In the series of tax reforms, the Prime Minister Narendra Modi has on 13th August, 2020 announced some reformative measure during launch of ‘Transparent taxation honouring honest’ platform like faceless assessment, faceless appeal process and tax payer’s charter. Faceless Assessment and Taxpayer’s Charter is implemented with immediate effect, the Faceless Appeal will be effective from 25th September 2020.
I) Faceless Assessment:
> Introduction of Faceless Assessment:
Faceless Assessment is an extension of E-assessment scheme 2019 launched by Government of India in September 2019. Under the faceless scheme of assessment selection of the cases for scrutiny is supposed to be devoid of any human intervention. It will be done randomly and under an automated process.
The selection of cases and communication is proposed to be centralised. The selection of the cases will be done with the help of algorithms put in place on the criteria applied through data analytics and artificial intelligence. Excluding the role of human in the selection of cases for scrutiny will help remove individual bias as well as individual discretion of a particular assessing officer. This will result into altogether extinction of corruption practices involved in selection of the cases.
While on the other end the assessment process though not fully automated but will be system driven under which all the communication will be centralised. All the communication will be sent by central assessment centre the way the processing of the ITR and handling of TDS matter is done by CPS, Bangalore and TRACES respectively. The issue of notices and sending of final assessment order will be done through the central unit.
Under the new assessment scheme, the taxpayer and the tax official will not have any direct human intervention. The entire assessment process will be divided into various units. So the draft assessment will be done by one unit. The same would be reviewed by another unit and the final assessment will be done by a different units. The allocation of cases to various units will also be automated under the faceless scheme of assessment. It is also proposed that the particular task comprised in the assessment process will be allocated to different teams located at differently places geographically. This will create anonymous system where the tax payer does not know who the tax assessing officer is as the function of assessment will be performed by various units and that too in the form of team and not an individual.
> Impact of Faceless Assessment:
Due to automation in selection of cases, the discretionary power of the officer to select some of the cases will go away and so will the corruption inbuilt in it. Moreover due to the assessment process being divided into various parts and each unit supposed to work as a team during the process of assessment, the component of corruption in the system will be minimised though it cannot be all together ruled out. This is because though the tax payer would not know who is his assessing officer but the persons involved in any team at any stage of assessment will certainly know fully about the taxpayer. So the possibility of the tax payers being approached by any team members of the team of any of the unit involved in assessment cannot be ruled out.
Though it will minimise corruption from the system but it will cause undue hardship to taxpayer in the form of having to scan and upload tons of documents. Submission of physical documents is far easier than having to scan and upload tons of documents. Moreover every tax payer may not have the well-equipped system to carry out such tasks.
> Structure of Faceless Assessment:
For the purpose of faceless assessment, the CBDT shall set up the below ‘centres’ and ‘units’ and specify their respective jurisdiction.
1. ‘National e-Assessment Centre’ (“NeAC”) to facilitate and centrally control the e-assessment.
2. ‘Regional e-Assessment Centres’ (“ReAC”) under the jurisdiction of the regional Principal Chief Commissioner for making assessment.
3. ‘Assessment units’ (“AU”) for identifying points or issues, material for the determination of any liability (including refund), analysing information, and such other functions.
4. ‘Verification units’ (“VU”) for enquiry, cross verification, examination of books of accounts, witness and recording of statements, and such other functions.
5. ‘Technical units’ (“TU”) for technical assistance including any assistance or advice on legal, accounting, forensic, information technology, valuation, audit, transfer pricing, data analytics, management or any other technical matter.
6. ‘Review units’ (“RU”) for reviewing the draft assessment order to check whether the facts, relevant evidence and law and judicial decisions have been considered in the draft order.
> Procedure of Faceless Assessment:
1. National e-Assessment Centre (NeAC) will serve a notice on the assessee u/s 143(2) specifying the issues for selection of the case for Assessment.
2. The assessee may, within 15 days from the date of receipt of notice file the response to NeAC.
3. It is impertinent to note that the taxpayer’s case gets assessed under NeAC only when a taxpayer fails to furnish an income tax return voluntarily or in response to a notice, either under S 142(1) or 148(1) or 143(2) of the said Act, as the case may be, asking the taxpayer to furnish a return.
4. The NeAC shall assign the case selected to a specific AU in any one ReAC through an automated allocation system.
5. The AU may request NeAC to obtain further information, documents or evidence from the Assessee or conduct certain enquiry by the VU or seek technical assistance from TU.
6. Based on the specific request from ReAC, the NeAC will issue the appropriate notice or requisition to the assessee or any other persons for obtaining information or documents sought by the ReAC.
