1

PROJECT REPORT
SUBMITTED BY TEAM-C

Team Members:

1. Geethalakshmi B V
2. Pavitra G Bhat
3. Roshin T
4. Simran Lodha M
5. Venugopal K
6. Vishal Sundar Vasudevan Munjurpet

Under the Guidance of

Mr. D.V.N.S. Sarma, ICSI (SIRC)

Under the Co-Ordination of

Ms. Priyanka Das, ICSI (SIRC)

Submitted towards partial fulfilment of the requirement for the

Award of the Degree of
47th MANAGEMENT SKILLS ORIENTATION PROGRAM (MSOP)

2
 DECLARATION

We hereby declare that the project titled “Faceless Tax Assessment” submitted in partial
fulfilment of the requirements for the award of the certificate of MANAGEMENT SKILLS
ORIENTATION PROGRAM (MSOP) is our original work done under the guidance of Mr.
D.V.N.S. Sarma and under the Co-Ordination of Ms. Priyanka Das.

Place: Chennai
Date: 27.11.2021

Signature of Team Members

Geethalakshmi B V

Pavitra G Bhat

Roshin T

Simran Lodha M

Venugopal K

Vishal Sundar
Vasudevan
Munjurpet

3
 ACKNOWLEDGEMENT

We express our sincere gratitude to the Institute of Company Secretaries of India for
permitting me to undergo this project on Faceless Tax Assessment. We are extremely
grateful to Mr. D.V.N.S. Sarma and Ms. Priyanka Das for giving us opportunity to learn and
know how the research work is done. The topic chosen by us has a significant impact in
the current corporate scenario.

As per the guidelines provided to complete the prescribed Management Skills Orientation
Program, conducted by the Institute of Company Secretaries of India, each team is
required a Project Report during the 15 days’ Schedule. Keeping in view this requirement,
we have been assigned this project report in consultation with our course co-ordinator
Mr. D.V.N.S. Sarma and course Facilitator Ms. Priyanka Das. We would like to place on
record of our acknowledgements to all those who helped us during this course of project.

Last but not least we thank all our 47th MSOP Participants of SIRC Chennai, who were of
immense support throughout these 15 days.

4
 PREFACE

The project Report has been prepared after referencing various books, websites &
presentations on the topic and critical analysis on the relevant sections in the relevant
acts as may be applicable. Best efforts have been made to make this project as lucid and
simple as possible. The successful completion of this project has been the result of the
help extended by a number of people.

The said Project has been prepared by us after taking into consideration all the possible
areas relating to faceless tax assessment and other related acts, notifications, circulars
and the Rules framed by the Government of India and Central Board of Direct Tax (CBDT)
from time to time.

5
 INDEX

Sl. No Particulars Page No

1.
2.
3.
4.
5.
6.
7.
8.
9.
10
11.
12.
13.
14.
15
16.
17.

6
 Faceless Tax Assessment

Introduction

In order to bring more transparency, efficiency, and accountability in Income Tax

Assessment and in order to reduce corruption, the Central government has been working
for some quiet time and in the last few years; the tax department had introduced e-
proceedings, faceless assessment, and faceless appeal, to avoid incidences of harassment
or other malpractices by the tax authorities.

Under the faceless assessment system, a taxpayer or an assessee is not required to visit
an I-T department office or meet a department official for income tax-related businesses.

The scheme brings greater flexibility for taxpayers and professionals representing before
tax authorities. It has resulted in substantial time savings on account of travel to the tax
office, waiting time over there, etc. It also reduces bribery and harassment involved in the
system.

Faceless assessments enhance trust and transparency leading to improved

administrative efficiency and delivery. This transformation will assist in reducing
unwanted litigations and improve our stand as a global player with an efficient and
sustainable tax administrative system within the ecosystem of economic growth.

E-Governance measures were taken to ensure accurate and secure filing of tax returns
and their quick processing by the Centralised Processing Centre. However, the
Government of India felt it necessary to transform taxpayers’ interface with the Income-
tax Department in relation to proceedings for assessment and appeals, and
simultaneously enable the department to improve the quality of its audits and bring in
country-wide consistency in its approach and position.

Consequently, in 2015, the Central Board of Direct Taxes (CBDT), the Apex Tax
Authority, ushered in a paperless environment for tax assessment proceedings on a pilot
basis by using emails to correspond with taxpayers. The CBDT launched this optional
facility for selected taxpayers in certain cities, whereby these taxpayers could respond to
notices and questionnaires via emails.

In April 2017, the CBDT launched an e-Proceeding facility to enable electronic tax
assessments, under which a tax officer or assessing officer could communicate with a
taxpayer through the Income-tax e-Filing portal. Using this facility, the tax officer could
upload a notice on the Income-tax e-Filing portal and the taxpayer would have the option
to respond to it on this portal. This marked the expansion of electronic assessment
proceedings and eliminated the need for taxpayers to send their responses either as
hardcopies or via email. Although the scope of the e-Proceedings facility covered the

7
various aspects of tax assessments electronically, taxpayers had the option to opt out
from the ‘e-Proceedings facility’.

In August 2018, the CBDT made it mandatory for all assessments framed in the financial
year 2018-19 to be conducted through the e-Proceeding facility, except in certain
circumstances.

In Budget Speech 2018, the Hon’ble Finance Minister introduced the faceless assessment
procedure (which was initially known as the e-Assessment scheme). The objectives
of the scheme as highlighted by the Finance Minister in his Budget speech and the
memorandum to the Finance Bill, 2018 resembles the faceless assessment scheme
closely.

To achieve the objectives of the Central Government, the Finance Act, 2018 amended the
Income-tax law to empower the Government of India to prescribe a new scheme for
electronic and faceless tax assessments and add significantly to its efficiency,
transparency and accountability.

Accordingly, the e-Assessment scheme was notified on 12 September 2019, for

automation of the various assessment procedures mandated under the Act. 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.

Assessments in the past

Tax assessment, or assessment, is the job of determining the value, and sometimes
determining the use of property, usually to calculate a property tax. This is usually done
by an office called the assessor or tax assessor.

Governments need to collect taxes in order to function. Federal, state and local
governments impose tax assessments against real property, personal property and
income. The word tax assessment is used in different ways but often refers to a tax
liability owed by a taxpayer.

Traditionally, the assessments procedure was a face-to-face interaction between the

taxpayer and the tax authorities. The tax authorities would typically send a notice to
taxpayers at their address or registered email ID. The notice would contain the details
that the income tax authorities wish to examine and they would allot a date of hearing
when the taxpayer was required to attend the tax office and produce the requested
documents. On the appointed date, the taxpayer or his authorised representative had to
physically visit the jurisdictional Income tax office, submit the details and offer
explanations as requested by the tax officer. As most assessment proceedings require
multiple submissions and hearings with the tax officer, the taxpayer had to spend
considerable time, effort and money to travel to the tax office to attend the hearings.

8
New Era of Faceless Assessments

On 13 August 2020, the Hon’ble Prime Minister announced three key structural tax
reforms under the ‘Transparent Taxation - Honouring the Honest’ platform -
Faceless Assessment, Faceless Appeal and Taxpayers’ charter.

Under faceless scrutiny assessment, a central computer picks up tax returns for scrutiny
based on risk parameters and mismatch and then allots them randomly to a team of
officers. This allocation is reviewed by officers at another randomly selected location and
only if concurred, a notice is sent by the centralised computer system. All such notices
need to be responded to electronically without the requirement of visiting a tax office or
meeting any official.

India will perhaps be the first country to implement such a system, CBDT Chairman PC
Mody said. “We perceived our roles as tax enforcers hitherto… We want a total paradigm
shift and we want to be tax facilitators,” further Mr. PC Mody said “adding that the effort
was to make the compliance process easier and ensure objectivity”.

The National e-Assessment Centre in Delhi will be governing authority for all
communication with taxpayers under the faceless assessment scheme. There will be
regional centres in Mumbai, Kolkata, Hyderabad, Chennai, Pune, Ahmedabad and
Bengaluru.

The Hon’ble Finance Minister Smt. Nirmala Seetaraman speaks that using the faceless
assessment will lead to reduction of tax evasion, “We’re bringing in tax transparency
through law because it is extremely important for the country”. This also made relaxation
to the NRI investors as additional charge being applied on the dividend income for foreign
portfolio investors (FPI) which utilizes the structure which stands at 15%.

The government has employed state-of-the-art digital technology for a risk management
system for the assessment. Automated Examination Tool, Artificial Intelligence, and
Machine Learning will ensure that there is no human intervention or less interference
from the Income Tax Department. No boundaries, no limit, use it anywhere, anytime. The
faceless tax assessment will provide more transparency and efficiency to the system.

The income tax department has launched the Faceless facility for income tax appeals.
Under the facility, all the cases will be completed in a faceless way in a faceless
environment except for appeals that are related to evasion of tax, serious frauds, black
money, international tax, and special research.

The Faceless Assessment Scheme aims to eliminate the human interface between
the taxpayer and the income tax department.

As the income-tax department has no right to appeal against the order passed by the tax
officer, Section 263 was introduced under the Act to arm Income-tax Commissioners with
the power of revising the orders of tax officers if the orders are erroneous and prejudicial
to the interest of the Income-tax Department.

9
However, in view of the procedures of the new faceless assessment, which provides for
team-based assessment, it is expected that there will be minimum invocation of Section
263 of the Act, since the outcome will hereafter be achieved at the assessment level by
the various units.

Related Recent Initiatives:

o Dispute Resolution Committee:
● In Budget2021, the Minister of Finance has proposed the formation of a Dispute
Resolution Committee (DRC) in order to provide quicker relief to taxpayers in tax
disputes.
● TheDRC will cater to small taxpayers having a taxable income of up to Rs. 50 lakh
and a disputed income of up to Rs. 10 lakh.
o VIVAD SE VISHWAS SCHEME:
● The scheme provides for settlement of disputed tax, disputed interest, disputed
penalty or disputed fees in relation to an assessment or reassessment order on
payment of 100% of the disputed tax and 25% of the disputed penalty or interest
or fee.
The Central Board of Direct Taxes (CBDT) reconstituted the National e-Assessment
Centre (NeAC) vide office order 1 dated 13th August, 2020, having its headquarters at
Delhi.

