What is the Faceless Assessment Scheme 2020?
The Faceless Assessment Scheme, 2020 has been launched by the Income-Tax Department to eliminate the interface between the Assessing Officer and the Assessee during the Faceless Assessment Procedure. Section 143(3A) of Faceless Income-Tax Assessment was introduced by the Finance Act, 2018 where Central Government was enabled to empower the new assessment procedure with new technology and minimum human interface.
The Faceless Assessment Scheme aims to abolish territorial jurisdiction, whereby the return filed by a taxpayer would get scrutinized anonymously. This will narrow down the scope of the human interface and corruption. Additionally, Faceless Assessment will offer functional specialization in specific parts of the assessment with the assistance of specialized units.
What are the salient features of the Faceless Assessment Scheme?
- The Faceless Assessment Scheme is applicable with effect from 1st April 2021.
- Faceless Assessment makes use of specialized units to bring more efficiency to income tax governance.
- It uses smart technology such as data analytics, artificial intelligence (AI), machine learning, and other latest tools to ascertain misreporting or tax evasion.
- The Faceless Assessment Scheme aims to eliminate human interface & resultant corruption.
Which authorities are responsible for conducting the Faceless Assessment?
National Faceless Assessment Center
National Faceless Assessment Center
The National Faceless Assessment Center is a centralized proceeding center that conducts Faceless Assessments PAN India. The person in charge of NFAC is the Principal Chief Commissioner of Income Tax or Principal Director General of the Income Tax. Every type of communication between the Units and the Assessee is processed through this centralized National Faceless Assessment Center. NFAC sends notices and receives responses from the Assessee over virtual/online mode and transfers the documents to the required units for further assessment.
AU is the Unit of Assessing Unit that performs the function of making Faceless Assessments,
- The Assessment Unit identifies points or issues material for the determination of any liability (refund) or the material that has been referred for Faceless Assessment.
- AU performs analysis of the material furnished by the Assessee for Faceless Assessment.
- The Assessment Unit further Seeks information or clarification on the points or issues identified.
VU is the Unit that performs the function of providing verifications in Faceless Assessment,
- The Verification Unit performs inquiry, cross-verification, and examination of the book of accounts, and data response by the Assessee.
- AU examines the witness and recording of the statements for Faceless Assessment.
TU is the Unit that performs the function of providing technical assistance for the Faceless Assessment Process,
- The Technical Unit extends advice on legal accounting, valuation of property, and transfer pricing.
- TU performs forensic analysis in information technology to back the technical requirements in the process of Faceless Assessment.
- The Technical Unit also offers data analytic and legal technical reports for the Assessments.
Before the finalization of the Final Order, Review Units (RU) are allocated to review the determination proposal assigned under Section 144B,
- The Review Unit reviews the relevant material evidence that has been brought to the records.
- RU reviews the facts and laws that have been duly incorporated for Faceless Assessment.
- The Review Unit also addresses whether the issues require additions or not.
- Moreover, the Review Unit verifies that the disallowance has been incorporated.
What is the procedure of Faceless Assessment conducted by NFAC?
STEP: 01 - Assignment allocation by the National Faceless Assessment Center (NFAC) to the Assessing Unit (AU)
The NFAC shall allocate and assign the selected case for the purposes of Faceless Assessment through the automated allocation system to the specific Assessing Unit (AU) Officer and intimate the Assessee via SMS or email alert that the Assessee has been selected for the Assessment in accordance with the procedure laid down u/s 144B.
A taxpayer’s case may get assessed under the Faceless Assessment Scheme in the following cases,
- If the taxpayer furnishes an Income Tax Return voluntarily u/s 139 and the Assessment Unit picks up the case due to Annual Information Return and Income Tax Return.
- If the taxpayer furnishes the Income Tax Return in response to notice u/s 142(1), 148(1), or 143(2).
- In case the taxpayer fails to file the income tax return in response to notice u/s 142(1).
- In case the taxpayer fails to file the income tax return in response to notice u/s 148(1).
STEP: 02 - Notice sent to Assessee prepared by the Assessment Unit (AU) and delivered through the National Faceless Assessment Center (NFAC)
- The Assessee receives a notice for Faceless Assessment under Section 142(2)/142(1) on his registered login ID by NFAC.
- The Assessee may file his response to the aforementioned notice within the date specified in such notice issued by NFAC.
- The reply received by Assessee will be forwarded to AU, through NFAC.
STEP: 03 - Further information from Assessee as required by Assessment Unit (AU)
AU may ask for additional information, documents, or evidence for Faceless Assessment, from the Assessee, through NFAC and NFAC shall serve appropriate notice on the Assessee for obtaining such Documents and evidence.
