1.1 Faceless assessments: A Paradigm Shift towards Digital & Anonymous Tax Administration!!
Well Yes Friends, FACELESS ASSESSMENTS have become a REALITY nowâ¦
Our Honâble PM Sh. Narendra Modi has launched a new platform for Transparent Taxation for âHonouring the Honest Taxpayersâ, coining three new terms viz. Seamless, Painless & Faceless, for showcasing the perceived changed nature of the tax administration in India. The thrust of this taxation platform is on Faceless Assessments, Faceless Appeals and Taxpayersâ Charter.
It may be recollected that on 7-10-2019, delivering on the promise made to taxpayers in the budget speech of the Honâble Finance Minister, the âE-Assessment Scheme, 2019â contemplating within its fold, the use of artificial intelligence, machine learning, algorithm based automated allocation system, automated examination tool and risk management functionalities, has been launched by the Honâble Revenue Secretary, with the inauguration of the National e-Assessment Centre (NeAC) in New Delhi.
In the first phase, the Income-tax department has selected 58,319 cases of regular assessments u/s 143(3), for AY 2018-19, for scrutiny under the new âE-Assessment Scheme, 2019â, on pilot basis and the remaining regular assessment cases for AY 2018-19, were being conducted in the traditional manner by the jurisdictional assessing authorities via e-Proceedings functionality, in the e-filing portal of the Income-tax department.
However, as usual, our Honâble PM Sh. Narendra Modi, going by his well-known image of initiating bold reforms and inducting surprise element in his policy announcements, has extended the coverage of the âE-Assessment Scheme 2019â (now being renamed as the âFaceless Assessment Scheme, 2019), to all the regular assessments u/s 143(3) for the AY 2018-19, and to best judgement assessments u/s 144, and further to all pending income escaping assessments u/s 147 of the Income Tax Act, 1961, as well, w.e.f. 13.8.2020.
The assessments being covered under the new Faceless Assessment Scheme, 2019, are more popularly being referred to as the âFaceless Assessmentsâ or the âJurisdiction-less Assessmentsâ. Let us understand, why these assessments are being referred so.
(a) Faceless Assessments: These assessments are being referred to as âFacelessâ simply because the assessee will not get to see the face of his/her assessing officer or in other words, the assessee will not be able to know as to who will conduct his/her assessments. The Faceless Assessments, completely eliminate the physical interface between the assessee and the assessing authority and instead involves the electronic interface right from the selection of the cases for the scrutiny purpose with the help of âautomated allocation systemâ involving therein an algorithm for randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning, with a view to optimise the use of resources, and the conduct of assessments exclusively in electronic mode via the âe-Proceedingsâ utility of the e-Filing portal of Income-tax departmentâs website, and finally the review and examination of the assessment orders using âautomated examination toolâ involving therein an algorithm for standardised examination of draft assessment orders, by using suitable technological tools, including artificial intelligence and machine learning, with a view to reduce the scope of discretion.
(b) Jurisdiction-less Assessments: These assessments are being referred to as âJurisdiction-lessâ because these are conducted by a Team/Group of Expert IT Officers at multiple-level assessment units viz. National e-Assessment Centre (NeAC), Regional e-Assessment Centre (ReAC), Verification Unit, Technical Unit and Review Unit, and shall not be conducted by an individual jurisdictional Assessing Officer. The cases shall be assigned by NeAC to an assessment unit in any ReAC based on âautomated allocation systemâ involving therein an algorithm for randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning and as such shall be location agnostic.
CBDT vide its Gazetted Notification S.O. 2745 dated 13.8.2020, have amended the “E-Assessment Scheme 2019”, to provide that w.e.f. 13.8.2020, the “E-Assessment Scheme 2019”, shall be termed as “Faceless Assessment Scheme 2019”, and all E-Assessments shall be conducted as Faceless Assessments.
Further, CBDT vide its Order u/s 119 of the Income Tax ActÂ Â bearing F.No. 187/3/2020-ITA-I, dated 13.8.2020, have directed that in order to ensure that all assessment orders are passed through Faceless Assessment Scheme 2019, all the assessment orders shall hereafter be passed by National e-Assessment Centre (NeAC), through the Faceless Assessment Scheme 2019.