Further CBDT reconstituted the Regional e-Assessment Centre (ReAC) vide Office order
2 dated 13th August, 2020.

With these reforms Government of India aims to:

● Introducepolicy-driven governance by putting in place unambiguous policies and

minimising grey areas to rule out alleged discretion in administrative processes
● Bridge the trust deficit between taxpayers and the Income-tax Department

● Limit human interface and substitute it with technology driven models to improve the
Government of India administrative systems
● Integrate the elements of ‘efficiency, integrity and sensitivity’ in the governance system

● Reduce tax litigation at various level

● Improve India’s ranking on the ‘Ease of doing business’ list of rankings.

Features of the Faceless Assessment Scheme

● Selection of a tax payer only through system using data analytics and AI
● Abolition of territorial jurisdiction
● Automated random allocation of cases
● Central issuance of notices with Document Identification No. (DIN)

10
● No physical interface, no need to visit the income tax office
● Team-based assessments and team-based review
● Draft assessment order in one city, review in another city and finalisation in third
city.

Types of faceless scheme

1. Faceless Assessment Scheme

2. Faceless Appeal Scheme
3. Faceless Penalty Scheme

11
 Provisions under Income Tax Act

Faceless Tax Assessment Scheme:

Income Tax Act (“Act”) has been amended to bring in Section 143(3A), 143 (3B), 143(3C)
and 143(3D). Section 143 provides provisions for assessment of tax based on return filed
under the section 139, or in response to a notice under sub-section (1) of section 142.

Section 143(3A) provides for powers to Central Government to introduce Faceless Tax
Assessment Scheme, while:

• Section 143(3B) provides for powers to Central Government to provide necessary

directions that any provisions of the Act relating to assessment of total income or
loss shall not apply or shall apply with such exceptions, modifications and
adaptations. (Applicable only till 31/03/2021)

• Section 143(3C) provides notification made under Section 143(3A) or Section

143(3B) shall be laid before both the Houses of Parliament

• Section 143(3D) provides that Section 143(3A) or Section 143(3B) shall not apply
to assessment made under Section 143(3) and Section 144. (Effective from
01/04/2021)

However, introduction of the faceless assessment scheme had raised doubts about
whether the Government had the power to create such a scheme through a notification,
and if this action tantamount to excessive delegation of authority. To avoid any confusion,
the faceless assessment scheme was codified into Section 144B which was introduced
vide ‘The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions)
Act, 2020’, effective from 1st April 2021.

Faceless Appeal Scheme

Income Tax Act has been amended to bring in Section 250 (6B), 250(6C) and Section 250
(6D). Section 250 provides provision for procedure for appeal.

Section 250(6B) provides for powers to Central Government to introduce Faceless

Appeal Scheme, while

• Section 250 (6C) provides powers to Central Government to direct that any of the
provisions of Income Tax Act relating to jurisdiction and procedure for disposal of
appeals by Commissioner (Appeals) shall not apply or shall apply with such
exceptions, modifications and adaptations (which is effective only till 31/03/2022)

• Section 250 (6D) provides notification made under Section 250(6B) or Section 250
(6C) shall be laid before both the Houses of Parliament

12
Faceless Penalty Scheme

Income Tax Act has been amended to bring in Section 274 (2A), 274 (2B) and 274 (2C).
Section 274 provides provision for procedure for appeal.

Section 274 (2A) provides for powers to Central Government to introduce Faceless
Penalty Scheme, while

• Section 274 (2B) provides for powers to Central Government to provide necessary
directions that any provisions of the Act relating to jurisdiction and procedure for
imposing penalty shall not apply or shall apply with such exceptions, modifications
and adaptations. (Applicable only till 31/03/2022)

• Section 274 (2C) provides that notification made under Section 274 (2A), 274 (2B)
shall be laid before both the Houses of Parliament

Other faceless assessment regimes:

The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act,
2020 has amended certain provisions of the Act to expand the scope of the faceless
regime to various other proceedings under the Act, such as:

• Reference to the Transfer Pricing Officer – Section 92CA (8), 92CA (9) and 92CA
(10) - - This Section provides that Central Government can make scheme for the
purposes of determination of the arm's length price under Section 92CA (3).

• Faceless collection and recovery of tax – Section 231 - This Section provides that
Central Government can make scheme for –
o issuance of certificate for deduction of income-tax at any lower rates or no
deduction of income-tax under section 197,
o deeming a person to be an assessee in default under sub-section (1) of
section 201 or sub-section (6A) of section 206C,
o issuance of certificate for lower collection of tax under sub-section (9) of
section 206C
o passing of order or amended order under sub-section (3) or sub-section (4)
of section 210,
o reduction or waiver of the amount of interest paid or payable by an
assessee under sub-section (2A), or extending the time for payment or
allowing payment by instalment under sub-section (3), or treating the
assessee as not being in default under sub-section (6) or sub-section (7) of
section 220,
o levy of penalty under section 221,
o drawing of certificate by the Tax Recovery Officer under section 222,
o jurisdiction of Tax Recovery Officer under section 223,

13
 o stay of proceedings in pursuance of certificate and amendment or
cancellation thereof by the Tax Recovery Officer under section 225,
o other modes of recovery under section 226
o issuance of tax clearance certificate under section 230

• Faceless jurisdiction of Income-tax authorities – Section 130 - This section

provides that Central Government can make scheme for
o exercise of all or any of the powers and performance of all or any of the
functions conferred on or assigned to income-tax authorities by or under
the Act as referred to in section 120;
o vesting the jurisdiction with the Assessing Officer as referred to in section
124;
o exercise of power to transfer cases under section 127; or
o exercise of jurisdiction in case of change of incumbency as referred to in
section 129

• Filing of Departmental Appeal to Income-tax Appellate Tribunal - Section 253(8),

253 (9) and 253 (10) - This section provides that Central Government can make
scheme for the purposes of appeal to the Appellate Tribunal under section 253(2).

• Faceless collection of information – Section 135A – This section provides that

Central Government can make scheme for the purpose of –
o calling for information under section 133,
o collecting certain information under section 133B,
o calling for information by prescribed income-tax authority under section
133C,
o exercise of power to inspect register of companies under section 134,
o exercise of power of Assessing Officer under section 135

• Faceless revision of orders –Section 264A - This section provides that Central
Government can make scheme for the purposes of revision of orders made under
section 263 or section 264 of the Act

• Faceless inquiry or valuation – Section 142B - This section provides that Central
Government can make scheme for the purpose of
o issuing notice under sub-section (1) or making inquiry before assessment
under sub-section (2), or directing the assessee to get his accounts audited
under sub-section (2A) of section 142,
o estimating the value of any asset, property or investment by a Valuation
Officer under section 142A

14
• Faceless order-giving effect – Section 264B - This section provides that Central
Government can make scheme for the purposes of giving effect to an order under
section 250, 254, 260, 262, 263 or 264 of the Act

• Reference to Dispute Resolution panel – Section 144C (14B), 144C (14C), 144C
(14D)- This section provides that Central Government can make scheme for the
purposes of issuance of directions by the dispute resolution panel

• Prosecution and compounding of offences – Section 279(4), 279(5) and 279(6) –

This section provides that Central Government can make scheme for the purpose of
granting sanction under sub-section (1) or compounding under sub-section (2) of
Section 279

• Faceless reassessment – Section 151A - This section provides that Central

Government can make scheme for the purpose of –
o assessment, reassessment or re-computation under section 147
o issuance of notice under section 148
o conducting of enquiries or issuance of show-cause notice or passing of
order under section 148A
o sanction for issue of such notice under section 151

• Faceless approval or registration – Section 293D - This section provides that Central
Government can make scheme for the purposes of granting approval or registration,
as the case may be, by income-tax authority under any provision of the Act

• Faceless rectification – Section 157A - This section provides that Central Government
can make scheme for the purpose of-
o rectification of any mistake apparent from record under section 154
o other amendments under section 155
o issue of notice of demand under section 156,
o intimation of loss under section 157

15
 Structure for faceless tax assessment

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 has set up the below ‘centres’ and ‘units’ and has specified their
respective jurisdiction:

• National e-Assessment Centre (NeAC)

NeAC shall facilitate the conduct of e-assessment proceedings in a centralised manner,

which shall be vested with the jurisdiction to make assessment in accordance with the
provisions of the scheme. NeAC will act as a central gateway for all communication
between taxpayers and field officers, thereby, maintaining anonymity between the
Income- tax authorities and taxpayers. The NeAC is located in Delhi and headed by a
Principal Chief Commissioner of Income-tax. However, at any stage of the assessment,
the NFAC may transfer a case to the tax officer with jurisdiction over such case (with
the approval of the CBDT).

• Regional e-Assessment Centres (ReAC)

ReAC will be responsible for facilitating the conduct of the proceedings of faceless
assessments. Every ReAC will have (i) Assessment Units, (ii) Verification Units, (iii)
Technical Units and (iv) Review Units. Every ReAC will be headed by a Chief
Commissioner of Income-tax.

16
• Assessment Units

The assessment units will be responsible for conducting the assessment proceedings.
Broadly, its functions will include:

o Identifying points and issues that are material for determination of a tax
liability or refund.
o Seeking information or clarification on issues identified for a taxpayer
o Seeking assistance from the verification units and the technical units.
o Analysing the material or submissions furnished by the taxpayer or any
other person.
o Preparing the draft assessment order and determining whether penalty
proceedings should be initiated
o Preparing a final draft assessment order based on receipt of comments
from the review unit.

• Verification Units

The verification units carry out enquiries and cross verification, examines books of
accounts and witnesses, and records statements.

• Technical Units

The Technical units provides assistance or advice on legal, accounting, forensic, IT,
valuation, transfer pricing, data analytics, management or any other technical matters
that may be required.

