The CBDT is launching the Faceless Assessment in various direct & indirect tax procedures from today as announced earlier as promulgated by Prime Minister Narendra Modi as the income-tax appeals are all set to go faceless from Friday. Further, the income tax department has already enunciated PAN-India faceless assessment facilities for all taxpayers from August 13. The Centre hopes that the faceless system will ease compliance and expand the tax base.

The Faceless scrutiny system involves picking a random tax return by a central computer for scrutiny on the basis of certain risk parameters and mismatch and then allows them to a team of tax department officers. Faceless assessments will necessitate a structural change for tax authorities as well as significant infrastructure support. The new perspective structure needs fresh training for officers in a bid to streamline assessments.

Faceless Assessment

India announced a faceless assessment of tax on a preliminary basis since October 2019, undertaking around 58,000 cases. Out of which a total of 11000 cases were resolved and around orders 4,000-5,000 orders are expected to be issued soon.

Why do we need a faceless assessment?

a. Fulfilment of Specified Objectives under the Act-

The objectives to be pursued for achievement under this system are – exponentially faster clearance, a reduced interface between taxpayers and officers, and enhanced ease of doing business. Execution of a faceless scheme would eliminate the edge between the income tax authority and the assesses. It would also optimize the utilisation of the resources through economies of scale and functional specialization.

Therefore, all cases other than those assigned to the central charges (serious frauds, major tax evasion, sensitive and search matters, black money, and benami cases) and international tax charges are to be done through faceless assessment.

b. Extension of faceless assessment to all IT proceedings-

Earlier, the Government had proposed the provisions related to faceless Assessment to propose to almost all proceedings under the income tax law, including for collection and recovery of tax and gathering of information citing its importance in encouraging Ease of Doing Business”.

Further, The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020 suggested extension of the faceless assessment scheme to at least eight processes including under income tax law, collection and recovery of tax, revision, and effect of orders and approval or registration are proposed without any direct intervention from the department. The legislation also proposes faceless inquiry or valuation and a faceless collection of information.

The Bill also intends to formulate a scheme for ‘faceless jurisdiction of income-tax authorities’ that would “impart greater efficacy, transparency, and responsibility”. Currently, the faceless scheme is already executed for scrutiny assessment and would be prolonged to appeal cases from Friday, September 25.

c. Safeguard measures in place for e-assessment-

The income tax department has put in place in-built safeguard mechanisms to address the rise in ad hoc additions in demand by tax officers due to a gap in understanding or inadequate submissions. Any additions in demand made by a tax officer under the faceless assessment process for over Rs 5 lakh of income will undergo a rigorous review process before a final demand order is passed.

With the department expected to carry out close to 200,000 faceless assessments by March 31, 2021, the in-built check is aimed at ensuring that no one-sided or ex-parte assessment goes unchecked. The review unit will see if the addition being made or tax being levied is genuine or not. Under Section 144 of the Income Tax Act, the assessing officer can carry out ex-parte or one-sided assessment after serving a notice on the non-filer to the best of his judgment.

d. CBDT Clarification regarding Income Tax Appeals-

The CBDT clarified that the appeals at the tribunal or High Court will be allowed to file in the state where the assessee resides. Further, all appeals till the Commissioner of Income Tax (Appeals) level will go faceless, personal hearing might be allowed via video-conferencing in some cases after approvals from the concerned senior designated officials.

Conclusion:

The Union Finance had promulgated the faceless Assessment earlier in August 2020, stating that the prevailing system of scrutiny assessments in the income tax department contains a higher level of personal interaction amid the taxpayer as well as the department which leads towards certain unwanted practices on the part of tax officials.

Therefore, the introduction of such procedures is an important step leading towards the greater objectives of better taxpayer service, lessening of taxpayer complaints relating to the Prime Minister’s vision of ‘Digital India’ as well as promotion of easiness of carrying out business.

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