Watch this video for a ready reference on what All about Faceless Assessments – Top things to note
Watch our Video – The former Minister of Finance ‘Piyush Goyal’ in his speech of interim Budget 2019-20 delivered on 1st of February, 2019 in view of simplification of direct tax system to benefit tax-payers in respect of functioning of income tax department online in addition to present online functioning of returns, assessments, refunds and queries, had announced 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.
Afterwards, the present Minister of Finance Minister ‘Nirmala Sitharaman’ in her speech of Budget 2019-20 delivered on 5th of July, 2019 had announced regarding the launch of faceless e- assessment in a phased manner briefing it to be a scheme of faceless assessment in electronic mode involving no human interface for cases requiring verification of certain specified transactions or discrepancies wherein the cases selected for scrutiny shall be allocated to assessment units in a random manner and notices shall be issued electronically by a Central Cell, without disclosing the name, designation or location of the Assessing Officer. The Central Cell shall be the single point of contact between the taxpayer and the Department.
E- Assessment Scheme, 2019 has been introduced by the Central Board of Direct tax (CBDT) vide Notification No. 61/2019 dated 12-09-2019 and has been launched on 07-10-2019 by our the Hon’ble Revenue Secretary with the inauguration of National e- assessment Centre (herein after referred to as NeAC) to be the Central Cell of e-assessment proceeding at New Delhi. The NeAC was initially set-up vide CBDT Order – 1 bearing F.No. 187/7/2019 ITA-I, 20-10-2019 and has been reconstituted vide CBDT Office Order- 1 bearing F. No. 187/3/2020-ITA-I dated 13-08-2020. Also, 20 Regional e- assessment Centers across the cities, assessment units, verification units, technical units and review units have also been notified for the functioning of the assessment under the said scheme.
The E- Assessment Scheme, 2019 was amended by ‘Faceless Assessment Scheme, 2019’ vide Notification No. 60/2020 dated 13-08-2020. The said Faceless assessment scheme was effective only till 31-0302021.
Thereafter, w.e.f. 01-04-2021, the provision of faceless assessment has been codified vide insertion new section 144B in the Income Tax Act, 1961 (hereinafter referred to as Act) itself.
The FAQs giving a clear view of the faceless assessment are as follows:
- What is faceless assessment?
a)From the name itself, it is evident that in faceless assessment, neither the taxpayer nor the tax officer see the face of each other during the course of assessmentb) It means no physical interface between the taxpayer and the tax officerc) The entire scheme of faceless is codified u/s 144B of the Act with effect from 01.04.2021.
- What are the objectives of faceless assessment?a) To ensure greater transparency & accountability by eliminating the physical interface between taxpayer & tax officerb) Optimize utilization of resources of Government officesc) To ensure quality assessment order by introducing team based assessment system
- What are the advantages of faceless assessment to taxpayer and tax officer?
Advantages to Taxpayer
- No need to visit tax office: Taxpayers neither need to go to the tax office either himself nor through an Authorized Representative, they can represent their case to the tax officer themselves by submitting their submission online. Thereby, they don’t need to waste their time waiting for their turn of hearing in the income tax
- Transparent Environment: Now taxpayers will have the record of each hearing including the noting of the assessment team which earlier is not available with the taxpayers. Availability of such noting will certainly support the taxpayers in drafting the application for appellate proceedings in case it
- This is the future as cloud storage and paperless offices are growing: Taxpayers can access / view all the documents that they have submitted during the assessment proceeding. Complete information related to all the submissions is saved in the e-filing portal which can be accessed any time for future reference and risk like loss of files or damage to files are
Advantages to Tax Officers
- Specialized team of officers: The assessment will be done by the team rather than a single officer and even that team will be supported by the technical experts, verification experts, etc. It appears that now assessment will be completed on merit.
- Cost effective for the Government: Since assessment proceedings are paperless, it makes this initiative as environment-friendly
- Who shall be the different authorities in this scheme?
Roles & functions
National Faceless Assessment Centre (NFAC)
· To facilitate the conduct of faceless assessment in a centralized manner.
· To act as a central coordinator and facilitate all communication among the other units or with the
assessee with respect to the information/ documents / evidences.
Regional Faceless Assessment Centre (RFAC)
· To facilitate conduct of faceless assessment proceedings in the cadre controlling region of a Principal Chief Commissioner, which shall be vested
with the jurisdiction to make a faceless assessment
· To perform the function of making the assessment.
