The present Government had claimed in its election manifesto (2014) that ‘tax terrorism’ and ‘uncertainty’ has been leashed and had promised to provide a non-adversarial and conducive tax environment, as well as to rationalise and simplify tax regime. It had also stated that it will make the administration truly accountable to their work as well as to the people, through rigorous evaluation process. It claimed that it would establish a system which eliminates scope for corruption. One method for doing this was to have technology-enabled e-Governance - minimizing discretion in the citizen-government interface, a system-based, policy-driven governance - making it transparent, and rationalizing and simplifying the tax regime.

The Central Government has been clear on one concept – of using technology in every department, and every facet of Governance, and is also clear on another concept – that machine dependency (use of technology) will reduce corruption.

It would be worthwhile to remember the Tax Administration Reform Commission’s recommendations vide their first report dated 30/05/2014

“Hearing in all tax cases by personal presence should be avoided, and data can be sought through an e-system. The taxpayer can upload the data on the e-system, Personal hearing should be sought only in complex cases. (Section VI.4.a)” 

In October, 2015, the CBDT initiated the e-assessment procedure (CBDT letter no. F. No. 225/267/2015-ITA-II, dated October 19, 2015) on a pilot basis by stating that email shall be used for communicating with the assessee for sending questionnaire, notices, etc., as well as for receiving responses thereto. But this was restricted to five cities, and in 2016, it was extended to two more cities. The Government constituted a Committee to study the feasibility of the recommendations regarding group assessment and system of peer review before assessment in 2015 (F.No.225/246/2014/ ITA.II dated 10^th September, 2015) and in 2016 (Office Memorandum dated 19^th December, 2016) to give recommendations regarding how to make effective assessment through the use of departmental database/ e-system. Based on the recommendations, a task force was constituted vide office memorandum (F. No. 225/205/2017/ ITA.II dated 14^th June, 2017) inter alia,  to implement the recommendation of the committee regarding ‘effective assessment through the use of departmental database’, which was to submit its report by 31^st July, 2017.

The CBDT did come out an instruction (Instruction No. 8/2017 dated 29^th September, 2017) wherein the Assessing Officers were instructed to issue notices and call for compliances by 8^th October, 2017 and 15^th October, 2017 respectively. However, no information has been shared in the public domain as to what extent the instruction was complied with both, by assessees as well as by the Department. All assessments were completed by 31^st December, 2017, and the information as to how many assessees had opted to proceed as per the instruction, how many officers had complied with the instruction within the stipulated time, and was there any method adopted to circumvent the instruction, should be available with the Department, as the Government did not implement the suggestion in the first TARC Report, para II.6.b:

“II.6.b Taxpayer service delivery, Taxpayer surveys: Taxpayer surveys are required as a precursor to the design of any taxpayer service, as a tool to assess the generation of awareness and as a feedback mechanism for the service/ initiative itself. They ascertain the needs and requirements of taxpayers as well as their overall satisfaction level. Surveys should be a regular activity for the tax administration. Feedbacks help in fine tuning taxpayer service and in improving overall customer satisfaction. Surveys and related feedbacks also provide guidance for new services and improvement in structure for good delivery. Findings from customer surveys can also be used to update and reframe Frequently Asked Questions (FAQs). FAQs are an instrument for customer services, which have to be a regular part of the customer services to be put up on the website of the tax administration. Surveys can be random or have a structure, based on sample designing with ex-ante objectives.”

The CBDT has now issued an Instruction [No. 01/2018 dated 12^th February, 2018] based on which, assessment of all scrutiny cases (except in case of search cases) will be conducted through e-mode only. If the assessee objects to it, it will, for the time being, be kept on hold. In para 4.3, it states that “Online submissions may be filed till the office hours on the date stipulated for compliance.” This means that we are still stuck with our traditional approach, which will lead to further litigation as to when it is considered filed, the time in the sent mail or in the received mail. In electronic mode,  it should be possible to file 24x7, and accordingly the wordings need to be modified. Does this mean that all communications have to be sent from the email address of the assessee only? Does the assessee not have the facility of appointing an authorised representative? Will the assessee be able to see the order sheet? Should the assessee not be given a reasonable opportunity to submit the response (as in para 4.4, it states, “electronic submissions through ‘E-Proceeding’ shall be automatically closed seven days before time barring date.”), particularly when the information itself is called for, say, just over seven days before time barring?