However, two exceptions have been provided and these are:
(i) Assessment orders in cases assigned to Central Charges (Block Assessment Cases u/s 153A/153C);
(ii) Assessment Orders in cases assigned to International Tax Charges.
It has also been stipulated in the CBDT order that any assessment order which is not in conformity with the Faceless Assessment Scheme 2019, shall be treated as non-est and shall be deemed to have never been passed.
1.2 Difference between old e-assessment scheme, 2019 & new faceless Assessment scheme, 2019
Consequent to the announcement of the new platform for transparent taxation by our Honâble PM, the Central Board of Direct Taxes (CBDT), in exercise of the powers conferred by section 143(3A) of the Income Tax Act, 1961, has issued its Gazetted Notification dated 13.8.2020, bearing F.No. S.O. 2745 (E), making certain crucial and significant amendments in the E-Assessment Scheme, 2019, notified by its earlier Gazetted Notification dated 12.9.2020, bearing F.No. S.O. 3264 (E).
Inspite of the much hype and hoopla doing the rounds in the media channels and newspapers, concerning the new taxation platform launched by our Honâble PM, ironically, the practicalities and nuances of these notified amendments in the E-Assessment Scheme, 2019, by CBDT, have been somehow, overlooked and ignored in the Tax Circles and by the assessees and taxpayers. So, for the ready reference of the worthy readers, the exact nature, significance and implications of these amendments in the E-Assessment Scheme, 2019, as notified by CBDT, are being discussed and analysed as under:
|S. No.||Parameters||Old E-Assessment Scheme, 2019||New Faceless Assessment Scheme, 2019|
|1.||Nomenclature||E-Assessment Scheme, 2019||Faceless Assessment Scheme, 2019|
|2.||CBDT Notification||S.O. 3264 (E), dated 12.9.2019||S.O. 2745 (E), dated 13.8.2020|
|1.||Applicability||58,319 Regular Assessments under section 143(3), for AY 2018-19, selected on pilot basis.||(i) All Regular Assessments under section 143(3), for AY 2018-19;
(ii) All pending Income Escaping Assessments /Reassessments under section 147, as on 13.8.2020;
(iii) Best Judgement Assessments u/s 144.
|3.||Applicability of Income Tax Rules, 1962||No specific mention of applicability.||Applicable to the Faceless Assessment Scheme 2019.|
|4.||Enlargement in Function of Technical Unit (TU)||Technical assistance on legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics, management or other technical matters.||Technical assistance on audit in addition to legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics, management or other technical matters.|
|5.||Enlargement in Scope & Coverage||E-Assessment Scheme 2019, covered only 58,399 regular assessments u/s 143(3), for AY 2018-19, on pilot basis.||By virtue of insertion of new clause (iii) in para 5. Procedure for assessment, the undermentioned cases are now being covered in Faceless Assessment Scheme, 2019,
âwhere the assessee â
(a) has furnished his return of income under section 139 or in response to a notice issued under subsection (1) of 142 or sub-section (1) of section 148; and a notice under sub-section (2) of section 143 has been issued by the Assessing Officer or the prescribed income-tax authority, as the case may be; or
(b) has not furnished his return of income in response to a notice issued under sub-section (1) of section 142 by the Assessing Officer; or
(c) has not furnished his return of income under sub-section (1) of section 148 and a notice under subsection (1) of section 142 has been issued by the Assessing Officer.
