The Central Government introduced the Faceless Assessment Scheme to provide greater transparency, efficiency and accountability in Income Tax assessments.

All provisions introduced under Faceless Assessment, under the Income Tax Act, 1961, are introduced to

1. Eliminate the interface between the Assessing Officer and the assessee during the course of proceedings, to the extent that is technologically feasible;

1. Optimise the utilisation of resources through the economies of scale and functional specialisation; and

1. Introduce a team-based determination of arm’s length price with dynamic jurisdiction.

In the Union Budget 2019, the Finance Minister proposed the introduction of a scheme of faceless e-assessment. The scheme seeks to eliminate the human interface between the taxpayer and the income tax department. The scheme lays down the procedure to carry out a faceless assessment through electronic mode. From 13 August 2020, the e-assessment scheme of 2019 stands amended and hence known as the Faceless Assessment scheme.

The faceless assessment scheme applied only to scrutiny assessment and best judgment assessment. However, as per the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020, Faceless Assessment will now bring other provisions of the Income Tax Act, 1961 under its purview.

Structure for faceless assessment

A faceless assessment will be as per the Income Tax Act and Income Tax Rules. The Central Board of Direct Taxes (CBDT) decides the scope of the faceless assessment such as territorial area, persons, class of persons, incomes, class of incomes, cases or class of cases to whom this faceless assessment is applicable. For the purpose of faceless assessment, the CBDT would set up the below ‘centres’ and ‘units’ and specify their respective jurisdiction:

1. A ‘National e-Assessment Centre’ to facilitate and centrally control the e-assessment.

1. ‘Regional e-Assessment Centres’ under the jurisdiction of the regional Principal Chief Commissioner for making an assessment.

1. ‘Assessment units’ for identifying points or issues, material for the determination of any liability (including refund), analysing information, and such other functions.

1. ‘Verification units’ for enquiry, cross verification, examination of books of accounts, witness and recording of statements, and such other functions.

1. ‘Technical units’ for technical assistance, including any assistance or advice on legal, accounting, forensic, information technology, valuation, audit, transfer pricing, data analytics, the management or any other technical matter.

1. ‘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 the communications between all the units mentioned above to make an assessment under this scheme would be through the National e-Assessment Centre.

Procedure in Faceless Assessment

The procedure for e-assessment is as below:

1. A notice under section 143(2) would be served by the National e-Assessment Centre specifying the issues for selecting taxpayer’s case for assessment.

1. The taxpayer has a period of fifteen days for filing a response with the National e-Assessment Centre.

1. The taxpayer’s case gets assessed under e-assessment if a taxpayer:

1. furnishes income tax return voluntarily under section 139

1. furnishes income tax return in response to notice under section 142(1) or 148(1) or 143(2)

1. fails to furnish an income tax return in response to a notice under section 142(1)

1. fails to furnish an income tax return in response to a notice under section 148(1)

1. An assessment will include assessment under section 143(3) and under section 144. Scrutiny assessment and summary assessment will be through faceless assessment.

1. The National e-Assessment Centre will assign the case selected for the purposes of e-assessment to a specific ‘assessment unit’ in anyone ‘Regional e-Assessment Centre’ through an automated allocation system.

1. Once a case is assigned to an assessment unit, it may make a request to the National e-Assessment Centre for:

1. Obtaining such further information, documents or evidence from the taxpayer or any other person, as it may specify

1. Conducting of certain enquiry or verification by verification unit; and

1. Seeking technical assistance from the technical unit

1. 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 information, documents or evidence requisitioned by the assessment unit.

1. The taxpayer can submit a response to the notice within the time specified in the notice.

1. Upon a request being made for certain enquiry or verification as above, the National e-Assessment Centre shall assign the request to a verification unit through an automated allocation system.

1. Upon a request being made seeking technical assistance as above, the National e-Assessment Centre shall assign the request to a technical unit in any one Regional e-Assessment Centres through an automated allocation system.