• Review Units

The review unit shall perform the following functions:

o Check whether the relevant and material evidence has been put on record.
o Check whether the relevant points of fact and law have been incorporated
in the draft order
o Check whether applicable judicial decisions have been considered and
dealt with in the draft order
o Verify the arithmetical accuracy of modifications proposed
o Review the draft assessment order and decide on whether it will concur
with it or make modifications to it, and accordingly, communicate this to
the NeAC.

17
The Assessment Unit, Technical Unit, Verification Unit and Review Unit shall have the
following officers:

o Additional Commissioner, Additional Director, Joint Commissioner or Joint

Director
o Deputy Commissioner, Deputy Director, Assistant Commissioner, Assistant
Director or Income-tax Officer
o Other Income-tax authority, ministerial staff, executive or consultant, as
required by the CBDT.

18
 Procedure for assessment as per CBDT

The assessment under this Scheme shall be made as per the following procedure:

i. the National e-Assessment Centre shall serve a notice on the assesse under sub-section
(2) of section 143, specifying the issues for selection of his case for assessment;

ii. the assessee may, within fifteen days from the date of receipt of notice referred to in
sub-clause (i), file his response to the National e-assessment Centre;

iii. the National e-assessment Centre shall assign the case selected for the purposes of e-
assessment under this Scheme to a specific assessment unit in any one Regional e-
assessment Centre through an automated allocation system;

iv. where a case is assigned to the assessment unit, it may make a request to the National
e-assessment Centre for:
a. obtaining such further information, documents or evidence from the
assesse or any other person, as it may specify;

b. conducting of certain enquiry or verification by verification unit; and

c. seeking technical assistance from the technical unit;

19
 v. where a request for obtaining further information, documents or evidence from the
assessee or any other person has been made by the assessment unit, the National e-
assessment Centre shall issue appropriate notice or requisition to the assessee or any
other person for obtaining the information, documents or evidence requisitioned by
the assessment unit;

vi. where a request for conducting of certain enquiry or verification by the verification
unit has been made by the assessment unit, the request shall be assigned by the
National e-assessment Centre to a verification unit through an automated allocation
system;

vii. where a request for seeking technical assistance from the technical unit has been made
by the assessment unit, the request shall be assigned by the National e-assessment
Centre to a technical unit in any one regional e-assessment Centres through an
automated allocation system;

viii. the assessment unit shall, after taking into account all the relevant material available
on the record, make in writing, a draft assessment order either accepting the returned
income of the assessee or modifying the returned income of the assesse, as the case
may be, and send a copy of such order to the National e-assessment Centre;

ix. the assessment unit shall, while making draft assessment order, provide details of the
penalty proceedings to be initiated therein, if any;

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

a. finalise the assessment as per the draft assessment order and 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;
or

b. provide an opportunity to the assessee, 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

c. assign the draft assessment order to a review unit in any one regional e-
assessment Centre, through an automated allocation system, for
conducting review of such order;

20
 xi. the review unit shall conduct review of the draft assessment order, referred to it by the
National e-assessment Centre whereupon it may decide to-

a. concur with the draft assessment order and intimate the National e-
assessment Centre about such concurrence; or

b. suggest such modification, as it may deem fit, to the draft assessment order
and send its suggestions to the National e-assessment Centre;

xii. the National e-assessment Centre shall, upon receiving concurrence of the review unit,
follow the procedure laid down in sub-paragraph (a) or sub-paragraph (b) of
paragraph (x), as the case may be;

xiii. the National e-assessment Centre shall, upon receiving suggestions for modifications
from the review unit, communicate the same to the Assessment unit;

xiv. the assessment unit shall, after considering the modifications suggested by the Review
unit, send the final draft assessment order to the National e-assessment Centre;

xv. The National e-assessment Centre shall, upon receiving final draft assessment order,
follow the procedure laid down in sub-paragraph (a) or sub-paragraph (b) of
paragraph (x), as the case may be;

xvi. The assessee may, in a case where show-cause notice under sub-paragraph (b) of
paragraph (x) has been served upon him, furnish his response to the National e-
assessment Centre on or before the date and time specified in the notice;

xvii. The National e-assessment Centre shall-

a. in a case where no response to the show-cause notice is received, finalise
the assessment as per the draft assessment order, as per the procedure laid
down in sub-paragraph (a) of paragraph (x); or

b. in any other case, send the response received from the assessee to the
assessment unit;

xviii. The assessment unit shall, after taking into account the response furnished by the
assessee, make a revised draft assessment order and send it to the National e-
assessment Centre;

21
xix. The National e-assessment Centre shall, upon receiving the revised draft assessment
order-
a. in case no modification prejudicial to the interest of the assessee is
proposed with reference to the draft assessment order, finalise the
assessment as per the procedure laid down in sub-paragraph (a) of
paragraph (x); or

b. in case a modification prejudicial to the interest of the assessee is proposed

with reference to the draft assessment order, provide an opportunity to the
assessee, as per the procedure laid down in subparagraph (b) of paragraph
(x);

c. the response furnished by the assessee shall be dealt with as per the
procedure laid down in paragraphs (xvi),(xvii), and (xviii);

xx. The National e-assessment Centre shall, after completion of assessment, transfer all
the electronic records of the case to the Assessing Officer having jurisdiction over such
case., for

o imposition of penalty;
o collection and recovery of demand;
o rectification of mistake;
o giving effect to appellate orders;
o submission of remand report, or any other report to be furnished, or any
representation to be made, or any record to be produced before the
Commissioner (Appeals), Appellate Tribunal or Courts, as the case may
be;
o proposal seeking sanction for launch of prosecution and filing of
complaint before the Court;

xxi. Notwithstanding anything contained in paragraph (xx), the National e-assessment

Centre may at any stage of the assessment, if considered necessary, transfer the case
to the Assessing Officer having jurisdiction over such case.

22
1. A person shall not be required to appear either personally or through 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 in any unit set-up under this Scheme.

2. In a case where a modification is proposed in the 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
assessment order, the assessee or his authorised representative, as the case may be,
shall be entitled to seek personal hearing so as to make his oral submissions or present
his case before the income-tax authority in any unit under this Scheme, and such
hearing shall be conducted exclusively through video conferencing, including use of any
telecommunication application software which supports video telephony, in
accordance with the procedure laid down by the Board.

3. Any examination or recording of the statement of the assessee or any other person
(other than statement recorded in the course of survey under section 133A of the Act)
shall be conducted by an income-tax authority in any unit under this Scheme,
exclusively through video conferencing, including use of any telecommunication
application software which supports video telephony in accordance with the procedure
laid down by the Board.

4. The Board shall establish suitable facilities for video conferencing including
telecommunication application software which supports video telephony at such
locations as may be necessary, so as to ensure that the assessee, or his authorised
representative, or any other person referred to in sub-paragraph (2) or sub-paragraph
(3) is not denied the benefit of this Scheme merely on the consideration that such
assessee or his authorised representative, or any other person does not have access to
video conferencing at his end.

Appellate Proceedings

An appeal against an assessment made by the National e-assessment Centre under this
Scheme shall lie before the Commissioner (Appeals) having jurisdiction over the
jurisdictional Assessing Officer and any reference to the Commissioner (Appeals) in any
communication from the National e-assessment Centre shall mean such jurisdictional
Commissioner (Appeals).

23
Exchange of communication exclusively by electronic mode

For the purposes of this Scheme

a. all communications between the National e-assessment Centre and the assessee, or his
authorised representative, shall be exchanged exclusively by electronic mode; and
b. all internal communications between the National e-assessment Centre, Regional e-
assessment Centres and various units shall be exchanged exclusively by electronic
mode.

Authentication of electronic record

For the purposes of this Scheme, an electronic record shall be authenticated by the
originator by affixing his digital signature in accordance with the provisions of sub-
section (2) of section 3 of the Information Technology Act, 2000

Delivery of electronic record

i. Every notice or order or any other electronic communication under this Scheme shall
be delivered to the addressee, being the assessee, by way of-

a. placing an authenticated copy thereof in the assessee's registered account; or

b. sending an authenticated copy thereof to the registered email address of the
assessee or his authorised representative; or
c. uploading an authenticated copy on the assessee’s Mobile App and followed by a
real time alert.

ii. Every notice or order or any other electronic communication under this Scheme shall
be delivered to the addressee, being any other person, by sending an authenticated
copy thereof to the registered email address of such person, followed by a real time
alert.

iii. The Assessee shall file his response to any notice or order or any other electronic
communication, under this Scheme, through his registered account, and once an
acknowledgement is sent by the National e-assessment Centre containing the hash
result generated upon successful submission of response, the response shall be
deemed to be authenticated.

iv. The time and place of dispatch and receipt of electronic record shall be determined in
accordance with the provisions of section 13 of the Information Technology Act, 2000

24
 No personal appearance in the Centres or Units.

1. A person shall not be required to appear either personally or through 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.

2. In a case where a modification is proposed in the 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
assessment order, the assessee or his authorised representative, as the case may be,
shall be entitled to seek personal hearing so as to make his oral submissions or
present his case before the income-tax authority in any unit under this Scheme, and
such hearing shall be conducted exclusively through video conferencing, including
use of any telecommunication application software which supports video telephony,
in accordance with the procedure laid down by the Board.

3. Any examination or recording of the statement of the assessee or any other person
(other than statement recorded in the course of survey under section 133A of the Act)
shall be conducted by an income-tax authority in any unit under this Scheme,
exclusively through video conferencing, including use of any telecommunication
application software which supports video telephony in accordance with the
procedure laid down by the Board.

4. The Board shall establish suitable facilities for video conferencing including
telecommunication application software which supports video telephony at such
locations as may be necessary, so as to ensure that the assessee, or his authorised
representative, or any other person referred to in sub-paragraph (2) or sub-
paragraph (3) is not denied the benefit of this Scheme merely on the consideration
that such assessee or his authorised representative, or any other person does not have
access to video conferencing at his end.

