to NEC,
Identifying details regarding payments or refund,
Request information or to provide for the issues raised,
Scrutinise the information provided by the assessee.

Verification Units

The verification units perform the following functions as per the regulation of NEC:

Cross verification,
Examination of books of accounts,
Examining the statements or recordings of witness,
Sending enquiry to assessment or technical units for clarification on documents.

Technical Units

The technical units are established to assist with legal, forensic and accounting. Similarly, information technology, data analytics, valuation, transfer pricing and other related technical requirements have also been established.

Review Units

The review units play an essential role by performing the following functions:

Assessing all the documents sent by the assessee,
Reviewing the draft assessment order,
Cross verification of the material evidence,
Reviewing the relevant points has been added as per the guidelines of NEC.

Procedures of Serving Notice through e-assessment Scheme

S. No.	Procedure	Rule/Act
1	Serving e-assessment notice to the taxpayer upon the discrepancy	sub-section(2) of Section 143
2	The individual must reply within 15 days from the date mentioned on the receipt	sub-clause(i)
3	The individual should respond to the notice only through the registered account. The response shall be notified by National e-assessment centre
4	Individuals no longer have to visit any I-T departments with regards to the notice received for submitting any documents
5	All communication between the individual and the department for verification or enquiry will only be through online
6	If the regional I-T departments require assistance from verification or technical unit, it will be processed through an automated system. The requirements such as: Requirement of additional documents or evidence Conducting enquiry or verification regarding the returns filed Seeking technical assistance from the technical unit
7	The NEC can assign scrutiny case to any regional centres through an automated allotment system

Procedures of Penalty Proceedings through e-assessment Scheme

S. No.	Procedure	Rule/Act
1	Any draft order that initiates penalty proceedings should follow the following regulations: The draft order should be initiated as specified by the committee of NEC The penalty proceedings should be initiated by sending a copy to the assessee. The copy shall include demand notice, pending payments as well as details of the refund. The draft order should provide all the details of the penalty proceedings
2	The assessee should be notified in case of any modifications
3	The draft order can be assigned to any of the regional e-assessment centres through an automated allotment system
4	The assessee shall reply, upload or request the details through registered account only (online)

Procedures of Review Proceedings through e-assessment Scheme

S. No.	Procedure	Rule/Act
1	The draft order or the proceedings can be reviewed in the case of: When the review unit concurs with the draft order When the draft order is set to review by the concent of NEC Providing suggestions for modification with regards to the draft order to the NEC
2	The NEC can apply, change or modify the draft order as per the suggestions received from the review unit as stated by the procedure	Sub-paragraph (a), (b) or (x)
3	Upon revisions to the draft stated by the review unit, the NEC forwards to the Assessment unit
4	Assessment unit shall review the suggestions, modify if necessary and prepares the final draft to the NEC
5	The NEC finalise the revised order by the procedure	Sub-paragraph (a), (b) or (x)

Procedures of Show-cause Notice through e-assessment Scheme

S. No.	Procedure	Rule/Act
1	The assessee should respond to the show-cause notice within the stipulated time to the NEC	Sub-paragraph (b) of paragraph (x)
2	In case of no response, the NEC finalises the assessment as per the procedure	Sub-paragraph (a) of paragraph (x)
3	If the assess sends the details for the notice, NEC forwards to the Assessment unit

Finalising the Draft

S. No.	Procedure	Rule/Act
1	The Assessment unit verifies the details sent by the assessee and forwards to the NEC for finalising the draft
2	In the modification of the NEC has no prejudicial interest towards the assessee, the NEC shall follow as per the procedure	Sub-paragraph (a) of paragraph (x)
3	Upon having a prejudicial interest towards the assessee, the NEC should provide an opportunity as per the procedure	Sub-paragraph (b) of paragraph (x)
4	The response should be reviewed/assessed as per NEC committee procedure	Paragraphs (xvi), (xvii) and (xviii)