The Face of Faceless e-Assessments: Artificial Intelligence, Machine Learning & Team Based Scrutiny!!

Mayank Mohanka , Last updated: 13 December 2019
Share

Artificial Intelligence, Machine Learning, Advanced Data Analytics, Complex Algorithms based Automated Allocation System, Automated Examination Tool, Hash Function, Video Telephony and the list goes on……

The Face of Faceless e-Assessments: Artificial Intelligence, Machine Learning and Team Based Scrutiny

No, any science fiction movie or any space science mission are not being talked about here. Only the 'phraseology' and 'terminology' being used in the recent Official Gazetted Notification No. SO 3264 issued by the Ministry of Finance on 12.9.2019, bringing to fore the 'New Scheme of E-assessment 2019', is being referred to here.

'Welcome to the New Era of 'Faceless', 'Jurisdiction-less', and hopefully 'Corruption-less' E-assessments.'

The Regular Assessments u/s 143(3)/143(3A) being conducted under the New Scheme of e-Assessments 2019, are more popularly known as 'Faceless Assessments' & 'Jurisdiction-less Assessments'.

(a) Faceless Assessments: These assessments are being referred to as 'Faceless' because these completely eliminate the physical interface between the assessee and the assessing authority and instead involves the electronic interface right from the selection of the cases for the scrutiny purpose with the help of 'automated allocation system' involving therein an algorithm for randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning, with a view to optimise the use of resources, and the conduct of assessments exclusively in electronic mode via the 'e-Proceedings' utility of the e-Filing portal of Income-tax department's website, till the review and examination of the assessment orders using 'automated examination tool' involving therein an algorithm for standardised examination of draft assessment orders, by using suitable technological tools, including artificial intelligence and machine learning, with a view to reduce the scope of discretion.

(b) Jurisdiction-less Assessments: These assessments are being referred to as 'Jurisdiction-less' because these are conducted by a Team/Group of Expert IT Officers at multiple-level assessment units viz. National e-Assessment Centre (NeAC), Regional e-Assessment Centre (ReAC), Verification Unit, Technical Unit and Review Unit, and shall not be conducted by an individual jurisdictional Assessing Officer. The cases shall be assigned by NeAC to an assessment unit in any ReAC based on 'automated allocation system' involving therein an algorithm for randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning and as such shall be location agnostic.

On 7.10.2019, delivering on the promise made to taxpayers in the budget speech of the Hon'ble Finance Minister, the faceless E-assessment scheme of the Income-tax assessments for the AY 2018-19 and onwards has been launched by the Hon'ble Revenue Secretary, with the inauguration of the National e-Assessment Centre (NeAC) in New Delhi.

In the first phase, out of more than 2.5 lakhs cases selected for scrutiny u/s 143 for the AY 2018-19, the Income-tax department has selected 58,319 cases for scrutiny under the 'New Scheme of E-assessment-2019' more popularly known as the 'Faceless assessments' on pilot basis, and the remaining scrutiny cases are being conducted on the 'e-Proceedings' utility of the e-Filing portal of the Website of the Income-Tax department, as per the existing scrutiny norms.

So, a natural question which comes up in every enlightened mind is as to what is the difference between the existing regular assessments u/s 143(3) being carried out through the e-Proceedings windows and the 'new scheme of e-assessment 2019/faceless e-assessments'.

"To be curious is a good thing and to be able to satisfy someone's curiosity is even better."

Difference between the Assessments through 'e-Proceedings' and the New Scheme of 'E-assessment 2019':

