The Faceless Assessment And Appeals

1. Introduction to Faceless Assessment & Appeals

Prime Minister Narendra Modi introduced the ‘Charter of Taxpayers’ Rights and Obligations’ to India on August 13, 2020 before the 74th Independence Day. The Faceless Assessment & Appeals Scheme was launched by Modi to establish both painless taxation procedures and continuous tax compliance processes.

During his address the Prime Minister observed the growing number of people filing Income-tax Returns which surpassed from 4.5 crore to 7 crore yet maintained that only 1.5 crore actually paid taxes because others declared nil income.

2. Framework for Faceless Assessment & Appeals

Introduction

Sections 143(3A) & (3B) of the Income-tax Act allow the E-Assessment Scheme to be notified through notifications.

• Elimination of direct interaction between the Assessing Officer and Assessee

• Optimization of resources through economies of scale and functional specialization

• Team-based assessment with dynamic jurisdiction

The E-Assessment Scheme received its first notification on September 12, 2019 until the amendment under the Finance Act 2020 brought forward the revised scheme as Faceless Assessment on August 13, 2020.

3. Statutory Framework for Faceless Assessment

The Faceless Assessment Scheme was established through CBDT Notifications SO 2745 & 2746 along with Orders from August 13, 2020.

• Starting from August 13, 2020, the Faceless Assessment Scheme became applicable to all assessment cases.

• Failing to comply with assessment requirements may result in a Section 144 best judgment order issued by the tax authorities.

• The assessment process under this scheme excludes investigations involving significant cases of frauds, major tax evasion, black money transactions and international taxation matters.

• Any assessment order that violates procedure becomes invalid and non-exists.

• For AY 2020-2021 (FY 2019-2020): The original assessment was required to be completed by March 31, 2021

4. Faceless Assessment Ecosystem

The CBDT launched different Faceless Assessment centers and units to implement this initiative

• E-Assessment procedures under National E-Assessment Centre (NeAC) receive central management for efficient electronic assessment execution.

• The Regional E-Assessment Centres (ReACs) serve as assessment units which operate within the region of Regional Principal Chief Commissioners.

• Assessment Units (AUs) function to detect concerns and study information and establish the value of potential liabilities.

• Verification Units (VUs) complete cross-verifications by examining books of account while performing statement recordings.

• Technical Units (TUs) support assessment processes with their expertise for legal accounting as well as IT functions and valuation work and audit examinations and additional specialized areas.

• The Review Units perform analyzing work on draft assessment orders (DAOs) that requires both factual and legal examination for accuracy.

NeAC functions as the exclusive communication gateway between assessment and verification units and all taxpayers.

5. Functions of National E-Assessment Centre (NeAC)

Primary Functions:

• The board first approves a plan which establishes the required format together with mode and procedure and processes.

• Tools for Automated Allocation System (AAS) manage the distribution of e-verification cases under Section 133C to Verification Units.

• Electronically issue notices and communications.

• Assign cases to Assessment Units.

• Technical support verification operations and requests will be facilitated through this system.

Secondary Functions:

• Assessment Units receive notifications about taxpayer non-compliance.

• Assessment Units must receive edit assessment orders for review.

• The allocation system should place modified cases within different Assessment Units.

• Before issuing orders administrators must offer taxpayers the opportunity to explain their situation with show-cause notices.

• Assessment orders receive their final stage of completion and distribution to taxpayers.

• Relevant post-assessment data should be forwarded to officers of the jurisdiction.

6. Functions of Residual Hierarchy

• The organization carries out three fundamental duties which include the collection of taxes as well as managing demands and recovering funds.

• Taxpayer education, outreach, and grievance handling.

• Rectification and revision proceedings.

• Audit functions and remedial actions.

• Higher judicial decisions together with appellate orders get implemented through this process.

• The residual hierarchy controls legal activities and provides implementation services for appeals as well as writ petitions and prosecution proceedings.

These functions exist in the ITBA Portal under electronic procedural formats.

7. E-Assessment Procedure

Step 1: Initiation

• The Notice carries assessment issues based on Section 143(2) which NeAC issues to taxpayers.

• Taxpayer has 15 days to respond.

• ReAC guides NeAC in assigning cases to Assessment Units which will act under its authority.

Step 2: Information & Verification

• AU requires additional documents which they may need along with enquiries and technical assistance.

• Through its official function NeAC distributes formal notification documents to both taxpayers and external parties.

• NeAC sends verification together with technical assistance requirements to the designated units.

• NeAC initiates a Section 144 best judgment assessment procedure when taxpayers do not provide a response to their requests.

Step 3: Draft Assessment Order (DAO)

• AU creates assessment orders (DAOs) that either confirm or alter the incomes reported by tax levies.

• A review process of the DAO takes place at NeAC.

Step 4: Review & Finalization

• Risk Management Strategy (RMS) is used by NeAC for DAO evaluation.

• NeAC issues payment or refund directions after completing the execution of DAO.

• A show-cause notice will be issued whenever proposal modifications occur.

• The Review Unit receives the assessment for more examination work.

• The Review Unit supports DAO by agreement or makes proposed changes to it.

• NeAC evaluates DAO and also guarantees another assessment opportunity to taxpayers who need it.

Step 5: Finalization & Appeal

• No response from the taxpayer leads to DAO becoming official.

• AU examines the received response from the taxpayer to make potentially necessary changes to DAO.

• After review NeAC executes the assessment documentation before sending it to responsible jurisdictional officers.

• The National Faceless Assessment Centre acquires CBDT approval to return cases to jurisdictional officers when necessary.

8. Procedure for Penalty

• The assessment units possess authority to propose penalties for cases of non-compliance.

• The penalty application operates through independent e-proceedings under ITBA regulation.

Conclusion

The Faceless Assessment & Appeals Scheme brings radical improvements to modernize the tax assessment system while ensuring its operational efficiency and transparency. Through automated risk management algorithms and fair procedures the tax compliance system aims to decrease disputes while streamlining direct human involvement and procedures. Digital institutions NeAC and ReACs together with the specialized units create a structured assessment system that enhances trust between taxpayers and government officials.

What is the Faceless Assessment & Appeals Scheme?

The scheme is an initiative by the Indian government to conduct tax assessments electronically, eliminating the need for face-to-face interactions between taxpayers and tax officers.

Which legal provisions support the Faceless Assessment?

The scheme operates under Sections 143(3A) & (3B) of the Income-tax Act, along with CBDT notifications SO 2745 & 2746.

What are the major components of the Faceless Assessment ecosystem?

The ecosystem includes the National E-Assessment Centre (NeAC), Regional E-Assessment Centres (ReACs), Assessment Units (AUs), Verification Units (VUs), Technical Units (TUs), and Review Units (RUs).

How does the assessment process work under this scheme?

The process involves initiation, information gathering, draft assessment order creation, review, finalization, and appeal, all conducted electronically.

What are the key objectives of the scheme?

The scheme aims to ensure transparency, efficiency, and reduced human intervention in tax assessments while optimizing resources and preventing harassment.