Power to specify format, mode, procedure and processes

The Principal Chief Commissioner or the Principal Director General, in charge of the
National e-assessment Centre shall lay down the standards, procedures and processes for
effective functioning of the National e-assessment Centre, Regional e-assessment Centres
and the unit set-up under this Scheme, in an automated and mechanised environment,
including format, mode, procedure and processes in respect of the following, namely:

(i) service of the notice, order or any other communication;

(ii) receipt of any information or documents from the person in response to the notice,
order or any other communication;
(iii) issue of acknowledgment of the response furnished by the person;

25
(iv) provision of “e-proceeding” facility including login account facility, tracking status of
assessment, display of relevant details, and facility of download;
(v) accessing, verification and authentication of information and response including
documents submitted during the assessment proceedings;
(vi) receipt, storage and retrieval of information or documents in a centralised manner;
(vii) general administration and grievance redressal mechanism in the respective
Centres and units.

Stepwise procedure of income tax faceless assessment

Step-1

WHERE NOTICE UNDER SECTION 143(2) NOT ISSUED BY ASSESSING OFFICER:

• NeACs shall serve notice to the assessee under section 143(2): Assessee is required to
file his response to NeACs up to 15 days from receipt of notice
WHERE NOTICE UNDER SECTION 143(2) OR SHOW CAUSE NOTICE UNDER 144 OR
NOTICE UNDER SECTION 148 ISSUED BY ASSESSING OFFICER:

• If the assessee has filed its return under section 139 or under section 142(1)(i) or 148
or not filed its return under section 142(1) or against the notice under section 148
NeACs to intimate the assessee that assessment shall be completed under section 144B
in a Faceless manner

Step-2

After receiving the reply from the assessee within 15 days, NeACs will assign the case to
anyone ReACs through Automated Allocation System (AAS).

Step-3

During Proceedings, NeACs will regularly communicate to all the centers and assessee
and all units will send the information to NeACs from time to time. All these
communications with the assessee will be made in electronic mode.

Step-4

After collecting and analyzing all the information relating to faceless scrutiny, NeACs will
send the same to Review unit, and on the basis of which such unit will prepare the draft
assessment order and sent it to NeACs.

Step-5

Before issuing the final order, the assessee will be given an opportunity of being heard as
to why such an order should not be issued to him.

26
The snapshot of the procedure of the faceless tax Assessment is as follows:

27
 Advantages and Disadvantages of faceless tax assessment

Due to introduction of faceless assessments, India is a pioneer in embracing technology

and AI in tax administration, to enhance accountability, transparency and efficiency in
the system.

Faceless Assessment under Income Tax has certain Advantages like Faceless assessment
under Income Tax reduces chances of corruption, saves time and efforts, Cloud storage
and paperless office, cost effective for the Government and Assessment is handled by two
officers.

Some of the disadvantages includes Difficult to explain the subject, technical glitches, Size
of the file and restriction on number of documents.

A. Advantages of faceless tax assessment

1. The assessing taxpayer is selected based on data analytics and artificial intelligence
(AI). This rule out the power in the hands of any human – so the chances of error are
very less.

2. Fully automated system and random allocation of cases and Elimination of territorial
authority, i.e. though a taxpayer belongs to X city, assessment is done in Y city, due to
random choice of computer.

3. No presence at the IT office required and no interference from IT officer on a physical

basis.

4. Notices are issued centrally with DIN (Document Identification No).

5. Draft assessment order, review of the order, and finalization procedure all are done in
different cities and hence biased outcomes can be avoided.

6. Fair appeal orders help in minimizing litigation. which is a huge cost both for the
assessee and the department.

7. Efficiency and transparency in the entire system successfully eradicates corruption

and bribery.

8. Relief to honest taxpayers. Now the tax payer can complain against the IT officer
without any consequences.

28
 9. This digital portal of tax payment can be used any time and any place, irrespective of
boundaries. The automated process will potentially improve tax collection.

10. Online acknowledgment receipts and transaction IDs prove as evidence of tax
submission.

11. Saves time and effort. It will reduce the time bracket between issuance of notice and
receipt of compliance by the assessee.

12. Cloud Storage and Go Paperless is the future of digitalization and hence India is one of
the pioneers in faceless assessment scheme.

13. An assessee can comply easily anytime and from anywhere as the portal will be
accessible 24×7 and supported by a dedicated cloud server.

B. Disadvantages of Faceless Assessment:

1. Inconvenience in uploading capacious documents. Traditional offices which do not

have sufficient infrastructure find difficulties in uploading voluminous documents.

2. Lack of physical demonstration creates difficulty in the explanation process. When

submission is complex in nature at that time assessee need to give physical presence
at the Income Tax office to explain the case to assessing officers.

3. Unexplained tax submissions can lead to wrong decisions and conclusions by tax
officials. Many times, because of complex nature of business assessing office find
difficulties in understanding documents submitted by assessee, due to which officer
conclude the assessment based on his understanding.

4. Technical glitches in the online portal may cause a delay in the submission process,
leading to penalty charges. It is possible sometimes speed of Internet is not good
because some technical problems or excess load over Income Tax website, due to
which assessee find difficulties in uploading documents at e-filing portal.

5. Restriction in file size (up to 5 MB) Submission size of a single file is maximum 5MB.
Assesses have come with complaints that documents are larger in size and not getting
uploaded. When it is suggested to assessee that upload documents after dividing files,
then it becomes an added burden on the assesses.

6. Restriction on the number of documents (up to 10 documents) When submission size

is voluminous in nature at that time assessee needs to attach multiple documents but
due to restriction on attachment assessee cannot submit whole documents on e-filing
portal.

29
 7. Uneducated assessee may find it challenging to get the hang of the digital process. Also,
the personal touch lacks in the proceedings.

8. In terms of the functions of the VU, it has still not been decided how a unit will cross-
examine persons, or books of accounts or other documents in the absence of a personal
hearing.

9. Confidential and technical submissions may lack authenticity. Also, there could be
instances where confidential files are exposed to unknown receivers.

10. Difficulty in understanding will arise if an officer who is well versed in the respective
jurisdiction is handed the case of a different jurisdiction.

11. Assessee have to continuously follow up and keep their profiles updated on the
designated portal.

Faceless Assessment Impact on Business:

Since the Faceless Assessment Scheme has its own set of advantages and disadvantages,
the impact of this electronic mode of tax payment is neutral in the business world.

1. Since the human interface is excluded in the selection of cases which need to be
scrutinized, it will extinct corruption, biased decisions and will give rise to fair
judgment, creating a positive impact on business owners as well as their business.

2. Taxpayers and assessing officer’s identity tend to remain a secret due to territorial
distribution thus creating a positive business environment.

3. Taxpayers who do not have the resources or properly equipped system to carry out
the task may face a problem. Submission of documents on a technology-based
platform, may create hardships for them since loads of documents need to be uploaded
on the portal.

4. The transition from physical to digital may trigger anxiety in the initial stage. Tax
professionals also worry about the complications that the large enterprises need to
face, by uploading loads of documents. Since the upload count is limited, the situation
becomes more complex.

5. A taxpayer has to authenticate submissions, and in the case of a corporate entity, this
can be done by the authorised person assigned to sign a tax return. Every submission
filed by a taxpayer under the faceless regime will have to be authorised by a digital
signature certificate or by using an electronic verification code.

30
 Comparison between Present Assessment and Faceless Assessment
Present Assessment
1. Case selection through
a. System
b. Manual
c. Tax evasion Information
1. Cases were permanently assigned to a
territorial Jurisdiction
1. Issue of notices both manual and
electronically
1. During scrutiny proceedings multiple
physical meetings between the taxpayer
and the Officers
2. Long waiting time before meeting the
officers
1. Wide discretion with officers leads to
subjective approach and varying
interpretations
Faceless Assessment
1. No discretion to any officer
2. No selection except through
system red alert
3. No selection other than
information-based
1. Automated and random allocation
of cases
2. Dynamic jurisdiction to any
faceless team anywhere in the
country
1. No discretion in issue of Notices
2. System generated notices
triggered by alert
3. Notices without DIN are invalid
4. Notices to issued electronically
and centrally from NeAC in Delhi
1. No physical meetings with any
officer
2. No officer will call you to office
3. No more waiting outside the
office
4. Officer identity to remain
unknown
5. No human interface at any stage
6. Assessments in electronic mode
1. No discretion with any
individual officer. Team based
assessment
2. Draft in one city, review in
another city, finalization in third
city
3. Objective, Fair and just order
31
 Document Identification Number (DIN)

Document Identification Number (DIN) had been introduced to curb the practice of
issuing the notice or summons or any other letter of correspondence manually without
maintaining a proper audit trail of such communication. Hence, it had been decided that
no communication would be issued by the income-tax authorities relating to assessment,
appeals, orders, penalty, prosecution, approval, etc to the assessee or any other person
on or after 1st October 2019 unless a computer-generated Document Identification
Number (DIN) has been allotted and is duly quoted in the body of the communication.

Procedure for penalty and Exceptions

Procedure for penalty

• 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 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

• 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

• 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

• 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

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

• 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.

Exceptions to Faceless Assessment

The exceptions to the Faceless Assessment includes:

1. serious frauds,
2. major tax evasion,

32
3. sensitive and search matters.

The system also excludes international taxation and Black Money Act & Benami Property.

Case Laws:

Article 226 of the Constitution of India allows the High Court to issue writs where principles
of natural justice are breached or a procedure required for decision has not been adopted.
It has come to light that many taxpayers have adopted this recourse for both these reasons.

• In Sanjay Aggarwal vs National Faceless Assessment Centre, the taxpayer was not offered
an opportunity of personal hearing, even though they may request it. The use of the word
“may” in Section 144B (7)(ii) of the Income Tax Act cannot absolve the Revenue from
granting such request.

