What is scrutiny?
“Scrutiny means the examination of the Income-tax return and making enquires related to an assessment year”.
Every financial year, taxpayers file their income tax returns and pay tax. After submitting the return, the income tax (assessing) officer examines whether the income declared or expenses claimed in return are accurate. If the officer has reasons to believe that return is not filed correctly or filed incomplete, he initiates the scrutiny process and allows the assessee to substantiate it with supporting documents.
As per section 143(2) of the Income-tax act, 1961, the assessing officer has the power to issue a notice for the scrutiny cases.
The department has now shifted from the manual scrutiny assessment to the “Faceless E-assessment Scheme” under which escrutiny would be done with the aim of:
• Ease of compliance
• Eliminate human interface
• Curb corruption and
• Bring transparency
Features of New faceless escrutiny:
• Expeditious disposal of cases
• Fully automatic e-assessment through data analytics
• Two major centers the NeAC and ReAC
• NeAC will be responsible for issuing notices
• 15 days time period to response notice
• Four sub units under each center i.e., Assessment, review, technical, and reviewer
• Digital communication process would be followed i.e. email, SMS, and video conference
• Transfer of record to the jurisdictional AO for penalty and demand
Use of artificial intelligence:
Escrutiny is an online system that will use artificial intelligence, data analytics, machine learning and technology to allocate escrutiny cases automatically. It will remove the possibility of knowing which assessing officer is dealing with your case. Hence, the e-assessment scheme shall be fully automatic.
E-assessment Centers:
The scheme has two major units, i.e. the National E-assessment Centre (NeAC) and Regional E-assessment Centre (ReAC). Each centre comprises its assessment units, verification units, technical units and reviewer units. The head office of NeAc is in Delhi, and there are eight Regional e-Assessment Centres set up in Delhi, Mumbai, Chennai, Kolkata, Ahmedabad, Pune, Bengaluru and Hyderabad.
• Assessment units: Responsible for identifying issues and analyzing information provided by the assessee.
•Verification units: Responsible for enquiry, cross verification or examination.
•Technical units: Responsible for technical assistance or advice on legal, IT, transfer pricing etc.
• Review units: Responsible for reviewing the draft assessment order.
National e-Assessment Center (NeAC): National e-Assessment Center is an independent office that will be responsible for issuing notice under section 143(2) for the scrutiny assessment. NeAC will interact with the taxpayer to obtain evidence, receive observation, issue draft assessment order, raise demand etc. Further, it will also connect with all other units for smooth conducting of assessment proceedings.
Electronic communication:
Faceless scrutiny will allow only electronic communication between the assessing officer and the assessee. The income tax officer shall issue the notice and demand for information, documents etc. via email, SMS or video conference. Similarly, taxpayers must reply through digital mode. However, in case of the complicated matters, offers may ask to visit physically for assessment.
Time period to response notice: After receiving the scrutiny notice, the taxpayer has a period of 15 days of receipt of the notice to file the response online. He/she can respond to the notice through the registered account only and will receive an acknowledgement from the national e-assessment centre.
Completion of E-assessment:
On completion of the e-assessment order, NeAC shall transfer the all-electronic record of the assessee to the jurisdictional AO for the purpose of imposing penalty, collecting demand etc.
Conclusion:
In the overall process of the E-assessment or escrutiny scheme, The NeAC will issue the draft escrutiny assessment order and select the assessing unit by the automatic process. This will reduce the undesirable practices of the tax officials and make the scrutiny process transparent and fair.
Also it is very important for tax payers to account for correct expenses and incomes with proper documentation and evidence to substantiate the same, as proving the expense is very important and as it would be done online, it should be clear and transperent from the evidence itself that entries or expenses booked or income shown are legitimate. Tax payers must now be very cautious while claiming expenses and filing returns also.
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