|6.||Enabling Provision for undertaking Best Judgement Assessment/Exparte Assessment u/s 144 of the Income Tax Act, 1961.||There was no enabling provision in the E- Assessment Scheme, 2019, for undertaking best judgement assessment/exparte assessment u/s 144, in the situations of the failure of the assessee in responding to the scrutiny notices u/s 143(2) or 142(1), or with a direction issued u/s 142(2A).||An enabling provision has been specifically inserted in the new Faceless Assessment Scheme, 2019, for undertaking best judgement assessment/exparte assessment u/s 144, in the situations of the failure of the assessee in responding to the scrutiny notices u/s 143(2) or 142(1), or with a direction issued u/s 142(2A).|
|7.||Jurisdictional Unit for drafting Revised Draft Assessment Order||In the old E-Assessment Scheme, 2019, the Revised Draft Assessment Order, incorporating the suggested modifications by the Review Unit (RU), was also being prepared by the same Regional Assessment Unit (ReAC), which has prepared the original draft assessment order.||In the new Faceless Assessment Scheme, 2019, the Revised Draft Assessment Order, incorporating the suggested modifications by the Review Unit (RU), is to be prepared by a new Regional Assessment Unit (ReAC), selected by National e-Assessment Centre (NeAC) on random allocation basis, and not by the old ReAC, which has prepared the original draft assessment order. So, now, in the new scheme, two different ReACs may prepare the draft assessment orders.|
|8.||Power to Transfer Assessment Cases to the Jurisdictional Assessing Officer||In the old E-Assessment Scheme, 2019, the power to transfer assessment cases to the jurisdictional assessing officers, lies solely with the National e-Assessment Centre (NeAC).||In the new Faceless Assessment Scheme, 2019, the Principal Chief Commissioner or Principal Director General, NeAC, is authorised to transfer certain assessment cases to the jurisdictional assessing officers, only after getting the prior approval of the Board (CBDT). The situations and circumstances in which NeAC may transfer the assessment cases to the jurisdictional assessing officers, with the prior approval of CBDT, are yet to be notified by CBDT.|
|9.||Right of Personal Hearing by the Assessee||In the old E-Assessment Scheme, 2019, by virtue of a right vested in the scheme, the assessee was entitled to personal hearing, by way of video conferencing/telephony, in case of disagreement with the additions/disallowances proposed in the draft assessment order, in all assessment cases.||In the new Faceless Assessment Scheme, 2019, the assessee is not having any âby-defaultâ right of personal hearing and the assessee may only request for a personal hearing by way of video conferencing/telephony, in case of disagreement with the additions/disallowances proposed in the draft assessment order. The Chief Commissioner or the Director General, ReAC, may approve such request for personal hearing, if he is of the opinion that the case falls in the list of specified circumstances as notified by CBDT. The circumstances where the request of the assessee for personal hearing via video conferencing may be approved are yet to be notified by CBDT.|
|10.||Mode of Communications between the assessee and NeAC, ReAC, Technical Unit, Verification Unit and Review Unit||In the old E-Assessment Scheme, 2019, all communications between the assessee, NeAC, ReAC, Technical Unit, Verification Unit and Review Unit, were to be exchanged exclusively by electronic mode.||In the new Faceless Assessment Scheme, 2019, all communications between the assessee, NeAC, ReAC, Technical Unit and Review Unit, shall be exchanged exclusively by electronic mode. However, in the cases of enquiry or verification being conducted by the Verification Unit, in certain specified circumstances, yet to be notified by CBDT, the conventional means of communication, i.e. physical interface may be adopted.|
|11.||Authentication of Electronic Record||In the old E-Assessment Scheme, 2019, the authentication/signing of the electronic record was to be done by affixing the digital signature, both by the assessee and the assessing authority i.e. NeAC.||In the new, Faceless Assessment Scheme, 2019, the authentication/signing of the electronic record has to be done by NeAC by affixingÂ its digital signature, and the assessee shall authenticate the electronic record by affixing his/her digital signature, in cases where the assessee is required under the Rules to furnish his/her return of income under digital signature and in any other cases, either by affixing digital signature or under the electronic verification code.|
|12.||Power to specify format, mode, procedure and processes||In the old E-Assessment Scheme, 2019, the Principal Chief Commissioner or the Principal Director General, NeAC, were vested with the power to specify format, mode, procedure and processes under the Scheme.||In the new, Faceless Assessment Scheme, 2019, the Principal Chief Commissioner or the Principal Director General, NeAC, are authorised to specify format, mode, procedure and processes under the Scheme, only with the prior approval of the Board (CBDT).|
1.3 Difference between traditional e-proceedings assessments & new faceless assessments
In para 1.2 above, we have analysed and understood the points of distinction between the Old E-Assessment Scheme, 2019 and the New Faceless Assessment Scheme, 2019. However, for better and clear understanding of the worthy readers, it is also essential and desirable to know the distinction between the traditional e-assessments conducted via e-Proceedings functionality of the e-Filing portal of the Income-tax department and the new faceless assessments being conducted under the Faceless Assessment Scheme, 2019. Thus, for ready reference, these points of distinction are being tabulated as under:
|S. No.||Particulars||Conventional Assessments via e-Proceedings||Faceless Assessments under Faceless Assessment Scheme, 2019|
|1.||Applicability||Regular Assessments under section 143(3)||(i) Regular Assessments under section 143(3);
(ii) Reassessments under section 147;
(iii) Best Judgement Assessments u/s 144.
