As per the Income Tax Act, the Central Government has been given the power to create a scheme that aims to bring greater efficiency, transparency and accountability in the assessment of Income Tax under Section 143(3) or Section 144 of the Income Tax Act, 1961. In this context, we offer our CA services for Faceless Assessment under Income Tax, which has been introduced as a means to eliminate interface between assessing officers and assesses and to optimise resource utilisation through economies of scale and functional specialisation.
What is Faceless Assessment under Income Tax?
Faceless Assessment is a new initiative by the Income Tax Department to eliminate the need for taxpayers to visit the tax office for assessment proceedings. With the introduction of this scheme, the assessment proceedings are now carried out electronically through an online system, which is both transparent and fair.
Under Faceless Assessment, a team of tax experts and officers are assigned to each assessment case, who are located in different parts of the country, ensuring that the assessment is done without any geographical constraints. The entire process is conducted in a faceless, nameless and jurisdiction-less manner, with no direct interaction between the taxpayer and the tax officer.
The objective of the scheme is to minimize the chances of bias, corruption and discretion, thereby ensuring speedy and accurate assessments. It also ensures that there is no unnecessary harassment of taxpayers, and the department does not interfere in their lives unnecessarily.
Why Faceless Assessment is important?
The introduction of Faceless Assessment has revolutionized the way tax assessments are carried out in India. It has significantly reduced the physical interaction between the taxpayer and the tax authorities, thereby minimizing any scope of malpractices, corruption or delays. The process of assessment is now more streamlined, faster, and more efficient, which ultimately benefits both the taxpayer and the tax authorities.
Procedure for Assessment
The assessment process under the Scheme follows a clear and structured procedure:
- The National e-assessment Centre (NEC) serves a notice to the taxpayer under Section 143(2) of the Act, specifying the issues for selection of their case for assessment.
- The taxpayer has 15 days to respond to the notice.
- The NEC assigns the case to a specific assessment unit in one of the regional e-assessment centres through a fully-automated allocation system.
- The assessment unit may request more information, documents or evidence from the taxpayer or any other person, conduct particular enquiry or verification by the verification unit, or seek technical assistance from the technical unit.
- If the assessment unit requests more information, NEC issues an appropriate notice to obtain it.
- If the assessment unit requests particular enquiry or verification, NEC assigns the request to the verification unit.
- If the assessment unit requests technical assistance, NEC assigns the request to the technical department in one of the Regional e-assessment Centres.
- The assessment unit prepares a written assessment order in draft, either accepting or modifying the returned income of the taxpayer, and sends a copy of the order to NEC.
- The assessment unit provides details of any penalty proceedings to be initiated in the draft assessment order.
- NEC examines the draft assessment order following the risk management strategy specified by the CBDT and decides whether to finalise the assessment, provide an opportunity of being heard to the taxpayer, or assign the order to the review unit.
- The review unit reviews the draft assessment order and either concurs with it or suggests modifications.
- NEC communicates the review unit’s suggestions to the assessment unit, which sends the final draft assessment order to NEC.
- NEC finalises the assessment or provides an opportunity of being heard to the taxpayer if necessary.
- The taxpayer may respond to any show-cause notice served upon them by the NEC.
- If no response is received, NEC finalises the assessment as per the draft assessment order or sends the response to the assessment unit.
- The assessment unit makes a revised draft assessment order after considering the taxpayer’s response and sends it to NEC.
- If no modification prejudicial to the interest of the taxpayer is recommended, NEC finalises the assessment. If an amendment prejudicial to the interest of the taxpayer is offered, the taxpayer is provided an opportunity of being heard.
- After completion of the assessment, all electronic records of the case are transferred to the Assessing Officer (AO) having jurisdiction over the case for further action.
- At any stage of the assessment, if necessary, NEC may transfer the case to the AO having jurisdiction over the case.
By following this structured process, the assessment under the Scheme is conducted in a fair and transparent manner.
Procedure for Penalty
Any unit conducting an assessment may recommend the initiation of penalty proceedings under the Income Tax Act against the taxpayer or any other person for non-compliance with any notice, direction, or order issued under this Scheme. The recommendation must be sent to the NEC if it is necessary or expedient to do so.
Upon receipt of the recommendation, the NEC will serve a legal notice on the taxpayer or other person, requiring them to show cause as to why a penalty should not be imposed on them under the Income Tax Act.
