Faceless Assessment –A New Era under Income Tax

-By Khushboo Sharma

‘Welcome to the New Era of ‘Faceless’, ‘Jurisdiction-less’, ‘Paper-less’ and hopefully ‘Corruption-less’ E-
assessments.”

1) CONCEPT:
a. Basics:
The Faceless Assessment (earlier known as E-assessment) has been rolled out to remove the
human interface between the taxpayer and the Income Tax Department. Transparent Taxation –
Honoring the Honest: For honoring the Honest taxpayers, the Prime Minister Narendra Modi
launched a faceless tax scrutiny and appeal and urged people to pay their due taxes and
contribute to nation building.
The Central Government makes the Faceless Assessment Scheme which was previously named as
the E-assessment Scheme, 2019. This scheme was made vide CBDT Notification S.O. 3264(E) dated
12th September, 2019 as last amended by Notification S.O. 741(E) dated 17th February, 2021.
The Regular Assessments u/s 143(3)/143(3A) being conducted under the New Scheme of e-
Assessments 2019, are more popularly known as ‘Faceless Assessments’ & ‘Jurisdiction-less
Assessments’.

b. Features
Following are main features of Faceless Assessment Scheme for Honoring the Honest:
• Selection of a taxpayer only through system using data analytics and Artificial Intelligence
(AI)
• Automated random allocation of cases
• No physical interface, no need to visit the income tax office
• Dynamic Jurisdiction to Abolition of territorial jurisdiction
• Team based assessments and team-based review
• Central issuance of notices with Document Identification Number (DIN)
• Draft assessment order in one city, review in another city and finalisation in third city.
• 2/3rd of the manpower is utilised for faceless assessment and balance for other
functions.

c. Important provisions
1. Faceless Assessment Scheme (Section 144B of Income Tax Act),
2. Assessment and Re-assessment Provisions (Section 147, 148, 148A , 148B and 149 of Income
Tax Act),
3. Appeals Provisions (Section 158A, Section 158AA, 158AB)
4. Commissioners Revisionary Powers under Section 263 read with Transfer Pricing Order Issued
under Section 92CA of Income Tax Act and lastly
5. Penalty provisions (Section 271AAB, Section 271AAC and Section 271AAD of the Income Tax
Act)
2) FRAMEWORK
The E-Assessment Scheme was mentioned by the Hon’ble Finance Minister in his Budget Speech reported
in (2018) 401 ITR(St.) 1(29) dated 01.02.2018. He stated that E-assessment was introduced in 2016 on a
pilot basis and in 2017, extended it to 102 cities with the objective of reducing the interface between the
department and the taxpayers. With the experience gained so far, they were ready to roll out the E-
assessment across the country, which is expected to transform the age-old assessment procedure of the
income tax department and the manner in which they interact with taxpayers and other stakeholders.
Accordingly, he proposed to amend the Income-tax Act to notify a new scheme for assessment where the
assessment would be done in electronic mode which will almost eliminate person to person contact
leading to greater efficiency and transparency. Accordingly, sections 143(3A), 143(3B) & 143(3C) were
introduced w.e.f. 1.4.2018 where power has been granted to the Central Government to make any
scheme in this regard.

Brief glimpse of Notification:

