IT department to kickstart faceless verification of returns

In a major step towards income-tax proceedings becoming completely faceless, the Income Tax Department under the finance ministry will launch a new mechanism to verify taxpayers’ returns shortly.

A notification in this regard was issued by the finance ministry on Wednesday.

A Central Vigilance Commission (CVC) has been set up by the department to carry out e-verification of the ‘red-flagged’ cases of income-tax returns. The new facility will verify income-tax returns of individuals as well as companies.

The system will red-flag returns filed by taxpayers on the basis of around 200 odd risk assessment parameters set by the department. These cases will be taken up for e-verification by taxman.

Currently, while a large number of returns may have discrepancies, only about 0.5% of the total returns filed are picked up for a random scrutiny. The manual verification of all the returns, however, is not possible.

“Now with the new e-verification system, all the income-tax returns filed by taxpayers will be matched with the financial data available with the department, which it gets from various sources. If any discrepancy is found, the system-generated e-mail notices will be sent to taxpayers seeking responses. The entire process will be faceless without involving any human interaction,” said a senior official privy to the developments.

The new system of online verification will have the system-generated questionnaires with multiple choice questions. The replies of assessees would be in the machine-readable XML format, eliminating the need for manual reading of the responses.

The department had been working on the plan to make the entire process of verification as well as scrutiny completely faceless. While presenting the Budget on February 1, interim finance minister Piyush Goyal had said that within the next two years, almost all verification and assessment of returns selected for scrutiny will be done electronically through anonymised back office, manned by tax experts and officials, without any personal interface between taxpayers and tax officers.

“With the e-verification process kicking in, the verification process will become faster, crisper, transparent and efficient. This will also help in taxpayers filing their income details correctly,” said Aditya Vikram, member (I-T), Central Board of Direct Taxes (CBDT). CBDT is the apex policy making body of the I-T department.

The e-verification notices will be sent under section 133C of the Income-Tax Act, 1961. The cases where the reply of the assessee is found to be satisfactory will be closed and wouldn’t be pursued by the department. The other cases where the reply is not satisfactory will be sent to the assessing officer for scrutiny, which is a long-drawn statutory process under section 143 of the I-T Act.

The CVC, located in Ghaziabad in the National Capital Region, will have powers to call for any information from banks or any other financial institution. It will be headed by an I-T commissioner.

The next step will be to make the scrutiny process fully automated and completely faceless where the assessee wouldn’t know who is the assessing officer.

This will be a part of the next generation of Central Processing Centre (CPC) to come up at Bengaluru. The centre will allow faster processing of income-tax returns. The finance ministry’s revenue department plans to put in place a mechanism in the next two years to ensure that income tax returns are processed and refunds are issued 24 hours.