“The assessment was completed under faceless assessment Scheme without providing
an opportunity of personal hearing. The assessment was challenged by filing writ petition
on the ground that - assessment order has been passed under Section 143(3) read with
Section 144B of the Act, is contrary to the statutory scheme incorporated under Section
144B of the Act and the impact of such an infraction, as captured in Section 144B(9) of the
Act, is that, such assessment proceedings are non-est in the eyes of law. Allowing the
petition the Court held that perusal of clause (vii) of Section 144B (7) would show that
liberty has been given to the assessee, if his/her income is varied, to seek a personal
hearing in the matter. The usage of the word ‘may’ cannot absolve the Revenue from the
obligation cast upon it, to consider the request made for grant of personal hearing. Besides
this, under sub-clause (h) of Section 144B (7)(xii) read with Section 144B (7) (viii), the
Revenue has been given the power to frame standards, procedures and processes for
approving the request made for according personal hearing to an assessee who makes a
request qua the same. No such standards, procedures as also processes have been framed,
as yet. Accordingly the order was set aside. (AY. 2018 -19) (WP No. 5741 / 2021 dt 2-6 -
2021 \)”

• In case of, Anju Jalaj Batra Vs National E-Assessment Centre Additional Joint Deputy
Assistant Commissioner Of Income Tax Officer, the officer issued an assessment order
without a mandatory draft assessment order or a show cause notice.

“High Court order:

i) The learned counsel for the petitioner is correct in submitting that Section 144B of the
Act has been violated and the assessment proceeding has been completed in violation of
the principles of natural justice.

33
 ii) Consequently, the impugned assessment order issued u/s 144 read with section 144B of
the Act as well as demand notice issued u/s 156 of the Act and notice initiating penalty
u/s 270A and 271AAC (1) of the Act are set aside.
iii) However, the revenue is given liberty to pass a fresh assessment order in accordance
with the law.”

• During the imposition of Covid-19 taxpayers were not given enough time to
respond.

• In Naresh Kumar Goyal V. National Faceless Assessment Centre & Ors, the assessee was
given 48 hours to respond.

“Naresh Kumar Goyal (Petitioner) challenged the show cause notice and the draft
assessment order both dated April 19, 2021, penalty notice dated May 20, 2021
(Notices) and the assessment order dated May 20, 2021 (Impugned Order) passed
by the Department.

The Petitioner contended that, the Impugned Order and the Notices have been passed
without granting an opportunity for personal hearing and thus, are in gross violation
of principles of natural justice.

The Petitioner further contended that the Respondent rejected the request of the
Petitioner for personal hearing merely because such request was not made by the
Petitioner through the link provided by the Department in SCN. However, no such link
and manner was prescribed in the SCN.

The Hon’ble Delhi High Court analyzed Section 144B(7) of the IT Act and relied on
Sanjay Aggarwal v. National Faceless Assessment Centre Delhi [W.P. (C)
5741/2021 dated June 2, 2021] to state that personal hearing is to be provided.
Further, set aside the Impugned Order and the Notices and remanded back the matter
to the Assessing officer to pass the order after providing opportunity of hearing to the
Petitioner.”

• In the case of Naina Lal Kidwai Versus National Faceless Assessment Centre Delhi
(Earlier National E-Assessment Centre Delhi) & Anr, the assessee and their family were
afflicted by Covid-19 and for that reason missed the last date for opting for a hearing.
The AO passed the order, even though the date for passing assessment order had been
extended.

“Liberty is, given to AO to pass a fresh assessment order, after according personal hearing
to the petitioner and/or her authorized representative. The personal hearing will be
accorded via video-conferencing (VC) mechanism. For this purpose, the assessing officer
will issue a written notice, albeit, via the registered e-mail of the petitioner. The

34
Respondent no.1 will issue the VC link, in that behalf, to the petitioner. In case, the
petitioner wishes to file written submissions, respondent no.1 will take the same on
record.”

35
 Faceless Appeal scheme

You are poised to witness a new era where everything right from e-allocation of appeal
to e-communication of notice, questionnaire, verification, enquiry as well as the final
appellate order, the entire process of appeals will be an online affair. Moreover, the
authentication of the electronic communication will be under Digital signature. This
automation effort reminds me about the quote of Peter Sondergaard.

“Information is the oil of the 21st century, and analytics is the combustion engine.” – Peter
Sondergaard, Gartner Research

So truly said by Peter Sondergaard ! His statement is no less matched to the Faceless
Appeals system which includes allocation of cases through data analytics and artificial
intelligence under the auto jurisdiction with central issuance of notices which would be
having Document Identification Number (DIN). This is adequately fuelled by the pool of
information in the tax department’s database.

The new system of faceless appeals, as in case of faceless assessments, shifts cases from
territorial jurisdiction to auto allocation with a tax officer anywhere in the country.
Hence, the entire process of appeals will be online, eliminating the need for any physical
interface between the appellant or their authorised representatives and the Department.

Effective Date: The Central Board of Direct Taxes had notified the Faceless Income Tax
Appeals Scheme w.e.f. 25th of September, 2020.

36
Background:

Section 250 (6B) has been introduced by the Finance Act 2020 Whereby power has been
given to CG to make a scheme for disposal of appeal by CIT(A) to impart greater efficiency,
transparency and accountability.

Objective:
➢ Under Faceless Appeals, all Income Tax appeals will be finalized in a faceless manner
under the faceless ecosystem with the exception of appeals relating to serious frauds,
major tax evasion, sensitive & search matters, International tax, and Black Money Act.

➢ Under the faceless appeal scheme, everything from allocation of appeal,

communication of notice/ questionnaire, verification, inquiry to the communication
of appellate orders would be online dispensing with the need for any physical
interface between the appellant and the authorities. This enables the appellant to
make submissions from the comfort of their home and saves time and resources.

Process:

The Entire process of assessment is routed through National e-Assessment Centre

(NeAC) where it shall allocate cases selected for faceless assessment under the scheme to
regional e-assessment centers through an automated allocation system. The assessment
proceedings thereafter proceed through all communication, predominantly via written
electronic exchanges, routed through the National e-assessment center. The assessing
officer is a quasi-judicial authority and it fulfills a judicial function while making an
assessment. Thus, the rules of natural justice cannot be given a go-by. The courts have
time and again stressed on the principles of natural justice being followed during the
assessment and that no interference is to be made any superior authority in the
assessment. The scheme prima facie does not have a provision for a default personal
hearing as a matter of right and secondly, there is a direct encroachment by the National
e-Assessment Centres upon the autonomy of the assessing officer.

National Faceless Appeal Centre (NFAC)

The NFAC shall be a nodal agency and act as an interface between National e-Assessment
Centre (NeAC) or the Assessing Officer (AO), the appellant or any other person and the
Appeal Units (AU). The NFAC shall act as a central authority and it shall be conferred with
the powers to enable the e-appeal proceedings and dispose of the appeal. Accordingly,
entire communications shall be only through the NFAC with the AU by the appellant or
the NeAC/Assessing Officer. The NFAC shall inform to the appellant about the admission

37
or rejection of an appeal. The appellant or the authorised representative can
communicate electronically through e-mails or other specified electronic modes with the
NFAC.

Under the scheme, the appellant can file an e-appeal through his registered account.
Hence, the tax appeals proceedings will be through an ‘e-appeal’ facility under the
registered account of the appellant in a designated web portal for e-appeals. The
submissions can be filed through the registered accounts of the parties.

Regional Faceless Appeal Centre (RFAC)

The RFAC will facilitate the conduct of e-appeal proceedings and shall be vested with the
jurisdiction to dispose of the appeal as per the provisions of the scheme. The four regional
centres are in New Delhi, Mumbai, Chennai and Kolkata.

Appeal unit (AU)

Under the scheme, the NFAC shall be assigning the appeals to the appeal units.
Accordingly, an automated allocation system using artificial intelligence and other
suitable technology will facilitate random allocation of cases. However, all the
communications between the AU and the parties to an appeal shall be facilitated through
the NFAC. The regional Commissioners of Income Tax (Appeal unit) will act as an AU. In
each region, Appeal units will conduct the e-appeal proceedings and perform the function
of disposing of appeal, which includes:

• Additional grounds of appeal admission.

38
 • Making further inquiry or directing NeAC or AO to make further inquiry.
• Seeking information / clarification on admitted grounds of appeal.
• Providing an opportunity of being heard to the Appellant, Analysis of material
furnished by appellant.
• Review of draft order and other functions as may be required.

An automated examination tool will facilitate examination of draft orders using

technology. Hence, the use of artificial intelligence will eliminate discretion in the
examination and selection of cases.

Broadly, the scheme provides procedures for the following proceedings:

S. No. Function Procedure of Function

Step 1: After an appeal is filed before • · Such selection of appeal unit

commissioner (appeals), the shall be dynamic
Assignment of case shall be assigned to one • · Selection shall on the basis of
Appeal to appeal unit automated allocation system.
Appeal Unit (1st • · No concept of jurisdictional
appeal Unit) commissioner (appeal)
• · Location does not matter
• · Case of Kolkata may be given
to appeal unit in Delhi

Step 2: The Appeal Unit shall either • The intimation of such

Intimation of accept the appeal or reject the acceptance or rejection shall
Admission or appeal be intimated to the NFAC by
Rejection of the Appeal Unit
Appeal • · The NFAC shall intimate it to
the Appellant

Step 3: Request to NFAC for

information and evidences
Gathering of
information by · When the case is admitted by
the Appeal Unit the Appeal Unit, it shall perform
the following functions:

39
 a. Asking to NFAC for
information or inquiry from
assesse or any other person
b. Asking of report from
assessing officer or national
faceless assessment center for
information on record or
arrange for related enquiry to be
conducted by them.
Serving of the Notice by the
NFAC for information asked by
the Appeal Unit
· The NFAC shall vide notice
ask the Appellant or Assessing
Officer or other for such
information
· The Appellant or Assessing
officer other person shall reply
to that within date and time
specified in the notice.
Transfer of information by
NFAC

The NFAC shall forward the

collected information and
evidences from Appellant or
Assessing Officer or other
person to Appeal Unit.

Step 4: Additional Grounds of Appeal Section 250(5) specifically

may also be submitted, however, empowers the CIT(A) to allow an
Submitting of on sufficient reasons for appellant at the hearing of the
additional omission at the time of filing of appeal to go into any ground of
grounds appeal. appeal not specified in the
Memorandum of Appeal if the
CIT(A) is satisfied that the
omission of that ground from the
form of appeal was not wilful or
unreasonable.

