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Faceless Assessment under Income Tax

Faceless Assessment Scheme – TwinDesk Accounting and Legal Advisors LLP

Background

Section 143(3A) / (3B) / (3C) of the Income Tax Act, 1961 vests power in the Central Government to make a scheme by notification to enhance efficiency, transparency, and accountability in income tax assessment. This scheme covers the assessment of Income Tax under Section 143(3) or Section 144 of the Income Tax Act, 1961.

Section 143(3A) of the Act authorizes the formulation of the scheme with the following objectives:

  • Eliminating the interface between the assessing officer and assessee to the extent technologically feasible
  • Optimizing the utilization of resources through economies of scale and functional specialization
  • Introducing a team-based assessment with dynamic jurisdiction

By virtue of Section 143(3A) of the Act, the Central Government notified the E-Assessment Scheme, 2019 vide Notification No. 61/2019 dated September 12, 2019. On October 7, 2019, the E-Assessment Scheme was officially launched with the inauguration of the National E-Assessment Centre (NEC).

To address limitations of the earlier framework, the government amended the scheme and introduced the Faceless Assessment Scheme vide Notification No. 60/2020 dated August 13, 2020. The CBDT further notified the Faceless Appeals Scheme, prescribing a centralized and automated appeal process through the National Faceless Appeal Centre (NFAC).

Procedure for Assessment

The assessment under the Faceless Assessment Scheme follows the procedure below:

Issuance of Notice

  • The National E-Assessment Centre (NEC) serves a notice under Section 143(2) specifying issues for selection
  • The taxpayer must respond within 15 days of receiving the notice

Case Assignment

NEC assigns the case to an Assessment Unit (AU) in any Regional E-Assessment Centre (REC) through an automated allocation system.

Requests by the Assessment Unit

  • Calling for additional information, documents, or evidence from the taxpayer or other persons
  • Seeking verification or inquiry by a Verification Unit (VU)
  • Obtaining technical assistance from a Technical Unit (TU)

Processing of Requests

  • NEC issues notices for additional documents or evidence
  • Verification tasks are assigned to the Verification Unit
  • Technical matters are assigned to the Technical Unit

Draft Assessment Order

  • Accepting the taxpayer’s declared income, or
  • Modifying the taxpayer’s declared income

The Assessment Unit submits the draft assessment order to NEC along with details of any penalty proceedings.

Review and Finalization

  • NEC may finalize the assessment and issue a demand notice
  • Provide an opportunity of being heard to the taxpayer
  • Send the draft order to a Review Unit (RU)

The Review Unit may approve the draft or suggest modifications. After considering the suggestions, the Assessment Unit submits the final draft to NEC for completion.

Response and Completion

  • The taxpayer may respond to show-cause notices within the specified time
  • If no response is received, NEC finalizes the assessment
  • If a response is received, a revised draft order is prepared

Post-Assessment Processing

NEC transfers electronic records to the Jurisdictional Assessing Officer for:

  • Penalty proceedings
  • Demand recovery
  • Rectification of mistakes
  • Giving effect to appellate orders
  • Remand reports and prosecution sanctions

Procedure for Penalty

  • Any unit may recommend initiation of penalty proceedings
  • NEC issues a show-cause notice
  • Draft penalty order is prepared or proceedings are dropped
  • NEC issues the final penalty order

Procedure for Appeal

If the taxpayer disagrees with the assessment order, an appeal can be filed before the Commissioner (Appeals) having jurisdiction over the Assessing Officer.

Communication and Electronic Records

  • All communications are conducted electronically
  • Notices are sent via registered account, email, and mobile app notifications

Appearance of Taxpayer

  • No physical appearance is required
  • Electronic submissions and video conferencing hearings are allowed
  • Income-tax authorities may examine taxpayers via video conferencing

Power to Specify Processes and Procedures

The Principal Chief Commissioner or Principal Director General of NEC specifies procedures for:

  • Service of notices and orders
  • Receipt and acknowledgment of responses
  • Status tracking of e-proceedings
  • Electronic record storage and retrieval
  • Grievance redressal mechanisms

TwinDesk Accounting and Legal Advisors LLP Comments

The Faceless Assessment Scheme is a landmark initiative that significantly reduces direct interaction between taxpayers and the Income Tax Department. It ensures faster resolution of cases while reinforcing transparency and trust in the tax system.

If you are facing issues with the Income Tax Department, feel free to contact TwinDesk Accounting and Legal Advisors LLP at admit@twindeskllp.com.