7. The assessee or any other authorised person may file the response to NeAC within such time as may be extended on an application to NeAC by the assessee or any other person.
8. Where certain request for enquiry or verification is made by ReAC then the NeAC will assign it to Verification Unit through an automated allocation system.
9. Thereafter, the NeAC shall send the report received from VU or TU to the concerned AU.
10. Where the assessee fails to comply with the notice from NeAC or notice issued u/s 142(1) or direction issued u/s 142(2A), the NeAC will serve upon such assessee a notice u/s 144 giving an opportunity to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of its judgement.
11. Where the assessee fails to submit the response within the time specified in the notice or within such extended time, then the NeAC will intimate the assessment unit (i.e. ReAC) about failure of the assessee.
12. The ReAC, after considering all the relevant material available on record, will make in writing a draft assessment order and send copy of such order to NeAC. The ReAC will provide the details of the penalty proceedings to be initiated.
13. NeAC will examine the draft assessment order in accordance with risk management strategy specified by the Board, including by way of automated tool and it may decide to
i) Finalise the assessment order and serve copy of the order along with the demand order and notice for initiating penalty order if any.
ii) Provide an opportunity to the assessee in case any modification is proposed by serving a notice to the assessee
iii) Assign the draft assessment order to a review unit for conducting review of such order.
14. The review unit may concur with the draft assessment order or suggest modifications to the draft assessment order and intimate NeAC.
15. The NeAC upon receiving concurrence of the review unit either finalise the order or provide an opportunity to the assessee to respond.
16. The NeAC, upon receiving the suggestions for any modifications from the review unit, will assign the case to ReAC other than to unit which made the draft assessment order
17. The ReAC, after considering the suggestions made by the review unit will send the final draft assessment order to NeAC
18. The NeAC upon receiving the final draft assessment order will decide to finalise the order or provide an opportunity to the assessee to respond.
19. Where show cause notice is received by the assessee, the assessee may furnish his response to NeAC within such time or such extended time if any.
20. The NeAC, will
i) in case where no response is received to the show cause notice finalise the draft assessment order
ii) in any other case, send the response received to the assessment unit. (ReAC)
21. The ReAC, after considering the response furnished will make a revised draft assessment order and send it to NeAC.
22. The NeAC upon receiving the revised draft assessment order
i) In case no modification is prejudicial to the interest of the assessee, finalise the assessment order or
ii) In case modification is prejudicial to the interest of the assessee, provide an opportunity to the assessee by serving notice
iii) The response furnished by the assessee shall be duly considered before finalising the assessment order
23. The NeAC, after completion of assessment, will transfer all electronic records of the case to the Assessing Officer having jurisdiction over the said assessee for such action as may be required under the Act.
The faceless system of assessment will not apply to certain category of cases like black money and benami property matters, international taxation cases, serious fraud cases and tax evasion cases. All the cases covered under income tax raids will also be outside purview the faceless assessment scheme.
II) Tax Payer’s Charter:
The taxpayer charter was first introduced in the budget speech by Honourable Finance minister Nirmala Sitharaman while presenting budget for the year 2020-21.
> 14 Point Taxpayer Charter:
The 14 Point taxpayer charter includes the following:
1. Provide fair, courteous, and reasonable treatment
2. Treat taxpayer as honest
3. Provide mechanism for appeal and review
4. Provide complete and accurate information
5. Provide timely decisions
6. Collect the correct amount of Tax
7. Respect privacy of taxpayer
8. Maintain confidentiality
9. Hold its authorities accountable
10. Enable representative of choice
11. Provide mechanism to lodge compliant
12. Provide a fair and just system
13. Publish service standards and report periodically
14. Reduce cost of compliance
To implement the Taxpayer Charter the department expects following from the Taxpayer:
1. Be Honest and Compliant
2. Be informed
3. Keep accurate records
4. Know what representative does on his behalf
5. Respond in time
6. Pay in time
III) Faceless Appeal:
As a part of Government initiative to have greater transparency, efficiency, and accountability in the assessment process, the faceless appeal scheme is introduced on similar lines of faceless assessment.
Faceless Appeal scheme to have following features:
1. Empowering Govt. to notify faceless appeal scheme for disposal of appeals
2. Eliminating interface between Commissioner (Appeals) and the appellant during appeal proceedings to the extent technologically feasible
3. Optimizing utilisation of the resources through economies of scale and functional specialisation
4. Introducing appeal system with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals)
The Government is yet to notify the Faceless Appeal scheme and is expected to be made effective from 25th September 2020.