The Faceless Assessment & Appeals | Fearless Tax Regime Roadmap

I. Introduction to Faceless Assessment & Appeals

On 13th August, 2020, the eve of India’s 74th Independence Day, Prime Minister Narendra Modi launched the Country’s First ‘Charter of Taxpayers’ Rights and Obligations.’ He announced the launch of the Faceless Assessment & Appeals Scheme, aimed at Painless Tax Regime and Seamless Tax Compliance.

The Prime Minister observed that the Number of Income-tax Return Filers, during the past 6 Years, has no doubt increased from 4.50 Crores to 7 Crores. However, he also lamented that in a country of 130 Crores, the effective number of Income-tax Payers is only 1.5 Crores, since the remaining are Filers of Zero Tax Returns.

II. Framework for Faceless Assessment & Appeals – Introduction

Section 143(3A) & (3B) of the Income-tax Act empowered notification of E-Assessment Scheme, to impart greater efficiency, transparency and accountability by:

• Eliminating interface between Assessing Officer and Assessee to the extent technologically feasible
• Optimising the utilisation of resources through economies of scale and functional specialisation
• Introducing team-based assessment with dynamic jurisdiction

E-Assessment Scheme 2019 was notified on 12.09.2019 vide SO 3264 and 3265. Finance Act, 2020 amended the above Provisions. Consequently, amended Notifications of the Faceless Assessment Scheme was issued on 13.08.20. Amongst various other changes, the E-Assessment Scheme has been now renamed as “Faceless Assessment Scheme”.

III. Framework for Faceless Assessment – Statutory

As per CBDT Notifications SO 2745 & 2746 & Orders dated 13th August 2020:

• Detailed procedure for Faceless Assessment was laid out – Scheme effective for all cases with effect from 13th August, 2020
• In the absence of compliance by the Taxpayer, jurisdiction to pass best judgment order u/s 144 of the Act, even under Faceless Assessment
• All Cases other than those assigned to the Central Charges (Serious Frauds, Major Tax Evasion, Sensitive and Search Matters, Black Money and Benami Law Cases) and International Tax Charges to be completed only through Faceless Assessment
• Any Order not in conformity with above shall be treated as Non-Est and shall be deemed to have never been passed
• Assessment Time Barring for Current F.Y. effective until 31st March, 2021.

IV. Faceless Assessment Ecosystem

For Faceless Assessment, CBDT would set up ‘Centres’ and ‘Units’ as under and specify their respective jurisdictions:

• A ‘National E-Assessment Centre’ (NeAC) to facilitate and centrally control the E-assessment Proceedings
• ‘Regional e-Assessment Centres’ (ReAC) under the jurisdiction of the Regional Principal Chief Commissioners for making assessment
• ‘Assessment Units’ for identifying points or issues, material for the determination of any liability (including refund), analyzing information and such other functions
• ‘Verification Units’ for enquiry, cross verification, examination of books of accounts, witnesses and recording of statements and such other functions
• ‘Technical Units’ for technical assistance including any assistance or advice on legal, accounting, forensic, information technology, valuation, audit, transfer pricing, data analytics, management or any other technical matter
• ‘Review units’ for reviewing the draft assessment order to check whether the facts, relevant evidence and law and judicial decisions have been considered in the draft order
• All Communications between all Units as above and with the concerned Taxpayers, for the purpose of making an assessment under this Scheme shall be only through the NeAC.

V. Present v/s Faceless Assessment

VI. Functions of National e-Assessment Centre – 1

• Specify Format, Mode, Procedure and Processes (FMPP) after Approval from Board
• Allocate E-Verification Cases u/s.133C to Verification Units through Automated Allocation System (AAS)
• Send all Notices / Communication Electronically
• Assign cases to Assessment Units through AAS
• On a request for verification by an Assessment Unit, allocate case to Verification Units through AAS
• Provide Technical Inputs through Technical Units, including on Issues such as Transfer Pricing, Legal, Technical, Data Analytics,
• Forensic, Accounting, Information Technology, Valuation and Audit.

VII. Functions of National e-Assessment Centre – 2

• Inform Assessment Unit if Taxpayer fails to comply with a Notice
• Select Draft Assessment Order (DAO) for review, where circumstances so require & allocate to Review Unit through AAS
• Where Review Unit suggests modification, allocate case to an Assessment Unit, other than original Assessment Unit, through AAS
• Provide adequate opportunity to Taxpayer by sending Show Cause Notice and Draft Assessment Order, in case of any addition or adjustment proposed, which is prejudicial to the Taxpayer
• Finalize Assessment Orders and communicate to the Taxpayer
• Post Assessment, transfer all electronic records to jurisdictional Assessing Officer, for post assessment work.

VIII. Functions of Residual Hierarchy

• Demand Management, Collection and Recovery of Taxes
• Taxpayer Outreach, Education, Facilitation & Grievance Handling
• Rectification & Revision Proceedings
• Audit Functions & Remedial Actions
• Giving effect to Appellate Orders of Commissioner (Appeals), ITAT, High & Supreme Court & Settlement Commission
• Judicial Functions, Filing of Higher Appeals & SLPs where necessary, defending Writ Petitions, etc.
• Prosecution & Compounding Proceedings & related Court Matters
• Above Functions to be done through ITBA Portal, as E-Proceedings.