1. The National e-assessment Centre will send the report it receives from the verification unit or technical unit to the concerned assessment unit.

1. If a taxpayer fails to file a response to the notice, the National e-assessment centre will issue a notice under section 144 to make the best judgment assessment.

1. The taxpayer can file a response to the notice issued under section 144. However, suppose the taxpayer does not file a response. In that case, the National e-assessment centre will inform the assessment unit, who in turn will prepare a draft assessment order under best judgment assessment (section 144).

1. 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 National e-Assessment Centre

1. The ‘assessment unit’ shall, while making a draft assessment order, provide details of the penalty proceedings to be initiated therein, if any

1. The National e-Assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the CBDT, including by way of an automated examination tool, whereupon it may decide to:

1. Finalise the assessment as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, on the taxpayer, along with the demand notice, specifying the sum payable by or refund of any amount due to the taxpayer based on such assessment; or

1. Provide an opportunity to the taxpayer, in case a modification is proposed, by serving a notice calling upon him to show cause as to why the assessment should not be completed as per the draft assessment order; or

1. Assign the draft assessment order to a review unit in any one Regional e-Assessment Centre, through an automated allocation system, for conducting a review of such order

1. The review unit shall conduct a review of the draft assessment order, referred to it by the National e-Assessment Centre, whereupon it may decide to:

1. Concur with the draft assessment order and intimate the National e-Assessment Centre about such concurrence; or

1. Suggest such modification, as it may deem fit, to the draft assessment order and send its suggestions to the National e-Assessment Centre.

1. The National e-Assessment Centre shall, upon receiving the concurrence of the review unit, finalise the draft assessment order or provide an opportunity to the taxpayer in case a modification is proposed.

1. The National e-Assessment Centre shall, upon receiving suggestions for modifications from the review unit, assign the case to an assessment unit, other than the assessment unit which has made the draft assessment order, through an automated allocation system.

1. After considering the modifications suggested by the review unit, the assessment unit shall send the final draft assessment order to the National e-Assessment Centre.

1. The National e-assessment Centre shall, upon receiving the final draft assessment order, finalise the draft assessment order or provide an opportunity to the taxpayer in case a modification is proposed, as the case may be.

1. In a case where notice is issued for making submissions against the draft assessment order, the taxpayer may furnish his response to the National e-Assessment Centre on or before the date and time specified in the notice.

1. The National e-Assessment Centre shall:

1. In a case where no response to the show-cause notice is received, finalise the assessment as per the draft assessment order; or

1. In any other case, send the response received from the taxpayer to the assessment unit.

1. After taking into account the response furnished by the taxpayer, the assessment unit shall make a revised draft assessment order and send it to the National e-Assessment Centre.

1. The National e-Assessment Centre shall, upon receiving the revised draft assessment order:

1. In case no modification against the interest of the taxpayer is proposed with reference to the draft assessment order, finalise the draft assessment; or

1. In case a modification against the assessee's interest is proposed with reference to the draft assessment order, provide an opportunity to the taxpayer for hearing and making submissions.

1. The National e-Assessment centre shall deal with the response furnished by the taxpayer and the draft assessment order finalised.

1. Suppose the eligible assessee files his objections with the Dispute Resolution Panel. In that case, the National Faceless Assessment Centre shall forward such directions received from the Dispute Resolution Panel to the concerned assessment unit.

1. The assessment unit shall prepare a draft assessment order in conformity of the directions issued by the Dispute Resolution panel and send a copy of the order to the National Faceless Assessment Centre.

1. The National Faceless Assessment Centre shall finalise the draft assessment order received from the assessment unit and serve a copy of the order and notice for initiating penalty proceedings, if any, to the assessee. Based on such assessment, it shall issue a demand notice, specifying the sum payable by or refund of any amount due to the assessee.

1. The National e-Assessment Centre shall, after completion of the 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.