· To identify points or issue material for the completion of the assessment proceeding.
· To seek information or clarification on points so identified.
· To do analysis of the submission / evidence furnished by the assesse.
· To perform necessary functions as may be required for making the faceless assessment.
· To perform the function of verification.
· To make enquiry, cross verification, examination of books of accounts
· To examine witnesses and recording of statements and other functions as may be required for the purpose of verification
· To perform the function of providing technical assistance.
· To assist or advice on legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics, management or any other technical matter which may be required in a particular case.
Review Units (RU)
· To perform the function of review of the draft assessment order
· To check that
Ø Whether the relevant and material evidence has been brought on record
Ø Whether the relevant facts and law have been duly incorporated in the draft order
Ø Whether the issues on which addition or disallowance should be made have been discussed in the draft assessment order
Ø Whether the applicable judicial decisions have been considered and dealt with in the draft assessment order
Ø Arithmetical correctness of modifications proposed, if any and
Ø Any other functions required for the purpose of review
- What is the process of completion of assessment under new faceless proceedings regime?
Step 1 : Issue of notice
NFAC will issue notice under section 143(2) online by uploading the digitally signed copy on the registered
income tax account on e-filing portal or by sending notice to the assessee’s registered email address.
Step 2 : Filing of response
The taxpayer has a period of 15 days from the date of receipt of such notice to file a response to the NFAC by
uploading the reply on e-filing portal.
Step 3 : Intimation to the assessee
The NFAC shall intimate the assessee that assessment in his case shall be completed in accordance with the procedure laid down u/s 144B in the following cases-
· Where the assessee has furnished his return of income under section 139 or in response to a notice issued under section 142(1) or under section 148(1), and a notice has been issued for scrutiny assessment under section 143(2)
· Where the assessee has not furnished his return of income in response to a notice issued under section 142(1)
· Where the assessee has not furnished his return of income in response to a notice issued for reassessment under section 148(1) and a notice is issued under section 142(1)
Step 4 : Allocation to Assessment Unit (AU)
NFAC shall assign the case selected for the purpose of faceless assessment to a specific assessment unit in any one Regional Faceless Assessment Centre through an
automated allocation system
Step 5 : Request by Assessment Unit for assistance
Where a case is assigned to the assessment unit, it may make a request to the NFAC for –
· obtaining such further information, documents or evidence from the assessee or any other person
· conducting of certain enquiry or verification by
· seeking technical assistance from the technical unit
Step 6 : Support to be extended by NFAC
· After receiving request from the assessment unit, NFAC shall issue appropriate notice or requisition to the assessee or any other person for obtaining the information, documents or evidence as required by the assessment unit
· Assessee (or any other person) shall file his response to the notice issued by NFAC within the time specified therein or such time as may be extended on the basis of an application in this regard.
· where a request for conducting of certain enquiry or verification or seeking technical assistance has been made by the assessment unit, the request shall be assigned by the NFAC to a verification unit or technical unit in any one Regional Faceless Assessment Centre
through an automated allocation system
Step 7 : Sending report by NFAC
After receiving the report from the verification unit or the
technical unit, NFAC shall send the report to the concerned assessment unit.
Step 8 : Issue of notice for best judgment assessment
NFAC may issue notice for best judgment assessment under section 144 if the assessee fails to comply with-
· notice/requisition issued by NFAC for obtaining the information, documents or evidence as required by the assessment unit
· notice issued u/s 142(1)
· direction for special audit u/s 142(2A)
The assessee shall, within the time specified in the notice (or such time as may be extended on the basis of an application in this regard) file his response to the NFAC.
If the assessee fails to file any response, the NFAC shall intimate such failure to the assessment unit
Step 9 : Draft assessment order
Thereafter, the assessment unit shall pass a draft assessment order in writing after taking into account all the relevant material available on the record.
In a case where intimation is received from the NFAC regarding assessee’s failure, the assessment unit shall make a draft assessment order in writing to the best of its judgment and send a copy of such order to the NFAC.
Note: The assessment unit shall, while making draft assessment order, provide details of the penalty proceedings to be initiated therein, if any.
Step 10 : Review of the draft assessment order by NFAC
After receiving the draft assessment order, NFAC shall examine it in accordance with the risk management strategy specified by the Board and through an automated examination tool.
