All about Income Tax Faceless Assessments – Top things to note

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:

  1. 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 assessment

    b) It means no physical interface between the taxpayer and the tax officer

    c) The entire scheme of faceless is codified u/s 144B of the Act with effect from 01.04.2021.

  1. What are the objectives of faceless assessment?

    a) To ensure greater transparency & accountability by eliminating the physical interface between taxpayer & tax officer

    b) Optimize utilization of resources of Government offices

    c) To ensure quality assessment order by introducing team based assessment system

 

  1. 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

 

  1. Who shall be the different authorities in this scheme?

 

SN

Authorities

Roles & functions

1

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.

2

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

3

Assessment (AU)

Units

·     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.

4

Verification (VU)

Units

·     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

5

Technical (TU)

Units

·     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.

6

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

 

  1. 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

verification unit

· 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.

  1. 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 of

    c) Location does not matter

 

  1. 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.

 

  1. 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..

 

  1. 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 the

    c) 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.

 

  1. 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 mode

    b) 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 some

    d)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

 

  1. 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,

 

  1. 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.

 

  1. 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

 

  1. 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:

  1. CIT (Appeals) u/s 250
  2. Tribunal (ITAT) u/s 254
  • High Court u/s 260
  1. Supreme Court u/s 262
  2. 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.

 

  1. 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.

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