The response to the show-cause notice provided by the taxpayer or other person, if any, will be sent by the NEC to the unit that made the penalty recommendation. The unit will then prepare a draft penalty order and send a copy to the NEC or drop the penalty and provide reasons to the NEC.
The NEC will levy a penalty based on the draft order and serve a copy to the taxpayer or other person.
Procedure for Appeal
If a taxpayer wishes to appeal an assessment order made by the NEC under this Scheme, they may do so before the Commissioner (Appeals) having jurisdiction over the jurisdictional Assessing Officer.
Communication and Electronic Record
- All communications between the NEC and the taxpayer or their authorized representative will be exchanged exclusively through electronic means.
- All internal communications between the NEC, REC, and various units will also be exchanged exclusively through electronic means.
- The originator of any electronic records issued under the Scheme will authenticate them by affixing their digital signature.
- Any legal notice, order, or other electronic communication under this Scheme will be delivered to the taxpayer through their registered account or email address, with an authenticated copy uploaded to their mobile application and followed by a real-time alert.
- The taxpayer must file their response through their registered account, and upon receipt of an acknowledgement containing the hash result generated upon successful submission, the response will be deemed authenticated.
Appearance of Taxpayer before Centre and Units
Under this scheme, taxpayers are not required to appear in person or through an authorized representative before the IT authority at the NEC or REC or any unit set up under the scheme. This ensures that the assessment process is more streamlined and efficient.
In case of modifications proposed in the draft assessment orders, the concerned taxpayer is allowed to make submissions against such modifications. Additionally, the taxpayer or his authorized representative is entitled to a personal hearing before the income tax authority in any units under this scheme. Such hearing is conducted through video conferencing or video telephony, exclusively, as per the procedure laid down by the CBDT.
The CBDT also establishes suitable facilities for video conferencing and video telephony to facilitate the scheme.
Power to Specify Process and the Procedure
The Principal Chief Commissioner / Principal Director General, in charge of NEC, lays down standards, procedures, and processes for the effective functioning of the NEC, Regional e-Assessment C, and the units set-up under this scheme. This system functions in an automated, mechanized environment, including the format, mode, procedure, and processes for service of notice, receipt of information or document, acknowledgement of response furnished, provision of e-proceeding facility, accessing, verification, and authentication of information and response, receipt, storage, and retrieval of information or documents in a centralized manner, general administration, and grievance redressal mechanism in the respective centers and units.
We understand that dealing with the Income Tax department can be overwhelming and stressful. Our team of expert chartered accountants is here to help you fulfill all the requirements in the faceless assessment procedure and resolve any disputes with the Income Tax department.
Is it mandatory to have a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC) to file a response to a notice online?
No, a DSC or EVC is not required to file a response to a notice on the e-filing portal. You can file the response without these.
What if I don’t have a valid email ID registered on the Income Tax portal? Will I receive a physical notice at my registered correspondence address?
No, the Income Tax department communicates with taxpayers only through online mode and does not send notices/intimations physically. Therefore, it is essential to update your valid email ID in the ‘Profile’ section of your registered account on the e-filing portal. You can also view all the notices or intimations issued to you by the Department under the ‘e-Proceedings’ section on the e-filing portal.
I missed a notice because the email ID registered on my e-filing portal was incorrect. Can I use this as a valid reason for not filing or delayed filing of a response to such a notice?
No, it will not be considered a valid reason for not filing or delayed filing of the response to the notice issued by the department. Once the notice has been issued to you and the mail has been sent to the email ID registered on your e-filing portal, it will be deemed to be served to you. Hence, it is crucial to have valid contact details registered in your e-filing portal to remain updated on all communication from the department.
Does the Assessing Officer immediately pass the final assessment order?
No, before passing the final assessment order, the Assessing Officer has to forward a draft assessment order to the assessee if he proposes to make any variation against the interest of such assessee after considering all the evidence, hearings, and penalty proceedings.
Can I explain my case orally through video conferencing if I am not able to do so properly in written mode to the officer under Faceless Assessment?
If you are not able to make the Assessing Officer understand your case through written submissions, you can explain the same through video conferencing. However, you will have to file a request for a personal hearing. If the officer is satisfied that the hearing is required under genuine circumstances, only then will you be granted the opportunity to explain orally through video conferencing. However, a physical hearing is not allowed under Faceless Assessment.