After examination of the draft assessment order, NFAC may decide to –
· Finalise the assessment
In case no variation prejudicial to the interest of assessee is proposed as per the draft assessment order. Then NFAC will 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.
· Provide an opportunity to the assessee
In case any variation prejudicial to the interest of assessee is proposed, then NFAC will serve a notice to the assessee and call upon him to show cause as to why the proposed variation should not be made.
· Assign the draft assessment order to a review unit
In case NFAC thinks that review is required, then NFAC will refer the case to a Review Unit in any one RFAC through an automated allocation system for conducting review of such order.
Step 11 : Review Unit will review the draft assessment order
Review Unit will review the draft assessment order and either agree with the draft order or suggest modifications, as it may deem fit and intimate the same to the NFAC.
After receiving the opinion of Review Unit, NFAC will follow the following steps-
· If no variation is suggested by the Review Unit- After receiving the agreement of the Review Unit, NFAC will finalise the draft assessment order or provide the opportunity of being heard to the assesse in case of variation prejudicial to the interest of assessee.
· In case of any variation suggested by Review Unit-Where the Review Unit has suggested any variation, NFAC shall assign the case to the Assessment Unit, other than the assessment unit which has made the draft assessment order, through an automated allocation system.
· The Assessment Unit after considering the variations suggested by the review unit, send the final draft assessment order to the NFAC.
Thereafter, NFAC shall finalise the final draft assessment order or provide the opportunity of being heard to the assessee in case of variation prejudicial to the interest of assessee.
Step 12 : Assessee to file a response for the show cause notice
Where a variation prejudicial to the interest of assessee is proposed, NFAC shall provide an opportunity to the assessee by serving a notice calling upon him to show cause as to why the proposed variations should not be made.
· In such a situation, the assessee can furnish his response to NFAC within the time specified thereon
· In case, assessee submits response to Show cause notice, NFAC shall forward the same to Assessment Unit.
· In case, assessee does not response, NFAC shall finalise the assessment as per the draft assessment order (or final draft assessment order) and serve a copy of order and notice to initiate penalty to the assesse along with demand notice.
Step 13 : Revision of draft assessment order
Assessment Unit shall make a revised draft assessment
order after considering the response submitted by the assessee and forward the same to NFAC.
Step 14 : Finalisation of revised assessment order
After receiving the revised draft assessment order, NFAC shall do the following-
· Finalise the assessment
If no modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order or final draft assessment order.
· Provide an opportunity to the assessee
If modification prejudicial to the interest of the
assessee is proposed with reference to the draft assessment order or final draft assessment order.
Afterwards, the procedure as laid down in step no. 12, 13 and the finalization of assessment process in step 14 shall again be followed to complete the assessment.
Step 15 : Completion of assessment and transfer
of electronic records to Assessing Officer
After completion of the assessment, NFAC shall transfer all electronic records of the case to the jurisdictional assessing officer for such action as may be required by the act.
- Who will allot the job to the different units?a) All the Units shall be allocated jobs on the basis of automated allocation system.b) It is also possible that the case of Kolkata may be allocated to the officer ofc) Location does not matter
- What proceedings are covered under this scheme?a) Scrutiny assessment under section 143(3) and best judgment assessment under section 144 of the Act.b) Proceeding of re-assessment already initiated before 13-08-2020 where notice u/s 148(1) for reassessment already issued and the notice under section 143(2) or 142(1), as relevant, has been It means as of now only the issuance of notice under section 148 is not covered under faceless assessment, afterwards assessment shall be completed under the faceless system only.
- What proceedings are not covered under this faceless regime?a) The assessment proceedings in connection with search and survey are not covered by under the faceless regime..
- What shall be procedure of communication between the different units and the assessee?a) NFAC shall be the common portal for communication between the all the units and the It shall be the NFAC who shall issue notice to the assessee.b) Any information if required by the AU from the assessee, the same shall be communicated to the NFAC and it shall be the NFAC who will be communicating for required information to thec) After getting it from the assessee it shall be given to the Likewise of any assistance shall be required by the AU from other units the same shall be communicated via NFAC only and no direct communication shall be there between different units.
- What shall be mode of communication between the different units and the assessee?a) All communications between the NFAC and the assessee shall be exchanged exclusively by electronic modeb) All internal communications between NFAC, RFAC and various units shall be exchanged exclusively by electronic mode.c) However, the above rule is not applicable in the case of enquiry or verification conducted by Verification unit in somed)Electronic record shall be authenticated by affixing Digital signature (DSC).