IX. E-Assessment Procedure – 1

• Notice u/s.143(2) to be served by the NeAC specifying the issues for selection of taxpayer’s case for assessment
• NeAC shall give the Taxpayer a period of fifteen days for filing his response
• NeAC shall assign the case selected for the purpose of e-assessment to a specific ‘Assessment Unit’ in any one ReAC through an AAS
• On assignment of case, Assessment Unit may make a request to the NeAC for:
• Obtaining such further information, documents or evidence from the Taxpayer or any other Person, as it may specify;
• Conducting of certain enquiry or verification by Verification Unit; and,
• Seeking any technical assistance from the Technical Unit
• Upon a request being made by the Assessment Unit for any documents or evidence, the National e-Assessment Centre shall issue appropriate notice or requisition to the Taxpayer or any other Person for obtaining the same.

X. E-Assessment Procedure – 2

• Taxpayer shall submit his response to the Notice within the time specified
• Upon a request made by Assessment Unit for specific enquiry or verification, the same shall be assigned by NeAC to a Verification Unit through AAS
• Upon a request made by Assessment Unit for seeking technical assistance, the same shall be assigned by NeAC to a Technical Unit in any one ReAC
• NeAC shall send the Reports received from the Verification Unit or Technical Unit to the concerned Assessment Unit
• In case the Taxpayer fails to file response to the Notice, NeAC shall issue a notice u/s.144 for making a Best Judgment Assessment
• The Assessment Unit shall, after taking into account all the relevant material gathered as above, pass a Draft Assessment Order either accepting the Returned Income of the Taxpayer or modifying the Returned Income of the Taxpayer, as the case may be, and send a copy of such Order to the NeAC

XI. E-Assessment Procedure – 3

• The Assessment Unit shall, while making a DAO, provide details of the Penalty Proceedings to be initiated therein, if any
• The NeAC shall examine the Draft Assessment Order in accordance with the Risk Management Strategy (RMS) specified by the CBDT, including by way of an Automated Examination Tool, whereupon it may decide to:
• Finalise assessment as per the DAO and serve a copy of such order if any, on the Taxpayer, along with Demand Notice, specifying the sum payable refund due to the taxpayer; or
• Provide an opportunity to the Taxpayer, in case a modification is proposed, by serving a Show Cause Notice; or
• Assign the DAO to a Review Unit in any one ReAC, through AAS, for conducting review of such Order.

XII. E-Assessment Procedure – 4

The Review Unit shall conduct review of the DAO, referred to it by NeAC, whereupon it may decide to:

• Concur with the DAO and intimate NeAC about such concurrence; or
• Suggest such modification, as it may deem fit, to the DAO and send its suggestions to the NeAC
• The NeAC shall, upon receiving concurrence or suggestion for modification from the Review Unit ask the Assessment Unit to finalise the DAO or provide an opportunity to the Taxpayer in case a modification is proposed.
• The Assessment Unit shall, after considering the modifications suggested by the Review Unit, send the final DAO to the NeAC
• The NeAC shall, upon receiving final DAO, finalise the same, or provide an opportunity to the Taxpayer in case a modification is proposed
• The Taxpayer may, in a case where notice is issued for making submissions against the DAO, furnish his response to NeAC within the prescribed time.

XIII. E-Assessment Procedure – 5

The NeAC shall:

• In a case where no response to the show-cause notice is received, finalise the assessment as per the draft assessment order; or
• In any other case, send the response received from the taxpayer to the Assessment Unit
• The Assessment Unit shall, after taking into account the response furnished by the taxpayer, make a revised DAO and send it to the NeAC
• The NeAC shall, upon receiving the revised DAO:

1. In case no modification against the interest of the Taxpayer is proposed with reference to the DAO, finalise the assessment; or
2. In case a modification against the interest of the Taxpayer is proposed with reference to the DAO, provide an opportunity to the taxpayer for hearing and making submissions

• The response furnished by the Taxpayer shall be dealt with by the NeAC and the Assessment finalised
• The NeAC shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over such action as may be required under the law
• The NeAC may at any stage of the assessment, if it considers necessary, transfer the case to the Assessing Officer having jurisdiction over such case with the prior approval of the CBDT.

XIV. Procedure for Penalty

• Any Unit may, in the course of assessment proceedings, for non-compliance of any notice, direction or order issued under this scheme on the part of the Taxpayer or any other person, send recommendation to NeAC for initiation of any Penalty Proceedings under the Income-tax Act
• The NeAC shall, on receipt of such recommendation, serve a notice on the Taxpayer or any other person, as the case may be
• The response to Show Cause Notice furnished by the Taxpayer or such other person, shall be sent by NeACe to the concerned Unit which has made the recommendation for Penalty
• The said Unit shall, after taking into consideration the response furnished:

1. Make a Draft Order of Penalty and send a copy of such Draft to NeAC
2. Drop the Penalty after recording reasons, under intimation to NeAC

• The NeAC shall levy the Penalty as per the said draft order of penalty and serve a copy of the same along with a notice for demand on the Taxpayer or any other person, as the case may be.

Also Read: Faceless Assessment Scheme 2019 Process