S.No.	Particulars	Existing Assessments through e-Proceedings utility	Faceless E-assessment 2019
1.	Applicability	Assessments u/s 143(3), Assessments u/s 147	Assessment u/s 143(3)
2.	Assessment Year	Till AY 2017-18 and partial cases for AY 2018-19	58,319 cases for AY 2018-19 on Pilot basis
3.	Assessing Authority	Jurisdictional Assessing Officer	National E-assessment Centre (NeAC)
4.	Notice u/s 143(2) Issuing Authority	Jurisdictional Assessing Officer	NeAC, New Delhi
5.	Reply Period of Notice u/s 143(2) & 142(1)	As specified in the Notice u/s 143(2)	Within 15 days from the date of receipt of such Notice u/s 143(2)/142(1)
6.	Assignment of Case	Jurisdictional Assessing Officer	The NeAC assigns the case to a specific assessment unit in any one Regional E-assessment Centre through an automated allocation system, based on artificial intelligence and machine learning.
7.	Inquiries during the course of assessment proceedings	Jurisdictional Assessing Officer Issues Notices/Questionnaires u/s 142(1) of the Act, for seeking further information, documents or records, from the assessee.	The NeAC may issue appropriate notice or requisition u/s 142(1) to the assessee for obtaining any further information, documents or evidence as required by the assessment unit in the Regional E-assessment Centre, to which the case has been assigned by the NeAC.
8.	Provision of Draft Assessment Order	Only applicable in the Cases of References to Transfer Pricing Officers (TPO) resulting in Variation and Foreign Companies and such Draft Assessment Orders are being passed by the Jurisdictional AOs.	Applicable in all assessments u/s 143(3) of the Act. Draft Assessment Orders are passed by the assessment unit in the Regional E-assessment Centre (ReAC), to which the case has been assigned by the NeAC.
9.	Action on Draft Assessment Order	Not Applicable	The NeAC shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide to: (a) finalise the assessment as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; or (b) provide an opportunity to the assessee, in case a modification is proposed, by serving a notice calling upon him to show cause as to why the assessment should not be completed as per the draft assessment order; or (c) assign the draft assessment order to a review unit in any one Regional e-assessment Centre, through an automated allocation system, for conducting review of such order.
10.	Final Assessment Order	Passed by the Jurisdictional Assessing Officer after considering the written and verbal submissions of the assessees.	The NeAC sends all the e-replies and submissions of the assessee containing the justification for revision of the draft assessment order to the regional assessment unit for revision of the draft assessment order. In the cases, where no objections are filed by the assessees, the NeAC finalises the assessment based on the Draft Order only. Upon receiving the Revised Draft Assessment Order, the NeAC may: (i) in case no modification prejudicial to the interest of the assessee is proposed, finalise the assessment based on such revised draft assessment order; or (ii) in case modification prejudicial to the interest of the assessee is proposed, an opportunity of personal hearing by way of video telephony only is provided to the assessee, and based on the response of the assessee, the same procedure of revision and finalization is to be followed and Final Assessment Order is then passed by the NeAC.
11.	Mode of Interface between the Assessee and the Assessing Authority	Electronic Mode via the 'e-Proceedings' functionality in the ITBA Module. However, after serving the Show Cause Notice, an opportunity of Personal Hearing to the assessee involving physical interface between the assessee and the jurisdictional AO is to be provided.	Electronic Mode via the 'e-Proceedings' functionality in the ITBA Module. However, after serving the Show Cause Notice, an opportunity of Personal Hearing to the assessee via video telephony only and without involving any physical interface between the assessee and the NeAC is to be provided.

For easy and better understanding of the worthy readers, the complete procedure of 'E-assessment' proceedings as per the new scheme of 'E-assessment 2019' is being explained diagrammatically as under:

Live Webcast by ICAI & NeAC, Income-tax Department on the Topic 'Faceless E-Assessments: Issues & Challenges'.

Recently, on 4.12.2019, a live webcast by ICAI & NeAC, Income-tax Department on the topic 'Faceless E-Assessments: Issues & Challenges', was being conducted in which the Ld. PCCIT, NeAC, New Delhi, gave his valuable insights and resolved many queries concerning the new scheme of faceless e-assessments.

In the said live webcast on the new scheme of e-Assessments, being conducted jointly by ICAI & NeAC, the author's three queries vide question no. 49 were taken up viz.

(i) First Query: How will revisionary powers of CIT u/s 263/264 be exercised under the new scheme of e-Assessments?

Answer given: Revisionary powers u/s 263/264 shall be exercised after the passing of the final assessment order by NeAC and after transferring of all electronic assessment records to the file of jurisdictional AO, in the same manner as are being exercised at present.

Author's Humble Suggestion: The USP of this new scheme of faceless e-assessments is its 'Team/Group based conduct of e-Assessments by multiple assessment units viz. National e-Assessment Centre (NeAC) and Regional e-Assessment Units (ReAC) including Technical Unit, Verification Unit and Review Unit, in place of the existing individual jurisdictional Assessing Authority (AO).