However, in the case of assessee who is not required to furnish his return of income under digital signature, the concerned assessee can use electronic verification code (EVC) for
- How any further proceedings related to assessment shall be done?
Electronic records of the faceless assessment proceedings shall be passed on to jurisdictional assessing officer for imposition of penalty, collection of demand, rectification of mistake, giving effect to the appellate orders,
- Whether in any special scenario the proceedings shall be transferred to jurisdictional assessing officer?If it is considered necessary to do so, with the prior approval of Board.
- Can personal hearing be allowed in faceless assessment?a) In a case where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment order, and an opportunity is provided to the assessee by serving a notice calling upon him to show cause as to why the assessment should not be completed as per the such draft or final draft or revised draft assessment order, the assessee or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the income-tax authority in any
b) In such a case, approval may be granted for personal hearing (through video conferencing or video telephony) by the Chief Commissioner or the Director General, in charge of the Regional Faceless Assessment Centre, under which the concerned unit is set
- What are other amendments in the Act for faceless proceedings?
· Faceless inquiry or Valuation (Section 142B)
New Section 142B for issue of notification making scheme for issue of notice or making of enquiry or for audit direction given in section 142 of the Act or for valuation under section 142A of the Act to be done in a faceless manner.
· Faceless income escaping assessment (Section 151A)
New section 151A for conducting assessment, reassessment or re-computation u/s 147, issuance of notice u/s 148 and sanction u/s 151 for the issue of notice u/s 148 to be done in a faceless manner.
· Faceless rectification, amendments and issuance of notice or intimation (Section 157A)
New section 157A for notification for faceless Rectification of mistakes apparent from record under section 154 of the Act, making other amendments under section 155 of the Act, Notice of demand under section 156 of the Act, Intimation of loss under section 157 of the Act.
· Faceless collection and recovery of tax (Section 231)
New section 231 for notification for faceless issue of certificate for lower or no deduction of tax under section 197 of the Act, deeming a person to be assessee in default under section 201(1) or section 206C(6A) of the Act, issue of certificate for lower collection of tax under section 206C(9) of the Act, etc.
· Faceless revision of orders (Section 264A)
New section 264A has been inserted to empower the Central Government to make a scheme for revision of orders prejudicial to revenue u/s 263 or revision of other orders u/s 264 in a faceless manner
· Faceless effect of orders (Section 264B)
New section 264B has been inserted to empower the Central Government to make a scheme for giving effect in a faceless manner to order passed by the followings:
- CIT (Appeals) u/s 250
- Tribunal (ITAT) u/s 254
- High Court u/s 260
- Supreme Court u/s 262
- Revision orders passed u/s 263/264
· Faceless prosecutions (Section 279)
New section 279(4) has been inserted to empower the Central Government to make a scheme for the purpose of granting sanction to initiate prosecution for certain defaults or to compound an offence.
· Faceless approval or registration (Section 293D)
New section 293D has been inserted to empower the Central Government to make a scheme for granting approval or registration by the Income tax authority under any provision of the act in a faceless manner.
- What are the challenges regarding electronic communication and data?
a) Maintaining Digital records
Majority of the assessee who belong to rural area keep manual books of accounts and are not aware of the technology. Therefore, it will not be an easy process for them to maintain accounting in digital records for easy submission. Further, the small taxpayers shall also be required to maintain a robust IT system and have dedicated IT staff to work on real-time issues.
b) Lack of Infrastructure
The faceless assessment and faceless appeal will require robust infrastructure in the form of IT equipment’s, internet connection with good bandwidth, software to transform the data in size and form in which the same is desired by system, technical guidance, good drafting skills, etc.
The notices issued by the department contain numerous details. It might be not practicable to scan all those documents and upload the same on the portal. Even in e-assessment era, the taxpayers were submitting such data in hardcopy form due to technical difficulty. However, with faceless assessment, the taxpayer will have no choice but to scan all the data and transform the data in reduced size and form. Therefore, a robust infrastructure is required.
c) Difficulty in understanding transactions without personal hearing The faceless assessment procedure can lead to erroneous assessment if officers are not able to understand the transactions and statement of accounts of an assessee without a personal hearing.
For any query, support or feedback, reach us at Faceless Assessments and Appeals or WA us at +91-9230033070 or Call us at 1800-102-7550
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