|2.||Assessment Year||Till AY 2017-18||From AY 2018-19 onwards for All Regular Assessments and w.e.f. 13.8.2020, for all pending Re-Assessments.|
|3.||Assessing Authority||Jurisdictional Assessing Officer||National e-Assessment Centre (NeAC)|
|4.||Notice under section 143(2) Issuing Authority||Jurisdictional Assessing Officer||National e-Assessment Centre (NeAC)|
|5.||Reply Period of Notice under section 143(2)||As specified in the Notice under section 143(2)||Within 15 days from the date of receipt of such Notice under section 143(2)|
|6.||Assignment of Case||Jurisdictional Assessing Officer||The NeAC assigns the case to a specific assessment unit in any one Regional e-Assessment Centre through an automated allocation system.|
|7.||Inquiries during the course of assessment proceedings||Jurisdictional Assessing Officer Issues Notices/Questionnaires under section 142(1) of the Act.||The NeAC may issue appropriate notice or requisition u/s 142(1), to the assessee for obtaining any further information, documents or evidence as required by the assessment unit in the Regional e-Assessment Centre, to which the case has been assigned by the NeAC.|
|8.||Provision of Draft Assessment Order||Only applicable in the Cases of References to Transfer Pricing Officers (TPO) resulting in Variation and Foreign Companies passed by the Jurisdictional Assessing Officers||Applicable in all assessments under section 143(3) of the Act. Draft Assessment Orders are passed by the assessment unit in the Regional e-Assessment Centre, to which the case has been assigned by the NeAC.|
|9.||Action on Draft Assessment Order||Not Applicable||The NeAC shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide to:
(a)Â Â finalise the assessment as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; or
(b)Â Â provide an opportunity to the assessee, in case a modification is proposed, by serving a notice calling upon him to show cause as to why the assessment should not be completed as per the draft assessment order; or
(c)Â Â assign the draft assessment order to a review unit in any one Regional e-Assessment Centre, through an automated allocation system, for conducting review of such order.
|10.||Final Assessment Order||Passed by the Jurisdictional Assessing Officer after considering the written and verbal submissions of the assessees.||The NeAC sends all the e-replies and submissions of the assessee containing the justification for revision of the draft assessment order to the regional assessment unit for revision of the draft assessment order.|
|In the cases, where no objections are filed by the assessees, the NeAC finalises the assessment based on the Draft Order only.
Upon receiving the Revised Draft Assessment Order, the NeAC may:
(i)Â Â in case no modification prejudicial to the interest of the assessee is proposed, finalise the assessment based on such revised draft assessment order; or
(ii)Â Â in case modification prejudicial to the interest of the assessee is proposed, an opportunity of personal hearing by way of video telephony only may be provided to the assessee, and based on the response of the assessee, the same procedure of revision and finalization is to be followed and Final Assessment Order is then passed by the NeAC.
|11.||Mode of Interface between the Assessee and the Assessing Authority||Electronic Mode via the âe-Proceedingsâ functionality in the ITBA Module. However, after serving the Show Cause Notice, an opportunity of Personal Hearing to the assessee involving physical interface between the assessee and the jurisdictional AO is to be provided. However, practically there was no bar on physical interface between the assessee and the jurisdictional assessing officer.||Electronic Mode via the âe-Proceedingsâ functionality in the ITBA Module. However, after serving the Show Cause Notice, an opportunity of Personal Hearing to the assessee via video telephony only may be provided to the assessee in certain specified circumstances|
1.4 Concluding Remarks
âSelf-reform automatically brings about social reform.â- Ramana Maharshi.
