Income tax: Faceless Assessment Scheme

Preface to Income tax: Faceless assessment scheme

♦ Finance Minister Nirmala Sitharaman had announced the e-assessment scheme in her budget speech on 5th July 2019 which was inaugurated subsequently on 7th October 2019.

♦ Prime Minister Narendra Modi on 13^th August,2020 had lunched “Transparent Taxation-Honouring the honest” platform and by that enlisted the rights of assesses in a statute under Income Tax law. So from now onwards, e-assessment scheme as announced by FM will be known as Faceless Assessment Scheme

♦ This scheme aimed at moving to faceless scrutiny and eliminate human interference of human in assessment proceedings.

Features of Income tax: Faceless assessment scheme

♦ Selection of a tax payer only through system using data analytics and Al

♦ Abolition of territorial jurisdiction

♦ Automated random allocation of cases

♦ Central issuance of notices with Document Identification No.(DNI)

♦ No physical interface and 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.

Exceptions to Faceless Assessment

♦ Any assessment that includes serious frauds, major tax evasion, sensitive and search matters will be exceptions to the Faceless Assessment

♦ The system also excludes International Taxation and Black Money Act & Benami

Recent Steps by CBDT in relation to Faceless Assessment

♦ National e-Assessment Centre (NeAC) has been set up at New Delhi. Regional e-Assessment Centres with 30 headquarters across 20 cities including Delhi, Mumbai, Kolkata and Chennai, under the faceless assessment scheme notified on Thursday.

♦ Each of the regional centres, which will have a separate review unit and verification unit, will report to the National e-Assessment Centre (NeAC), that will issue randomized notices of scrutiny.

Step-wise process for Faceless Assessment

STEP 1: Issuance of notice to assesse

National e-Assessment Centre (NeAC) shall serve notice to assessee under section 143(2)

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Assesse may file his/her response with NeAC within 15 days from date of receipt of notice

STEP 2: Case to be assigned to Assessment Unit (AU)

NeAC shall assign the case selected to an AU in any one Regional e-Assessment Centre through automated allocation system

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The AU after allocation of case , may request NeAC for:-

a)obtaining such information/document/evidence from assessee or any other person

b)conducting of certain enquiry/verification by Verification Unit

c) seeking technical assistance from Technical Unit

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Where a request is received by NeAC for-

a) obtaining such information/document/evidence from assessee or any other person—) It shall issue appropriate notice/requisition to such for information requisitioned by the AU

b) conducting of certain enquiry/verification by Verification Unit ⇒ NeAC shall assign the request to a verification Unit through an automated allocation system

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c) seeking technical assistance from Technical Unit  ⇒  NeAC shall assign the request to a Technical Unit in any one ReAC through an automated allocation system

After taking into all the sought information in writing, The AU shall draft an assessment order of either accepting or modifying the returned return of that assessee and send a copy to NeAC along with penalty proceedings to be initiated, if any.

STEP 3 : Draft Assessment Order

i) NeAC shall examine the draft assessment order in accordance with the risk management strategy specified by board, whereupon it may decide to-
a) Finalise the assessment in accordance with draft assessment. Serve an order to assessee specifying the sum payable or refund amount along with notice of penalty proceedings if any.	b)In case of Modification is proposed, provide an opportunity to the assessee by serving a show cause notice as to why the assessment should not be completed as per draft assessment	c)In case of Review, the NeAC can assign the draft assessment order to Review Unit in any ReAC through an automated allocation system

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⇒  If NeAC has referred a case to REVIEW UNIT, RU shall conduct review of the order and may decide to-
a) Agree with the draft assessment order and intimate the same to NeAC	b) suggest any modification, as it may deem fit, to such draft order and send it to NeAC

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If NeAC receives modification as suggested by REVIEW UNIT, It will communicate the same to respective AU

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The AU after considering the modification suggested by the Review Unit, send the final draft assessment order to NeAC

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NeAC after receiving the final draft, shall follow the laid down procedure as discusses above in 3(i) a or b

⇒  NeAC has served show cause notice to Assessee in case of MODIFICATION,

a) Finalise the assessment as per draft order if assessee fails to reply in stipulated time period

b) Send the reply of assessee to AU and AU after taking into such response make a revised draft and send to NeAC

STEP 4 : Final Order and Completion of Assessment

The NeAC shall passes the order depending upon such revised order as received from AU. An opportunity will be provided to assessee in case the modification is prejudicial to the interest of assessee and then decide the case as per the procedure explained in step 3 above.

The NeAC shall after completion of assessment, transfer all the electronic records of the case to Assessing Officer having jurisdiction over such case for: –

a)Imposition of Penalty

b) Collection and recovery of demand

c) Rectification of mistake

d) Giving effect to appellate orders

e) Submitting reports to be produced before Commissioner(Appeals)/Tribunal/courts as the case may be

f)  Proposal seeking sanction for launch of prosecution and filing of complaint before the court

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