a. Scope of the Notification:
The scope of the Notification has been explained in Clause 4 where it has been highlighted that such
scheme shall be made in respect of such territorial area, or persons or class of persons, or incomes or
class of incomes, or cases or class of cases, as may be specified by the board.
b. Communication:
All communications will be conducted electronically. Tax Payers or advocates shall not remain
physically present. In some cases, video conferencing may be allowed. Clause No. 11 of the
Notification mentions, ‘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.’
Clause no.8 mentions that all communications between the National e-assessment Centre and the
assessee, or his authorised representative, shall be exchanged exclusively by electronic mode.
Electronic mode here may mean that all documents would be digitalized and uploaded on a certain
server. In case of a personal hearing, which may be requested by the assessee, a video conference
may take place so that the Assessee would be able to give oral submissions and explanations etc.
Section 282 of the IT Act specifically provides notice can be served in the form of any electronic record
as provided in chapter IV of the Information Technology Act, 2000. Explanation to section 282(2)
provides that the expressions “Electronic Mail” and “Electronic Mail Message” are assigned the
meaning as in explanation to section 66A of the Information Technology Act, 2000. The notification in
its definition Clause 2(xvi) expands the scope so as to include even ‘message on WhatsApp’.
c. Centres:
1. National E-Assessment Centre (NEC): The purpose of setting up the NEC has been stated to be
facilitation of the conduct of e-assessment proceedings in a centralized manner. However, it may
be noted that the constitution of the NEC has not been specified under the notification.
2. Regional E-Assessment Centre (REC): To facilitate the conduct of e-assessment proceedings in the
cadre controlling region of a Principal Chief Commissioner.
3. Assessment Units: To facilitate the conduct of e-assessment, to perform the function of making
assessment.
 4. Verification Units: To facilitate the conduct of e-assessment, to perform the function of
verification.
5. Technical Units: To facilitate the conduct of e-assessment, to perform the function of providing
technical assistance which includes any assistance or advice on legal, accounting, forensic,
information technology, valuation, transfer pricing, data analytics, management or any other
technical matter which may be required in a particular case or a class of cases, under this Scheme.
6. Review Units: To facilitate the conduct of e-assessment, to perform the function of review of the
draft assessment order, which includes checking whether the relevant and material evidence has
been brought on record, whether the relevant points of fact and law have been duly incorporated
in the draft order, whether the issues on which addition or disallowance should be made have
been discussed in the draft order, whether the applicable judicial decisions have been considered
and dealt with in the draft order, checking for arithmetical correctness of modifications proposed,
if any, and such other functions as may be required for the purposes of review, and specify their
respective jurisdiction.
d. Setup:
The National E-Assessment Centre (NEC) would, in select cases, serve a notice on the Assessee u/s
143(2) specifying the issues. Thereafter, the NEC would assign the cases selected to specific
Assessment Units in any one regional e-assessment centre through an automated allocation system.
The Assessment Unit may request NEC for a certain enquiry or verification by the verification unit or
request NEC for seeking technical assistance from the technical unit. After considering the documents
on record, the Assessment Unit would make a draft assessment order which would be examined by
NEC for finalization processes. NEC may also send it to the Review Unit, if it deems it necessary, which
in turn would provide its inputs and suggestions to NEC. The Draft Assessment Order would then be
finalized and forwarded to the jurisdictional AO. The AO may, based on such assessment, proceed to
impose penalty, launch prosecution, etc.
The chart below explains the procedure followed by the respective centres/units:

e. Post Assessment Procedure:

 At the end, everything would be transferred to the AO having jurisdiction for the purpose of
imposition of penalty, collection and recovery of demand, rectification of mistake, giving effect to
appellate orders, 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, proposal seeking sanction for launch of prosecution
and filing of complaint before the Court. A moot question may arise that after order is received from
NEC, the Assessing Officer having jurisdiction signs and issues the order. Whether it would be legally
justifiable for the AO to sign such an order where he is not a participant at all. Therefore, it is
suggested that at least the Jurisdictional AO should be made a party to the on-going procedure. If
there is an appeal by the assessee then the AO would be responsible to submit all data to the
appellate authority.

Benefits of E-Assessment:
In the budget speech of 1.2.2018, finance minister had specifically mentioned that there is the right
time to bring in e-assessment. From then i.e., 1.2.2018, the ball started rolling till date i.e., 12.9.2019
where the implementation of such proposal has taken place.
• The notification eliminates person to person to contact.
• Eliminates facetime with Assessing Officers allowing time and energy to be saved.
• Better transparency would be there by way of recording of all communications and documentary
evidences being digitalized.
• Results in greater efficiency since the assessment would be reviewed. In some cases, once at the time
of examination of the draft assessment order and once at the time of assigning the same to a review
unit, which makes the entire process more stable. With multiple internal processes to eliminate
unnecessary scrutiny of cases, much litigation time of assessees and the courts would be avoided.
Even inputs on technical issues of transfer pricing and cross border transactions where expert opinion
could be sought, would be considered.
• No chance of interfering in the process of assessment by any other authority. It is a straight jacket
formula where NEC would conduct the proceedings within the framework laid down by CBDT.

3) Sources
1. TaxGuru.com
2. Faceless Scheme (incometaxindia.gov.in)
3. What is Faceless Assessment scheme 2021? Complete Detail – AUBSP
4. Faceless Assessment – Beginning Of A New Era – Articles (itatonline.org)
5. Practical Guide to Faceless Assessment and Appeals - Kinjal Bhuta - Google Books