In order to make this path-breaking, radical and revolutionary initiative of the âfacelessâ and âjurisdiction-lessâ, âe-Assessmentsâ effective and taxpayer friendly, it is essential and crucial to issue appropriate clarifications with regard to the exact modus operandi of the functionality of such faceless assessments and to take suitable measures and steps to overcome the initial bottlenecks and hurdles by way of ensuring the commensurate and supporting IT infrastructure to enable seamless and smooth data transfer, incorporating standardization in the conduct of assessments by assessing authorities by implementing Standard Operating Procedures (SOPs) to do away with the subjective-ness and arbitrariness in making additions and disallowances in âFaceless Assessmentsâ and fixing proper and effective accountability in cases of high pitched assessments.
Clearly, the faceless assessmentâs process needs to be implemented in a very careful and thoughtful manner, considering the reality of complicated and ever dynamic business transactions.
So, all the stakeholders involved i.e. the taxpayers, the tax professionals, the assessing authorities, the regulatory body CBDT, the Finance Ministry and the Government should embrace this radical, revolutionary and path-breaking reform of âfaceless assessmentsâ in good and positive spirits and should work collectively and cohesively to make this initiative a grand success.
It is only then perhaps the Faceless Assessment will really live up to its true potential, and taxpayers as well as the tax administration authorities will reap the benefits that it is supposed to provide.
For the Tax Professionals though, it would mean missing out on âthe run-of-the-millâ, engrossing, satisfying, demanding and intriguing representations and face to face personal interactions and interfaces with the Revenue Authorities, the nostalgic feel and ambience of the Income Tax Offices including Central Revenue (CR) Building, Vikas Bhawan and the Drum Shaped Building, the sophistication and elegance of the Civic Centre and Large Taxpayers Unit (LTU) and most importantly that odd cup of tea with the assessing authoritiesâ¦.âChai pe Charchaâ¦..â
âThe only thing which is constant is the change!!âÂ
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Knowledge multiplies manifold by sharing. It is a supreme form of wealth.
About the Author :- Sh. Mayank Mohanka is a seasoned Tax Practitioner, a Fellow Member of the Institute of Chartered Accountants of India and a Bachelor of Commerce, in Honours Degree from Shree Ram College of Commerce (SRCC), Delhi University.
He is a Senior Partner in a Noida based established and reputed CA Firm, M/s S M Mohanka & Associates. He is the Founder Director in M/s Tax Aaram India Pvt Ltd, and has recently launched his unique Start-up Venture taxaaram.com, Indiaâs first digital platform offering painless, seamless and cost-effective professional e-services in relation to faceless assessments, appeals and other statutory e-compliances. He has a 15+ years of rich and profound experience in the field of Taxation (Direct & Indirect), and Advisory. He makes Representations for a widely diversified cross section of industries including Power Sector, Banking & Finance, Real Estate, Food Processing, Infrastructure, Manufacturing, Education and Information Technology, before Authority for Advance Rulings, ITAT, Education Boards and other appropriate forums.
He has to his credit 40 distinguished, informative, useful and practically oriented published articles in reputed journals, sites and platforms on wide ranging subjects including Income Tax, GST, PF, ESI, IBC, Corporate Laws, Education Acts & FEMA.
He has also authored a âBest Sellerâ Professional Book titled âCase Studies & Procedures under Direct tax Vivad se Vishwas Act, 2020â, Â and the Book âSUPER 21â, treasuring his real-life winning representations on Income Tax, GST, PF, ESI, IBC & Banking Regulation Act, in his professional practice.Â Â Â Â Â Â Â Â Â Â