1. The National e-Assessment Centre 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 Board.

Procedure for penalty

1. 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 a recommendation for initiation of any penalty proceedings under the income tax law, against such taxpayer or any other person, as the case may be, to the National e-Assessment Centre, if it considers necessary or expedient to do so

1. The National e-Assessment Centre shall, on receipt of such recommendation, serve a notice on the taxpayer or any other person, as the case may be, calling upon him to show cause as to why penalty should not be imposed on him under the income tax law

1. The response to show – cause notice furnished by the taxpayer or any other person, if any, shall be sent by the National e-Assessment Centre to the concerned unit which has made the recommendation for penalty

1. The said unit shall, after taking into consideration the response furnished by the taxpayer or any other person, as the case may be:

1. Make a draft order of penalty and send a copy of such draft to National e-Assessment Centre; or

1. Drop the penalty after recording reasons, under intimation to the National e-Assessment Centre

1. The National e-Assessment Centre 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, and also transfer the records of penalty proceedings to the jurisdictional assessing officer for further action.

Procedure for appeal

An appeal against an assessment order or penalty order made by the National e-Assessment Centre under this scheme can be filed before the Commissioner (Appeals) having jurisdiction over the jurisdictional Assessing Officer.

Communication and electronic record

1. All communications between the National e-Assessment Centre and the taxpayer, or his authorised representative, shall be exchanged exclusively by electronic mode; and

2. All internal communications between the National e-Assessment Centre, Regional e-Assessment Centres and various units shall be exchanged exclusively by electronic mode. However, the electronic exchange of communication is not applicable where the verification unit approves a personal hearing.

The National e-assessment centre shall authenticate all the electronic records issued under the scheme by affixing a digital signature or by the taxpayer or any other person by affixing their digital signature or through an EVC. Every notice or order or any other electronic communication under this scheme shall be delivered to the taxpayer by way of:

1. Placing an authenticated copy of the communication in the taxpayer’s registered account ;

1. Sending an authenticated copy thereof to the registered email address of the taxpayer or his authorised representative; and

1. Uploading an authenticated copy on the assessee’s Mobile App, followed by a real-time alert to the taxpayer.

The taxpayer shall file his response to any notice or order or any other electronic communication, under this scheme, through his registered account. Once an acknowledgement is sent by the National e-Assessment Centre containing the hash result generated upon successful submission of a response, the response shall be deemed to be authenticated.

Appearance of the taxpayer before the centre and units

A person is not required to appear personally or through an authorised representative in connection with any proceedings under this scheme before the income-tax authority at the National e-Assessment Centre or Regional e-Assessment Centre or any unit set up under this scheme.

In a case where a modification is proposed in the draft assessment order, the taxpayer will be given an opportunity to make submissions against such modifications.

The taxpayer or his authorised representative can also request for a personal hearing or make oral submissions before income tax authority in any unit under this scheme. Such hearing would be conducted exclusively through video conferencing, including through video telephony, in accordance with the procedure laid down by the CBDT.

An income-tax authority has the power to examine a taxpayer or record the statement of any taxpayer under this scheme. The income tax authority would do the same through video conferencing or video telephony. To facilitate the scheme, the CBDT shall establish suitable facilities for video conferencing and video telephony at such locations as may be necessary.

Power to specify process and procedure.

The Principal Chief Commissioner or the Principal Director General, in charge of the National e-Assessment Centre, shall, with the approval of CBDT, lay down the standards, procedures and processes for effective functioning of the National e-Assessment Centre, Regional e-Assessment Centres and the units set-up under this scheme. The systems shall function in an automated and mechanised environment, including format, mode, procedure and processes in respect of the following, namely:

1. Service of the notice, order or any other communication;

1. Receipt of any information or documents from the person in response to the notice, order or any other communication;

1. Issue of acknowledgement of the response furnished by the person;

1. Provision of ‘e-proceeding’ facility including login account facility, tracking status of assessment, display of relevant details, and facility of download;

1. Accessing, verification and authentication of information and response including documents submitted during the assessment proceedings;