40
Step 5: Additional evidences not
submitted to National Faceless
Submitting of Assessment Centre or assessing
additional officer may also be admitted,
evidences however, on sufficient reasons
for not submitting at the time of
original assessment.

Step 6: The National Faceless • Such request shall be

Assessment Centre or Assessing forwarded by NFAC to Appeal
Request by Officer may request NFAC for Unit
National asking Appellant to produce any • Appeal Unit shall make notice
Faceless further documents or evidences for production of such
Assessment or for witness of any other document or for witness of any
Centre or the person relevant for Appellate other person
Assessing proceedings. • Such notice shall be issued by
Officer for NFAC to the Appellant or any
further other person to submit
production of response within the time
evidences or specified in the notice.
documents • Upon response of such notice
from the by Appellant or any other
Appellant or person the same shall be
witness of any forwarded by NFAC to Appeal
other person Unit

Step 7: After all the evidences and • In such a case the Appeal Unit
Issue of Show documents on record, Appeal before doing so, shall make a
Cause Notice Unit intends to pass the order SCN and send it to NFAC.
(SCN) for which is not in favor of Appellant • NFAC shall issue SCN to
Enhancement i.e. Appellant
of assessment a. amount of assessment to be • Appellant shall file response
or penalty or increased or within the specified time.
reduction of b. Penalty to be increased or • On receipt of response the
refund amount c. Amount of refund to be NFAC shall forward it to the
reduces Appeal Unit.

Step 8: After considering all the matters • In the said order the
Draft Order on record the Commissioner commissioner (appeals) may
(appeals) shall pass the Draft confirm, reduce, enhance the
Order

41
 assessment or can cancel the
assessment.
• Thereafter, the said order shall
be passed on to the NFAC.
• Details of penalty proceedings
if any to initiated shall also
informed to the NFAC.

Step 9: When the amount of tax, penalty, • Such allotment of Appeal Unit
interest or fee in the draft order shall be allotted on the basis of
Allotment of is more than certain amount, the automated allocation system.
case to another case shall be allotted to another • Finalization of draft order shall
Appeal Unit Appeal Unit by NFAC for review be made by NGFAC on the
(2nd Appeal of Draft Order. basis of risk management
Unit) for review strategy and automated.
of Draft Order When the amount of tax, penalty, • Thereafter appeal order shall
or Finalization interest or fee in the draft order be passed by the NFAC.
of Draft Order is more than certain amount -
and passing The NFAC may do any of the two
appeal order option:

a) finalize the draft order

without allotting it to another
Appeal Unit and pass the Appeal
Order

b) Allot the case to another

Appeal Unit

Step 10: If the case is allotted to another • Another Appeal Unit may
Appeal Unit, the Draft Order agree with the Draft Order or,
Review of Draft shall be reviewed by another • Another Appeal Unit suggest
Order by Appeal Unit any variation in it to NFAC
Another Appeal • In case of no suggestion: The
Unit NFAC shall finalize the Draft
Order

Step 11: In case any suggestion is • Such allotment of Appeal Unit

Allotment of received by the 2nd appeal Unit shall be allotted on the basis of
Appeal to in Step 10 above, The NFAC shall automated allocation system.
another Appeal

42
Unit allot the appeal to another • The 3rd Appeal Unit shall be
(3rd Appeal Appeal Unit (3rd Appeal Unit) other than who prepared and
Unit) reviewed i.e. 1st and
2nd Appeal Unit.

Step 12: The 3rd Appeal Unit shall after • Procedure laid down in step 7
considering the suggestions for issue of SCN shall be
Issue of Show from 2nd appeal may intend to followed by 3rd Appeal Unit
Cause Notice by the following: and NFAC and response to be
3rd Appeal Unit a. amount of assessment to be submitted by Appellant.
increased or
b. Penalty to be increased or
c. Amount of refund to be
reduces

Step 13: The 3rd Appeal Unit shall • Procedure laid down in step 8
prepare the revised draft Order shall be followed in making the
Revised Draft on the basis of all the records. revised draft order by the
Order 3rd Appeal Unit.

Step 14: NFAC shall finalize the revised The appeal order shall be passed
draft order thereafter and pass by the NFAC as per the procedure
Finalization of the appeal. in Step 9.
revised draft
order and
appeal order

Step15: The appeal order shall be Also, SCN for initiating penalty
Communication communicated to the following: proceeding, if any, shall be issued
of passing of · Appellant to the Appellant.
Appeal order · Principal Chief Commissioner
or Chief Commissioner or
Principal Commissioner or
Commissioner
· National Faceless Assessment
Centre or the Assessing Officer

43
No personal appearance in Centre / Units

• Under the scheme, in connection with any proceedings, a person shall

not be required to appear either personally or through any Authorized
Representative before the income-tax authority.
• The Appellant or his Authorised Representative may request personal
hearing to make oral submissions or present his case before the AU
under the Scheme.
• Acceptance of Appellant’s request for personal hearing will be at the
discretion of the Chief Commissioner or Director General in charge of
RFAC.
• Under the scheme, hearing shall be conducted entirely through video
conferencing or video telephony and any other telecommunication
application software, which will support the said system.
• Under the scheme, the Commissioner (Appeals) in any AU shall conduct
any examination or recording of the statement of the Appellant or any
other person using the above mentioned communication system.
• In order to ensure that the appellant or his Authorized Representatives
or any other person gets complete benefit of the Scheme, the CBDT will
establish suitable facilities of the above mentioned communication
system at such locations as may be necessary.

Exceptions: As per the Press release dated 25 September 2020 issued by the CBDT, the
Scheme will not apply to the following cases –

• Search and seizure, major tax frauds/evasion

• Cases of International Tax Division, and
• Cases under the Black Money Act.

What appeals are covered under the scheme?

1. Appellate Proceedings
2. Assignment of Appeal
Through an automated allocation system, the NFAC will assign the appeal to a specific AU,
in any one of the RFAC. Hence, without any human interference the appeal will be
allocated to AU. Under Faceless Appeals, all Income Tax appeals will be finalised in a
faceless manner under the faceless ecosystem with the exception of appeals relating to

• serious frauds,

44
 • major tax evasion,
• sensitive & search matters,
• International tax and
• Black Money Act.

Against which orders, appeal can be filed before CIT(A)?

➢ As per Section 246A, there are 24 types of orders for which appeal can be filed to
CIT(A). Some of the scenarios when the appeal can be filed to commissioner (appeals)
are as follows:

➢ Whenever, after filing return of income, any liability of tax is determined in intimation
order u/s 143(1) of the Act and the assessee is of view that he is not liable for such
tax, the appeal can be made before commissioner (appeals) requesting for deletion of
such liability.

➢ Whenever any order is passed under scrutiny assessment u/s 143(3) of the any
additional demand of income tax or cancel of refund or reducing of loss, appeal can be
made before commissioner (appeals).

➢ Whenever assessee fails to reply to any notice for certain information asked by the
assessing officer, the assessing officer himself may pass the assessment by best
judgment u/s 144 of the Act making any addition of income tax, for this appeal can be
made before commissioner (appeals).

➢ An order of assessment, reassessment or recomputation u/s 147 except an order

passed in pursuance of directions of Dispute Resolution Panel or section 150

➢ Likewise, there are many other scenarios when the appeal has to be filed before
commissioner (appeals) listed u/s 246A of the Act.

➢ It is basically first appellate authority.

➢ Section 250 of the Income Tax Act, 1961 deals with the procedure in appeal before
the Commissioner (Appeals) wherein the power had been imposed with the Central
Government to make a scheme in respect of conduct of appellate procedure before
commissioner appeals in a faceless manner. In exercise of such power, the Central
Government had issued notification no. 76/2020 dated 25-09-2020.

➢ Therefore, w.e.f. 25-09-2020 entire appellate procedure before commissioner

(appeals) has been made faceless.

45
How to file before Commissioner (appeals) under faceless regime?

• We can file before CIT(A) on registered portal of income tax e-filing

in Form No.35 duly signed which will include-
• Scanned Copy of demand notice & assessment order
• Statement of Facts and Grounds of appeal
• Copy of challan of appeal fees
What is time period for filing appeal to commissioner (appeals)?

It is within the period of 30 days after the receipt of the relevant order.

Can the appeal be filed after the time limit of 30 days?

If there is a sufficient cause, there may be a delay in filing the appeal by the Appellant
beyond the time limit of 30 days. In such cases, the AU if satisfied shall condone the delay
in filing the appeal or reject the same. Further, in case the appellant has not filed return
of income, the AU if satisfied may admit the appeal by waiving the requirement of
payment of advance tax, or reject the same.

The AU would intimate the admission or rejection of the appeal to the NFAC and the NFAC
would intimate the same to the Appellant.

Whether it is necessary to pay advance tax before making appeal to commissioner

(appeals)

• Exemption from payment of advance tax may be applied by the

Appellant by submitting reasonable ground
• The appeal unit may admit appeal without payment of advance tax on
sufficient reason or even reject it.
• Communication for it shall also be made through NFAC.

Whether the assessee can take additional ground not specified in the grounds of
appeal in Form No. 35 filed before CIT(A)?

• The Appellant may file additional ground of appeal to NFAC which was
not specified in the ground of appeal filed earlier in a specified form
before the NFAC.

46
 • The NFAC shall send the additional ground of appeal to NeAC /AO and
AU.
• The NeAC / AO shall furnish their comments to the NFAC.
• The NFAC shall send the comments of the NeAC / AO to the AU.
• The AU may admit or reject the additional ground after taking into
consideration the comments received.
• The NFAC shall intimate the admission or rejection of the additional
ground to the Appellant.
Whether additional evidences other than those submitted at the time of original
assessment can also be submitted by the Appellant at the time of appeal to
commissioner (appeals)?

Filing and validity of the additional evidence is governed by Rule 46A(1) of the Income
Tax Rules, 1962. The Appellant may file additional evidence in the form to be specified by
the NFAC. The Appellant shall specify how his case is covered by the exceptional
circumstances under Rule 46A(1).
➢ The NFAC shall send the additional evidence to NeAC / AO for furnishing a report. The
NeAC /AO shall furnish the report to the NFAC, which shall in turn be sent to the AU.