STEP: 04 - Enquiry by VU on request of the Assessment Unit (AU) through the National Faceless Assessment Center (NFAC)
If AU requires further cross-verifications and examination of the book of accounts or needs to verify the recording statements and witnesses referred by the Assessee for Faceless Assessment, then AU makes a request through the NAFC for conducting inquiry or verification by VU. NFAC shall allocate and assign the VU through an automated allocation system.
STEP: 05 - Enquiry by Technical Unit (TU) on request of the Assessment Unit (AU) through the National Faceless Assessment Center (NFAC)
If the AU requires technical assistance or verification for undergoing Faceless Assessment, then it makes a request to TU for,
- Determination of arm’s length price.
- Valuation of property.
- Withdrawal of registration.
- Approval, exemption, or any other technical matter by referring to TU.
The request shall be assigned by the NFAC to the TU through an automated allocation system.
On the flip side, NFAC issues respective notices and receives a reply to the questionnaire raised by VU and TU.
STEP: 06 - Income loss determination by the Assessment Unit (AU)
After receiving the relevant replies to the notices by the Assessee, the AU shall prepare in writing, an income or loss determination proposal, after taking into account all the relevant material available on record.
- Where no variation prejudicial to Assessee is proposed, AU may send the same to the NAFC for the next procedure of Faceless Assessment.
- If the variation is being proposed then notice is served to the Assessee, stating variations proposed to be made to the income of the Assessee and calling upon him to submit as to why the proposed variation should not be made through NFAC.
STEP: 07 - Issue Show Caused Notice to Assessee through the National Faceless Assessment Center (NFAC) by the Assessment Unit (AU)
If the Assessee fails to comply with the said notice seeking information served by NFAC, or the earlier notice under Section 143(2) or u/s 142(1), NFAC shall intimate the same to the AU.
The AU shall serve upon the Assessee through NAFC a Show Cause Notice under Section 144, giving him the opportunity to explain the reason or extend justifications. The Assessee shall file his response to the Show Cause Notice under Section 144 within the time specified in such notice, to the NFAC, which shall forward the same to the AU for Faceless Assessment.
STEP: 08 - Response of the Assessee
The Assessee shall file his reply to the Show Cause Notice to the NFAC by the date and time specified, which shall forward the reply to the AU if the Assessee fails to respond within the specified time. The NAFC shall intimate the same to AU. After considering the response of the Assessee or the intimation of failure of the Assessee to file a response received from NFAC and all the relevant material available on the record, the AU shall prepare an Income or Loss determination proposal in writing and send it to the NFAC.
STEP: 09 - Draft Order and reviewed by Review Unit (RU)
Upon receipt of the income or loss determination proposal, with or without any variations proposed to the income of the Assessee, as the case may be, the NFAC may, on the basis of the guideline issued by the board, convey to the AU to prepare a Draft Order in accordance with such income or loss determination proposal which shall thereafter prepare a Draft Order or assign them income or loss determination proposal to RU through an automated allocation system which shall conduct a review of such order prepare a review report and send to NFAC.
STEP: 10 - Review Report to the Assessment Unit (AU)
The NFAC shall forward the review report received from the RU to the AU which has proposed the income or loss determination proposal. AU may accept or reject all modifications proposed in such review report prepare a Draft Order accordingly and send it to NFAC the AU shall record the reason for rejecting the modification prosed by RU.
STEP: 11 - Completion of the Assessment
In the case of Assessee, the NFAC shall convey the completion of the Faceless Assessment in accordance with such Draft Order which shall thereafter pass the Final Assessment Order and initiate penalty proceedings if any, and send it to NFAC. The NFAC shall serve a Final Assessment Order, notice for initiating penalty proceedings if any, and Demand Notice, specifying the sum payable by or refund of any amount due to the Assessee on the basis of such assessment to the Assessee.
Some Important Points
- All communication among the AU, VU, RU, and TU with the Assessee for the purpose of Faceless Assessment shall be through NFAC only.
- All internal communication and exchange of databases, documents, and evidence will be done through electronic mode only.
- Database, document, and any other record related to Faceless Assessment shall be authenticated by way of electronic communication, digital signature, and electronic verification code.
- Orders, notices, and other electronic communication shall be delivered to the Assessee through emails and mobile alerts (on a real-time basis), and his registered account available on the Income Tax Portal.
- The Assessee shall file his response to any notices or questionnaire through his registered account.
- Once the acknowledgment is sent by the NAFC, the response shall be authenticated.
- A person shall not be required to appear physically or through any other representative in connection with any proceeding u/s 144B.
- An oral submission is allowed in case of clarification again showcase notice against the income and loss determination proposal.
- In case of personal hearing, it shall be conducted through video conferencing and telecommunication.