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Income tax returns filing: E-assessments need proper mechanism


By-Shailesh Kumar, Director, Direct Taxation, Nangia & Co LLP 

The government has been taking a number of steps for promoting and implementing the concept of e-governance with an intention to increase efficiency. It is often said that one of the reasons of non-compliance with income tax provisions by many taxpayers is their fear regarding huge paper-work and dealing with arbitrary or corrupt officials in the income tax department.

In order to remove these bottlenecks and to make income tax procedures easier, more taxpayer friendly and less of paper work, discretionary & arbitrary on part of income tax department, the government has been implementing various e-filing/ e-governance initiatives in different phases.
E-filing of returns
The process started with e-filing of TDS returns through authorised agencies such as UTI and NSDL, e-filing of income tax returns, electronic processing of tax returns by Centralized Processing Center (CPC), e-filing of Tax Audit Reports & Transfer Pricing Certificates, e-filing of appeals before Commissioner of Income tax (Appeals), and the latest being e-assessments.
One of major advantages of such e-procedures is that all filings are now tracked digitally and wrong practices such as back-dated filings beyond permissible due date, subsequent changes/manipulation is filings already made in paper form, are now impossible. It has also been immensely beneficial for taxpayers and professionals, who were seen standing in long queues in tax departments closer to due dates of such filings and were also subject to harassment by babus of Income tax department, refusing to accept the filing on one account or other.
E-filings have certainly made things easy for taxpayers, who don’t have to run from pillar to post for making their tax filings. One does not have to worry about location or working hour of income tax department. Electronic processing of returns by CPC has made processing of returns and issuance of income tax refunds to taxpayers much faster and has definitely increased the efficiency and speed of income tax department with more certainty and less subjectivity & discretion.
E-assessment of returns
E-assessment of returns is another initiative, where the income tax department now intends to make income tax assessment of taxpayers online, without personal interaction between taxpayer and tax officials. In the e-assessment procedure, the income tax department officials shall send notices, queries to taxpayers electronically (i.e. through e-mail, notification to e-filing account, SMSs, etc.) and the taxpayers can also submit their replies/ documents online though e-mail, uploading to their e-filing account, etc.
Some apparent key benefits of e-assessment proceedings are, speed, time saved from personal visit to tax office, avoiding difficulties of taxpayers travelling or located in different city vis-à-vis its jurisdictional tax officer. This is very effective for speedy closing of assessment in small and simple cases, not requiring too many documents or complicated explanations.
At the same time, practical implementation of e-assessment in many cases, which involve complex commercial transactions, lot of supporting evidences and documents. In manual assessments, we often see cases of unnecessary adjustments being made by tax officers, either they are not able to understand commercial reason and structure of any business/transaction or they find the evidences submitted by taxpayer in support of its claim as inadequate or unclear.
In case of complete e-assessment proceedings without personal interaction may result in many arbitrary additions and adjustments by tax authorities, where tax officer making e-assessment is not able to understand the case and make addition only to protect interest of department. This will also result in increasing litigation and increasing paper-work at appellate levels and also multiple rounds of litigation in same case.
Clearly, e-assessment process needs to be implemented in a very careful and thoughtful manner, considering the reality of complicated and ever dynamic business transactions.

This story was originally published in Financial Express on October 4, 2017.

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