➢ The AU, before taking into account the additional evidence shall provide an
opportunity to the NeAC /AO to examine such evidence or to cross-examine witnesses
produced by the Appellant or to produce any evidence or document or any witness in
rebuttal. Accordingly, the NFAC shall serve a notice to the NeAC /AO.

➢ The NeAC /AO may request the NFAC to direct the production of any document or
evidence by the Appellant, or the examination of any witness. The NeAC /AO shall
furnish the report to the NFAC based on the examination and the NFAC shall send the
report to the AU.

➢ Accordingly, the NFAC will serve a notice prepared by AU to the Appellant and send
the Appellant’s response to the AU.

➢ The AU after considering the additional evidence and the report, if any, furnished by
NeAC /AO admit or reject additional evidence, for reasons to be recorded in writing,
and intimate the NFAC.

➢ The NFAC shall intimate the admission or rejection of the additional ground to the
Appellant.

47
What is the consequence of non-compliance of any notice or direction under the
faceless appeal scheme?

• For any such non-compliance penalty proceedings may be

recommended by the appeal Unit
• Upon such recommendation NFAC may issue SCN for initiating penalty
proceedings.
• Such proceedings shall also be conducted by allotting the same to any
appeal unit on the basis automated system
• On the basis of which the Appeal Unit may drop the penalty or pass the
draft order for penalty
• On the basis said draft NFAC shall pass the penalty order and issue to
the Appellant by the NFAC.

How the mistake apparent from record in the appeal order by the NFAC shall be
rectified?

• For such rectification an application has to be made to National Faceless

Appeal Centre (NFAC)
• NFAC shall assign such application to one Appeal Unit on automated
basis
• Such Appeal shall provide an opportunity via SCN to other party, i.e. if
rectification is filled by Appellant than by giving such opportunity to
National faceless assessment centre or Assessing Officer and the Appeal
Unit and vice-versa.
• NFAC shall that SCN to the other party
• Upon receipt of such response by other party, the NFAC shall forward it
to Appeal Unit
• On the basis of such response the Appeal Unit shall pass the draft order
for rectification or for rejection of application for rectification
• NFAC shall forward that order to appellant, national faceless
assessment centre or the assessing officer.
Jurisdiction:

Appeal against an order passed by the NFAC under this scheme shall lie before the ITAT
having jurisdiciton over the jurisdictional Assessing officer.

48
Is there any time limit for disposal of appeal by CIT(Appeals)?

With effect from 1.6.1999, the CIT(A), where it is possible, may hear and decide such
appeal with in a period of one year from the end of the financial year in which such appeal
has been filed. Prior to this there was no time limit. However we can make a petition for
early disposal, specifying the reasons for hearing on priority.

Further CBDT vide its Instruction No. 20/2003 dated 29/12/2013 has suggested to pass
appellate orders within 15 days from the date of last hearing. It has reiterated the same
in its instruction No. F No.279/Misc 53/2003, dated 19.06.2015.

Whether assessee is required to pay both tax and interest on returned income
before filing appeal before CIT(A)?

The assessee is required to pay tax on admitted income before filing appeal.
It is not mandatory to pay interest. – CIT v. Manoj Kumar Beriwal [2009] 316 ITR 218
(Bombay)
Is there any time limit for disposal of appeal by CIT(Appeals) ?

With effect from 1.6.1999, the CIT(A), where it is possible, may hear and decide such
appeal with in a period of one year from the end of the financial year in which such appeal
has been filed. Prior to this there was no time limit. However we can make a petition for
early disposal, specifying the reasons for hearing on priority.

Further CBDT vide its Instruction No. 20/2003 dated 29/12/2013 has suggested to pass
appellate orders within 15 days from the date of last hearing. It has reiterated the same
in its instruction No. F No.279/Misc 53/2003, dated 19.06.2015.
Can CIT(A) set aside the order of the A.O.?

The Finance Act, 2001, w.e.f. 1.6.2001 has amended section 251 and omitted the express
power of setting aside of an assessment order, as such CIT(A) has no express power of
setting aside an assessment order. But recently in the case of Union of India v. Umesh
Dhaimode [2002] 176 CTR (SC) 97:[1998] 98 ELT 584 (SC), the Supreme Court has held
that the power to annul includes the power to remand the case. Though this is a case
under Customs Act, but the then language of section 128(2) of Customs Act is identical to
the language of section 251(1(a) of the Income- tax Act, as Such the view may be taken
that the CIT(A) still has the power to set aside assessment.

Advantages:

49
Reform in Right Direction:

It will bring more fairness and confidence in the country's taxation system, as the
taxpayer and the tax officer will not know each other's identity this schemes will provide
not only great convenience to the taxpayers but will also ensure just and fair assessment
and appeal orders and minimize any further litigation.

A Game Changer:

It brings with it a promise to streamline and bring greater transparency and

accountability into the tax administration. This is a significant reform in the tax
administration process, reducing the tax officer's discretion, tax terrorism, and scope for
corruption and litigation.

Hassle- free Approach:

The income taxpayer can e- file assessment's reply on the IT portal without the hassle of
visiting any tax officer. On the 13th of August, 2020, the Hon'ble Prime minister had
announced various tax reforms under Transparent Taxation.

Aims for Transparency:

Aims to bring about transparency by building an opaque wall between the taxpayers and
the assessment officer.

Reducing the cost of Compliance:

It builds trust between the taxpayer and the authorities provide a time-bound resolution
and provide a complete and accurate information for tax compliance thereby reducing
the cost of compliance.

Disadvantages:

Rights seems minimized:

There are certain practical problems with respect to the right of hearing much depends
upon the implementation of the scheme. It is true that the right of being heard is not
entirely taken away by the scheme but it has minimized the exercise of such rights only
in some important cases.

50
Needs to face several Constitutional Challenges

Although the scheme may seem to be a step in the right direction, it has to face several
constitutional challenges.

Suffers Practical Issues:

scheme does not grant personal hearing via video conferencing as a default choice which
is in violation of the principles of natural justice. It is an exception to the well accepted
norms of practice.

Violate the basic Principle:

A Writ Petition has been filed before the Delhi High Court in Lakshya Budhiraja v. UOI
W.P.(C) 8044/2020 against the provision of discretionary power of hearing in the
scheme. In the said Writ Petition, the petitioner is seeking a direction that an opportunity
of hearing be granted to all taxpayers and this should not be at the discretion of the Chief
Commissioner or the Director General as proposed in the Faceless Appeal Scheme.

Hence, it is contended by the petitioner that in addition to the violation of Article 14 of

the Constitution, the right to provide or not to provide a hearing in the matter is also
against the principle of audi alteram partem i.e. no person should be judged without a fair
hearing in which each party is given an opportunity to respond to the evidence against
them. The Delhi High Court by its order dated 16 October 2020 has scheduled the next
hearing to 15 December 2020.

51
 Faceless Penalty scheme

In its endeavour to further digitize the interaction between the taxpayers and the income
tax authorities, the government notified the “faceless penalty scheme" (FPS) last week.
The government has already launched a faceless assessment and faceless appeal scheme.
Under the faceless penalty scheme, all penalty-related proceedings will be conducted
digitally without any human interface.

The scheme will be centrally managed through the National Faceless Penalty Center
(NFPC). The scheme has been structured in such a way that NFPC would have the power
to disagree with the proposal of the National Faceless Assessment Centre to initiate
penalty.

Under FPS, there will also be Regional Faceless Penalty Centers (RFPC). NFPC will be the
centralised unit. NFPC shall be the sole point of contact between the penalty unit or PU
(where the penalty order will be drafted) and the penalty review unit or PRU (which will
review the penalty order for arithmetic errors and check if all the facts are as per law) or
the taxpayer or any other person, or the income tax authority or the National Faceless
Assessment Centre (NFAC) with respect to the information or documents or evidence or
any other details necessary for the purpose of imposing penalty under the scheme. For
the time being, instead of RFPC, Regional Faceless Assessment Centers (RFAC) will
coordinate with NFAC.

Drafting of the penalty orders by penalty units will include identification of points or
issues for imposition of penalty under the Income-tax Act, seeking information or
clarification on points or issues so identified, providing the opportunity of being heard to
the assessee or any other person, analyzing the material furnished by the assessee or any

52
other person, and other functions that may be required for the purposes of imposing a
penalty.

Digital interface

The taxpayer will not be required to appear either personally or through an authorized
representative before the income tax authority at NFPC, RFAC, PU or PRU, in connection
with any proceedings under the scheme.

However, the taxpayer may request for a personal hearing to make oral submissions or
present his case before the PU under the scheme. The acceptance of a taxpayer’s request
for personal hearing will be at the discretion of the chief commissioner or director
general in charge of RFPC.

FPS is expected to reduce the chances of error in the penalty orders and rule out any bias
on the part of tax officers by reducing human interaction which may, at times, lead to
harassment of taxpayers.

“The goal is that the cases are decided in a uniform and standardized way on their merits
and without any subjectivity. In the past, the levy of penalty on the taxpayers was at the
discretion of a tax officer. The outcome was different for different taxpayers in the past
(for similar cases)," said Neeru Ahuja, partner, Deloitte India, a consultancy firm.

Effective Date:

By Virtue of Section 274 (2A), the Central Government made a scheme called as ‘ Faceless
Penalty Scheme, 2021 vide Notification No. 02/2021 dated 12.01.2021 which came into
effect from 12.01.2021.

Scope:

The Penalty under this scheme shall be imposed in respect of such territorial area, or
persons or class of persons, or income or class of income or cases or class of cases or
penalties or case of penalties as may be specified by the Board.

Faceless Penalty Centres:

National Faceless Penalty Centre: This centre is set up to conduct the faceless penalty
proceedings in a centralised manner and vest with the jurisdiction to impose penalty in
accordance with the provision.

Regional Faceless Penalty Centre: This centre will receive the individual cases from
the NFPC and allocate it to the penalty unit for the preparation of draft penalty order.

