The Faceless Assessment Scheme, introduced by the Indian government, is a transformative approach to income tax assessments with the primary goal of enhancing transparency, efficiency, and accountability through technology-driven, remote assessment. This scheme removes the need for physical interactions between taxpayers and the Income Tax Department which results in faster disposal of cases. Further, it is expected to ease compliance. This will further reduce the cost and anxiety for the taxpayer.
What is Faceless Assessment under section 144B?
The Faceless Assessment Scheme, also known as the e-assessment scheme, is a process designed for the faceless scrutiny of Income Tax Returns.
Under this scheme, all communication between the Income Tax Department (ITD) and taxpayers will take place electronically. Moreover, all internal communication within the ITD for a specific case will also happen electronically.
To facilitate this scheme, the National e-Assessment Centre (NeAC) has been set up. The NeAC can assign any case to a Regional e-Assessment Centre (ReAC) through an automated allocation system.
Section 144B of the Income Tax Act
By introducing this section, a new system has been implemented where taxpayers can complete all interactions with tax officials electronically, without the need for in-person meetings or unofficial requests. This not only saves time but also reduces difficulties.
Major Assessments covered under this scheme
There are four major assessments of income tax acr covered under this scheme:
Section 143(1) – Summary Assessment
This assessment involves making adjustments for arithmetical errors or incorrect claims before calculating the total income or loss. However, it does not involve a detailed scrutiny of returns.
Section 143(3) – Scrutiny Assessment
This assessment involves a thorough examination of the tax return. It aims to verify the accuracy and legitimacy of various deductions, claims, and other details provided by the taxpayer in their income return.
Section 144 – Best Judgment Assessment
Tax authorities perform this assessment when the taxpayer omits important information. In this process, they base the assessment on available data due to the taxpayer’s failure to provide complete or accurate information, often due to non-disclosure.
Section 147 – Income Escaping Assessment
The Assessing Officer can assess or reassess any income that has escaped assessment for a particular assessment year, as well as any other income that becomes apparent during the proceedings, in accordance with the provisions outlined in sections 148 to 153.
Framework of Faceless Assessment
The process of faceless assessment will be as per the Income Tax Act and Income Tax Rules. For the purpose of faceless assessment, the Central Board of Direct Taxes (CBDT) established the designated ‘centers’ and ‘units’ and defined their specific areas of authority:
- National e-Assessment Centre (NeAC): It will facilitate the conduct of faceless assessment proceedings in a centralized manner.
- Regional e-assessment Centre (ReAC): The assessment will be done through this centre which includes Assessment, Verification, Technical, and Review units.
- Assessment Units (AU): It will carry out faceless assessments, which involve determining tax liability (including refunds) under the law, seeking information, analyzing the provided data, and any other necessary tasks.
- Verification Units (VU): They perform functions such as inquiry, cross-checking, and examining records.
- Technical Units (TU): This unit provides support in legal, accounting, IT, valuation, and other technical matters relevant to the Income Tax Act or related agreements.
- Review Units (RU): It conducts assessments of income determination proposals. This involves ensuring all pertinent evidence and legal points are properly addressed, and any necessary adjustments are made.
Further, all the communications between these units regarding assessments will be through the National e-Assessment Centre.
Process of Faceless Assessment
The following is a step-by-step process for a Faceless assessment:
- The NeAC will send Notice u/s 143(2).
The Notice under section 143(2) served by the NeAC will specify the issues for the selection of the case for assessment.
- The taxpayer will have to submit a response within the date specified in such notice for scrutiny with the NeAC.
After receiving the reply, the NeAC will use an automated allocation system to assign the case to an assessment unit in any of the ReACs.
- After the case is assigned, the Assessment unit can request the NeAC for:
1. Information, including documents or evidence, from the taxpayer or any other person.
2. Conducting certain verification or inquiry
3. Technical assistance from the technical unit - If the NeAC accepts the assessment unit’s request for documents.
The NeAC will send notice or requisition to the assessee or any other person for obtaining documents. After receiving the reply from the assessee NeAC will forward that to AU. Also, they will forward the reports received by the Verification Unit and Technical Unit.
- After gathering the required information, the AU will pass a draft order, by either:
1. Accepting the ITR prepared by the taxpayer,
2. Additionally, the assessing units may modify the taxpayer’s ITR and send a copy to the NeAC, specifying any penalty proceedings, if applicable. - The NeAC will review and examine the draft assessment using an automated examination tool, and decide to:
1. Finalize the assessment order and serve the demand notice to the assessee,
2. Provide the assessee an opportunity to present their case. They will have to explain – why the assessment should not be completed as per the draft assessment order.
3. NeAC can Assign the order for a review to another Regional e-Assessment Centre through an automated allocation system. - The NeAC after completion of the assessment will transfer all the electronic records of the case to the Assessing Officer when:
1. Imposition of Penalty
2. Collection or Recovery of demand
3. Rectification of mistake
4. Submission of any reports such as remand report, etc.
5. Proposal seeking sanction for the complaint before the court.
Note: The NeAC can reassign the case to the Assessment Officer having jurisdiction over such cases at any stage of the assessment if it feels necessary.
Highlights of the Faceless Assessment Scheme
- The NeAC is based in Delhi and headed by the Principal Chief Commissioner of Income Tax.
- NeAC will authenticate electronic records by attaching a digital signature.
- If the taxpayer requests a personal hearing during the assessment procedure, the Chief Commissioner or Director General in charge of ReAC may use their discretion to grant it.
- The ITD has announced the adoption of an automated examination tool for Risk Management. Furthermore, they have emphasized the utilization of Artificial Intelligence and Machine Learning to assess the extent of discretion exercised by Income Tax officers.
- The NeAC will assign the cases using automated allocated systems to the Regional e-Assessment Centre (ReAC).
Process of Imposing Penalties
- In assessment proceedings, any unit can recommend initiating penalty proceedings if the concerned party fails to comply with notices, orders, or directions under this scheme.
- The National e-Assessment Centre will send a notice to the concerned party, asking them to provide justification for not imposing a penalty.
- The recommending unit will receive the response to the notice and consider it. They will either draft a penalty order and inform the National e-Assessment Centre or drop the penalty with recorded reasons.
FAQs
In terms of Notification No. 62/2019 dated 12th September 2019, the provisions of section 92CA shall apply to the assessment made in accordance with the E-Assessment Scheme 2019.
After logging in to the Income Tax Portal, select the ‘e-Proceedings’ link from under the ‘e-Proceeding’ tab, where you will be able to submit your e-proceedings.