So, if the final assessment order after being passed by the above multiple assessment units after a comprehensive and diligent review process as underlined in this new scheme, is still being amenable to be revised by an individual jurisdictional CIT, u/s 263, then the finality and conclusivity of such team-based final assessment order, still rests upon the view-points of the individual jurisdictional CIT, which is contrary to the very underlying principle of team-based assessments of this new scheme of faceless e-assessments, and as such suitable amendments should be incorporated in section 263 of the Income-tax Act, in this regards.

(ii) Second Query: Is there any alternative mode of uploading files as attachments along with e-Submissions, other than scanning files?

Answer given: The files may be uploaded in xmls & other modes, however at present these modalities are being worked out.

Author's Humble Suggestion: In the existing 'schema' and 'semantics' of the 'e-Proceedings' functionality, the maximum number of attachments or files which can be attached along with a single 'response' to any notice is 'TEN' (10) and the maximum 'size' of one attachment which can be attached along with a single 'e-response' is '50 MB' of data. Earlier the maximum size of one attachment which can be attached along with a single 'e-response' was 5 MB only. So, in the new scheme of 'E-assessment 2019' the issue of space constraint has been resolved to a great extent. However, the assessees can attach scanned documents only in .pdf, .xls, .xlsx, .csv format.

At times, the process of scanning of files or their conversion into pdf files for the purpose of uploading is very cumbersome and tedious process and involves a lot of time. So, this file conversion becomes an irritant and hinders the smooth and uninterrupted uploading of supporting attachments to be attached `along with the response to any query to a notice.

The requirement of scanning of files or the conversion of files into pdf version to make them up-loadable should be done away with and instead a standard file format like 'XML' in line with the International Best Practice of 'Standard Audit File for Tax' (SAF-T), should be adopted and implemented for uploading files and attachments, by aligning and integrating the 'e-proceedings' functionality of the ITBA module with that of the natural accounting systems of assessees.

(iii) Third Query: In the new scheme of e-Assessments, if say a Delhi based assessee is being assessed by a Mumbai based ReAC based on random allocation system, then Mumbai based ReAC will naturally be guided and influenced by the legal precedents of Mumbai High Court on several crucial scrutiny issues involving interpretation of Law, in conducting the e-assessment, which may differ from the legal precedents of Delhi High Court, on those issues, and applicable on Delhi based assessee. So, these may result in undue hardships for the Delhi based assessee.

Answer given: It is a complicated issue and suitable measures will be taken to overcome such complexities with the passage of time.

Author's Humble Suggestion: The nodal unit i.e. the NeAC should ensure adopting and following up of the legal precedents of the jurisdictional appellate authorities of the assessees in the conduct of their e-assessments by the assessment units in ReAC.

It is only through continuous, persistent and sincere efforts by the Law-makers and the realistic feedback provided by the assessees as well as the assessing authorities at the ground level, about the desirable improvements in the existing 'e-assessments' functionality, that such revolutionary initiative will get evolved into a more effective, efficient and mature system of Tax Administration over a period of time.

"When solving problems, dig at the roots instead of just hacking at the leaves." - Anthony J. D'Angelo

Useful Reference: For More Details and Complete Understanding of the nitty-gritties and nuances of the New Scheme of Faceless e-Assessments 2019, the recently published Book titled “Guide to e-Assessment with Real-time Case Studies & Suggestive e-Submissions', authored by the author of this article and published by Taxmann Publications, may be referred, which is a ready referencer and user manual to help and assist the assessees and the assessing authorities in their 'e-Assessment pursuits'. An honest and sincere effort has been made in this Book to explain and demonstrate the practical aspects and nitty-gritties of 'e-Assessments' in a 'step-by-step-manner' through 'real-time practical case studies' encompassing crucial and significant scrutiny issues having immense relevance and practical utility for all the assesses and the assessing authorities. The manner and practical aspects of 'e-filing of Rectification Application' u/s 154 of the Act and 'e-filing of Responses against the outstanding Income Tax demand have also been explained and demonstrated in a 'step-by-step' manner.

This Book characterizes a 'natural blend of law and practice' concerning the 'New Scheme of e-Assessment 2019' and also includes the Country-specific Best International Practices in Tax Administration and the measures taken up by the Indian Tax Administration Authorities to ramp up the effectiveness and efficiency of the governance levels and to transform into a 'digitally mature' tax administration.

"व्यये कृते वर्धते नित्यं | विद्या धनं सर्वे धनं प्रधानम् ||"