53
Penalty Units: These units are set to perform the functions like, drafting the penalty
orders by considering the points in the act under which penalty can be levied, seeking the
information or clarification on the points or issues identified, analysis of the material
furnished by the assessee or any other person and performing such other functions
required for the purpose of levying the penalty.

Penalty review units: For this scheme penalty review units may be set up to perform
the review of draft penalty orders, checking whether relevant material evidence has been
brought into record, whether the issues on which penalty is to be imposed has been
discussed and checking the arithmetical accuracy of the computation of penalty and such
other functions required for the purpose of review.

Composition of Penalty and Penalty Review Units:

Additional/ Joint Commissioner or Additional/Joint Director, Deputy/ Assistant

Commissioner or Deputy/ Assistant Director and such other income-tax authority,
ministerial staff, executive or consultant, as may be considered necessary by CBDT. Until
the National Faceless Penalty Centre or the Regional Faceless Penalty Centres, the Penalty
Units or the Penalty Review Units are set up, CBDT shall direct the National Faceless
Assessment Centre, Regional Faceless Assessment Centre, Assessment Unit and Review
Unit to also act as the National Faceless Penalty Centre, Regional Faceless Penalty Centre,
the Penalty Unit and the Penalty Review Unit, respectively.

54
 Procedure to be followed in penalty proceedings

➢ The income tax authority (‘ITA’) or the NFAC shall refer cases to NFPC. In these cases, the
penalty proceedings would have either been initiated or been recommended for
initiation.

➢ NFPC will assign the matter to a PU under any RFPC.

• In cases where initiation of penalty proceeding is recommended, PU will
examine the materials available on record. It can either disagree with the
recommendations (subject to recording reasons) or can agree with the
recommendation and draft the SCN. PU will send the reasons or SCN to NFPC.
• In cases where penalty proceedings are already initiated, the PU shall prepare
a draft show cause notice (SCN) and send it to NFPC
• Depending on the PU’s proposal, NFPC can either serve the SCN on the
assessee or decide not to initiate the penalty proceedings.
➢ The assessee must file the response to the SCN within the prescribed time limit. Extension
of time can be sought by the assessee by applying to NFPC.
➢ NFPC will send assessee’s response to the PU and if no response is filed then it will inform
PU about it.
➢ PU can now request NFPC:
➢ to obtain further information from the assessee or ITA/NFAC; or
➢ to seek technical assistance or to conduct verification.
➢ Upon PU’s request in point (5), NFPC can make appropriate requisition to the assessee or
ITA/NFAC. For technical assistance or verification, NFPC shall request NFAC to furnish a
report within a prescribed time-period. Information or report received by NFPC will be
forwarded to PU.
➢ After considering all the materials on record including the responses and the report, PU
may:
➢ propose for imposition of penalty and prepare a draft order; or
➢ propose for non-imposition of penalty and record the reasons.
➢ PU will send its proposal along with the draft order or the recorded reasons to the NFPC.
➢ NFPC has to examine the proposal in accordance with the risk management strategy by
way of an automated examination tool. After examining it NFPC may decide:
➢ to pass the penalty order as per the draft, and serve the order to the assessee; or
➢ not to impose the penalty as per the proposal, and inform the assessee about it; or
➢ assign the case to a PRU under any of the RFPC for review.
➢ The PRU may either concur with the proposal or suggest modification to it and record
reasons for such modification.
➢ If PRU has concurred with the proposal, then NFPC will pass an order as per PU’s
proposal.
➢ If PRU has suggested certain modifications, then NFPC will assign the case to a specific
PU other than the PU which initially proposed the imposition or non-imposition of
penalty.

55
➢ The new PU will examine all the materials on record including the suggestions and
reasons of the PRU. If modifications suggested by PRU are prejudicial to the interest of
the assessee, the PU will follow the procedure from point (2.2) to (7) to prepare the
revised draft penalty order. If modifications suggested are not prejudicial to the interest
of the assessee, then the PU will prepare a revised draft penalty order. PU may also
propose non-imposition of penalty and record the reasons for it.
➢ NFPC shall pass the penalty order as per the draft prepared by the new PU and serve a
copy of the order to the assessee and the ITA/NFAC. If the NFPC has received reasons for
non-imposition of penalty, then NFPC shall not impose penalty and inform the assessee
and ITA/NFAC about it.
➢ Regardless of the above-mentioned procedure, the Principal Chief Commissioner, or the
Principal Director General (who is in charge of the National Faceless Penalty Centre) can
transfer penalty proceedings to the income-tax authority / NFAC. The proceedings may
be transferred at any stage with the prior approval of the CBDT.

Procedure to be followed in proceedings for rectification

An application for rectification of mistake can be filed with the NFPC by an assessee, PU,
PRU or Income tax authority / NFAC. This application will be allotted to a PU for
examination by NFPC. PU shall serve a notice to the assessee, if the application is filed by
revenue and vice versa, to show cause why rectification should not be carried out. After
the response to such notice is filed with NFPC and forwarded to PU, the PU will draft an
order either to accept or reject the application. NFPC will receive the draft order along
with reasons from PU. NFPC will pass the order and communicate it to the assessee.

Authentication and Delivery of Electronic Record

All electronic record shall be authenticated by the National Faceless Penalty Centre or the
appellant by affixing his digital signature or under electronic verification code [where
appellant is not required to furnish return of income with digital signature]. Further,
every notice/order or communication shall be delivered to the addressee, being the
appellant or his authorised representative, by way of: a. placing an authenticated copy
thereof in the assessee’s or any other person’s registered account; b. sending an
authenticated copy thereof to the registered email address; or c. uploading an
authenticated copy on the assessee’s Mobile App followed by a real time alert. Further,
the scheme provides the assessee to file his response through his registered account and
once the National Faceless Penalty Centre acknowledges the receipt electronically, the
response shall be deemed to be authenticated. The time and place of dispatch and receipt
of electronic record shall be determined in accordance with the provisions of section 13
of the Information Technology Act, 2000.

56
TAX PAYERS’ CHARTER

Prime Minister Narendra Modi launched the 'transparent taxation' platform, which
implements faceless assessment of taxpayers, and the Rights' Charter for taxpayers.
Speaking at the launch, the prime minister said India was among the few countries that
were giving such rights and dignity to taxpayers. He said the charter had been introduced
with defined rights and responsibilities.

Taxpayers Charter is for building trust between the taxpayer and the income tax
department. The Taxpayers Charter defines a taxpayer’s rights and obligations under the
law. It also specifies the department’s commitment to providing services to the taxpayers.
The Charter is a step in bringing in transparency in the tax services from the department
and tax compliance by a taxpayer.

The Union Budget 2020 provided for the introduction of a Taxpayers Charter to aim for
clean and corruption-free governance. The tax administration seeks efficiency in the
delivery of services and to be fair and just with taxpayers. The objective is to end taxpayer
harassment or undue scrutiny from tax officers. The Union Budget 2020 inserted a new
section 119A to notify a Taxpayers Charter specifying the taxpayers’ rights and
obligations. Accordingly, a new Taxpayers Charter was notified effective from 13 August
2020.

The Taxpayers’ rights under the Charter are:

• To assist taxpayers in a courteous, fair and reasonable manner.

• To treat taxpayers as honest unless the department has a reason to believe
otherwise.
• To provide for a fair and impartial appeal procedure and review mechanism.

57
 • To provide accurate and complete information for tax compliance purposes.
• To complete and decide income tax proceedings in a time-bound manner.
• To ensure the collection of the correct amount of tax dues.
• To respect a taxpayer’s privacy and to conduct an enquiry or examination after
following the due process under the tax law. There will be no undue enquiry or
enforcement actions.
• To maintain the confidentiality of information provided by the taxpayers. There
will be no disclosure unless required under any other law in force.
• To ensure accountability for the actions of the income tax officers.
• To give a taxpayer the freedom to choose their authorised representatives as per
the income tax law.
• To put in place a procedure to raise complaints and grievance redressal
mechanisms.
• To adopt a fair and impartial approach to the resolution to tax disputes.
• To review and publicly report the standards on delivery of services.
• To consider the cost of compliance, administration and collection of taxes. The
department seeks to reduce the cost of tax compliance for a taxpayer.

Taxpayers’ obligations

The taxpayers’ obligations under the Charter are:

• To make a complete and honest disclosure of facts and information to the
department. The taxpayer should ensure compliance with all the tax filing and
reporting obligations.
• To seek an understanding of the tax obligations applicable to a taxpayer. For this
purpose, a taxpayer can seek clarifications and assistance from the department.
• To maintain accounting records and documents as prescribed under the income
tax law.
• To be informed about the representations before the department and seek details
from their authorised representatives.
• To respond to income tax notices and information requests in a time-bound
manner.
• To pay their income tax dues and comply with their filing requirements within the
due dates.

58
Conclusion:

Faceless assessment will curb corruption as there is no or minimum interaction between

the officials and the taxpayers. The Income tax department will be available 24*7 online,
therefore can easily be contacted. Machine Learning, artificial intelligence, automated
examination tool will facilitate efficiency, transparency and integrity. This will also
increase employment among skilled workforce. Every data will always be available online
and with no boundaries or limits attached, the assessment will be easier and systematic
with dynamic jurisdiction.

To provide relief to the honest taxpayers, Faceless Assessment scheme is launched and is
rightly termed as “Transparent taxation – Honouring the Honest” as the aim of this
scheme is to provide relief to the taxpayers in terms of procedures of assessment,
corruption, Income tax department instigation.

59
Acronyms:

NFAC - National Faceless Appeal Centre

NFPC - National Faceless Penalty Centre
PU - Penalty Unit
PRU - Penalty Review Unit
CBDT - Central Board of Direct Taxes
SCN - Show cause Notice
ITA - Income Tax Authority
RFAC - Regional Faceless Appeal Centre
RFPC - Regional Faceless Pentalty Centre
CIT(A) - Commissioner of Income Tax
NeAC/AO - National e-Assessment centre

60
Bibliography

• Income tax website, Notification, Orders

• ICAI website
• Articles from Google
• Taxguru.com
• PWC.com

61