Faceless tax scrutiny: I-T dept completes 60,000 cases, Phase-II in works

Dept plans to include more complicated cases in second phase of scheme

Faceless tax assessment was completed in the 60,000 cases shortlisted by the Income Tax (I-T) department under the project that was rolled out in October, sources said. Of these, about 4,000 cases pertained to companies.

Now, the I-T department is preparing for the second phase of the scheme and plans to include more complicated cases in the exercise, and to this end it has set a target of doubling the number of cases in financial year 2020-21 (FY21).

The system was introduced to eliminate interface between an assessing officer and taxpayer in a bid to boost transparency in tax administration. 

“All the cases that were selected for scrutiny were assessed by December 31, 2019. They were of current assessment year, while cases scrutinised for previous year were also on e-assessment basis, but they were jurisdictional unlike this time, when it was successfully done without jurisdiction," said an I-T official.

According to the official, the next phase will not be city specific, like it was in the first phase, where the department covered the cities of New Delhi, Mumbai, Pune, Hyderabad, Bengaluru, Chennai, Ahmedabad and Kolkata.

The department came across some teething issues in the first phase, which it expects to resolve, when the scheme is tried across the country. For instance, the department is making efforts to improvise its computer-assisted scrutiny selection (CASS) for the next cycle of scrutiny so that it will give specific and concrete results.

In the first phase, the CASS had selected about 100 parameters to scrutinise returns. Sources said some parameters, based on which notices were served, included undisclosed foreign income and immovable properties, high-value transactions, misreporting of long-term capital gains, TDS (tax deduction at source) claimed that did not match tax forms, non-disclosure of investments made in the name of spouse and relatives, filing defective return, tax evasion in earlier years.

“The scope should be widened, made more concrete and there has to be a definite specification to make the task easier and smoother,” said the official cited above.

Another issue was that the first phase was not fully faceless, as the jurisdictional officer was aware of the profile of the taxpayer and could view this information while serving notices. The department systems are looking to eliminate the jurisdictional officer’s role even in the initial stage of scrutiny.

In the first phase, the notices were generated and issued in a centralised manner for the cases selected. After the issuance of notices, assessments were conducted by the jurisdictional assessing officer through Income-Tax Business Application (ITBA). This allows the officers to access the ITBA portal containing profiles of assesses including PAN, I-T return, TDS, and so on. Sources said in the first phase few cases that had serious discrepancies were assessed. This was done to make the system robust and effective such that there would be no scope for confusion. 

Meanwhile, the department is upgrading its system so that tax refunds can be received in 24 hours. It now takes one to three months for ITRs to be processed and accordingly get refunds. The upgraded system is expected to be functional by April-May this year.

Faceless tax assessment

*Improvising the selection of cases through systems 

*Minimising the scope of reinterpretation, especially by companies 

*Looking to end role of jurisdiction officer in initial stage

*Maintaining anonymity of assesses even in auditing of balance sheet