1. Receipt, storage and retrieval of information or documents in a centralised manner;

1. General administration and grievance redressal mechanism in the respective Centres and units.

1. Circumstances for approving a personal hearing.

Faceless jurisdiction of income-tax authorities

Section 130 gives power to the Central Government to make a scheme by notifying the same in the Official Gazette, for the purposes of-

1. The exercise of any or all powers and performance of any or all the functions conferred on or assigned to the income-tax authorities under the Income Tax Act, as referred to in section 120; or

1. To vest the jurisdiction with the Assessing Officer, as referred to in section 124; or

1. To exercise power to transfer cases under section 127; or

1. To exercise jurisdiction in case of change of incumbency, as referred to in section 129

Faceless collection of information

Section 135A has been introduced to give powers to the Central Government to make a scheme for the purpose of calling for information under section 133, collecting information under section 133B, or calling for information by the prescribed income-tax authority under section 133C, or the exercise of power to inspect the register of companies under section 134 or power of the Assessing Officer under section 135.

Faceless inquiry or valuation

Section 142B has been introduced to give powers to the Central Government to make a scheme for the purposes of issuing a notice under sub-section (1) or making an inquiry before an assessment under sub-section (2) or to direct the assessee to get his accounts audited under sub-section (2A) of section 142, or to estimate the value of any asset, property or investment by a Valuation Officer under section 142A.

Faceless assessment of income escaping assessment

Section 151A has been introduced to give powers to the Central Government to make a scheme for the purposes of assessment, reassessment or re-computation under section 147 or issuance of notice under section 148 or sanction for the issue of such notice under section 151.

Faceless rectification, amendments and issuance of notice or intimation

Section 157A has been introduced to give powers to the Central Government to make a scheme for the purpose of rectification of mistakes apparent from the record under section 154, or other amendments under section 155, or issue of a notice of demand under section 156, or intimation of loss under section 157.

Faceless collection and recovery of tax

Section 231 has been introduced to give powers to the Central Government to make a scheme for the purposes of- 

1. Issuing certificates for the deduction of income-tax at a lower rate or no deduction of income-tax under section 197, or 

1. Deeming a person an assessee in default under sub-section (1) of section 201, or sub-section (6A) of section 206C, or 

1. Issuing certificates for a lower collection of tax under sub-section (9) of section 206C, or 

1. Passing an order or an amended order under sub-section (3) or sub-section (4) of section 210, or 

1. Reducing or waiving the amount of interest paid or payable by assessees under sub-section (2A), or 

1. Extending the time for payment or allowing payment by instalment under sub-section (3), or 

1. Treating an assessee as not being in default under sub-section (6) or sub-section (7) of section 220, or 

1. Levy of a penalty under section 221, or 

1. Drawing of a certificate by the Tax Recovery Officer under section 222, or 

1. Jurisdiction of the Tax Recovery Officer under section 223, or 

1. Staying of proceedings in pursuance of certificate and amendment or cancellation thereof by the Tax Recovery Officer under section 225, or 

1. Other modes of recovery under section 226, or 

1. Issuance of tax clearance certificates under section 230.

Faceless revision of orders

Section 264B gives the Central Government powers to make a scheme to give effect to orders under section 250, 254, 260, 262, 263 or 264.

Faceless effect of orders

Section 264B gives the Central Government powers to make a scheme to effect an order under section 250, 254, 260, 262, 263 or 264.

Faceless approval or registration

Section 293D has been introduced to give the Central Government powers to make a scheme to grant approval or registration by the income-tax authority under any provision of the Act.   The provisions of Faceless Assessment will also apply to Section 253 (Appeals to the Appellate Tribunal) and Section 279 (Prosecution to be at the instance of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner) to grant sanction under sub-section (1) or compound under sub-section (2).

The Central Government may direct that any provision of this Act shall not apply, or apply with exceptions, modifications and adaptations, which shall be specified in the notification, which needs to be issued in the Official Gazette. No direction will be issued after the 31st day of March 2022. Every notification issued as stated above shall be laid before each House of Parliament.