Be that as it may, the Finance Minister has now proposed to insert three sub-sections into the Income Tax Act, which will have far reaching implications, though it is in the direction of e-assessment, if it gets converted into law, namely Sections 143(3A), 143(3B) and 143(3C). The words used in the proposed sub-sections are not defined in the Income tax Act and are very vague. They will have far reaching impact if general meaning is applied.

“(3A) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) 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 team-based assessment with dynamic jurisdiction.

(3B) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:

Provided that no direction shall be issued after the 31st day of March 2020.

(3C) Every notification issued under sub-section (3A) and sub-section (3B) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.”

 [Emphasis supplied]

The proposed Sub-section (3A) is for making assessment. When one speaks of making assessment of total income, it encompasses almost the entire Income Tax Act, right from definition section to computation sections to assessment procedures, i.e., from Chapter I to Chapter XIV. The purpose stated therein are very vague. For example, sub-clause (a) uses the phrase, “to the extent technologically feasible” which can also mean that the Government is not sure whether it will be possible, or we may land up in the manner we landed in GST, or in the initial stages of online filing of income tax returns. It talks of team based assessments. Does it mean that there will be a panel of officers who will do the assessment, and the assessment will be done as done at the Tribunal or higher court level where the matter is referred to Special Benches or Larger Benches? The section has many words which will have different meaning, like ‘dynamic’ when used as an adjective to describe jurisdiction, as per Cambridge dictionary means ‘continuously changing or developing’.

An even more frightening proposal is the insertion of Sub-section (3B), which will empower the Central Government to state by a notification that any provision of the Act relating to assessment of Total Income (for which one has to travel through various Chapters, right from Chapter I up to Chapter XIV) shall not apply or shall apply with exception, modification and adaption as may be specified. One may hope that the power will not be misused or misinterpreted, but by the stroke of a pen, the Income Tax Act can be bypassed. Does a delegated authority, though Central Government, do this? More litigation is sure to be in the pipeline. The law as of now contains check and balances in many provisions, like sections 143(2), 149, 151, and section 127, which empowers the PCIT or CIT to transfer files from one officer to another. Now, by empowering oneself with this power, will the checks and balances as envisaged in the Act be given a go-by? One may say this is not the purpose, but its possible misuse is not addressed. It is also not clear whether the notification will be assessment year based or otherwise, as there is a proposed proviso that no notification can be issued after 31^st March, 2020. Does it mean that a notification once issued, will be valid forever, or that the Central Government will have the power to rescind the Notification? In the entire Budget document, it has not been explained why such a proviso is proposed to be inserted.

To top it all, sub-section (3C) only states that notifications issued shall be placed before each house of Parliament as soon as possible, without providing a binding time-frame.

It would also pertinent to be reminded of this extract from the TARC’s first report, Page 180:

“Currently, the general perception among tax payers is that the tax administration is focused on only one dimension – that of revenue generation. This perception gains strength from the manner in which goals are set at each functional unit of both the direct and indirect tax departments. These goals, in turn, drive the performance of individual tax officials. Therefore, the whole system of goal setting, performance assessment, incentivization and promotion appears to be focused on only this dimension. This single-minded revenue focus can never meet the criteria of the mission and values mentioned above. What is required is a robust framework that is holistic in its approach to issues of performance management.”

Strong turbulence is in store  if such unrestricted power is bestowed upon any authority, particularly with the past experience of lack of follow-up and action thereon, on instructions and circulars already issued by CBDT relating to the assessment procedures. Though e-assessment is good on certain fronts, the Government should come out with clear information as well as data on how this amendment to the Income Tax Act will be put in motion, so as to further smoothen the e-assessment, for which the Department has to first put its own house in order, by training its officers, as a majority of them have forgotten the law they are supposed to implement.