Central Board of Direct Taxes: Structure and Procedure of Faceless Assessment under Income Tax Act, pursuant to the amendment of e-assessment Scheme, 2019
In a pioneering decision, the Central Government vide Notification no. 60/2020 and 61/2020 dated 13 August 2020 (Notifications 2020) introduced Faceless Assessment for the purposes of Scrutiny Assessment and Best Judgement Assessment under S 143(3) and 144 of Income Tax Act, 1961 (Act) so as to impart greater efficiency, transparency and accountability by eliminating the interface between the Assessing Officer and the Assessee in the course of the proceedings. Consequently, last year’s Notification no. 61/2019 and Notification no. 62/2019 (Notifications 2019), which introduced Income Tax E-Assessment Scheme, 2019 was amended accordingly to include Best Judgement assessment, and Faceless Assessment as well as prescribe the procedure for such assessment.
In this edition, we have encapsulated the structure and procedure, as notified in Notifications 2020 by CBDT for the purpose of Faceless Assessment:
1. Structure for Faceless Assessment
For the purpose of faceless assessment, the CBDT shall set up the below ‘centres’ and ‘units’ and specify their respective jurisdiction (refer Notifications 62/2020 to 66/2020 dated 13-08-2020 for jurisdictions)
- A ‘National e-Assessment Centre’ (“NeAC”) to facilitate and centrally control the e-assessment.
- ‘Regional e-Assessment Centres’ (“ReAC”) under the jurisdiction of the regional Principal Chief Commissioner for making assessment.
- ‘Assessment units’ (“AU”) for identifying points or issues, material for the determination of any liability (including refund), analysing information, and such other functions.
- ‘Verification units’ (“VU”) for enquiry, cross verification, examination of books of accounts, witness and recording of statements, and such other functions.
- ‘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.
- ‘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.
All the communications between all the units mentioned above, for the purpose of making an assessment under this scheme would be through the National e-Assessment Centre.
2. Procedure for Faceless Assessment
- the NeAC shall serve a notice on the Assessee under S 143(2), specifying the issues for selection of his/her case for assessment whereby the Assessee needs to file his/ her response within 15 days from the date of receipt; 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;
- the NeAC shall assign the case selected to a specific AU in any one ReAC through an automated allocation system;
- 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;
- Thereafter, the NeAC shall issue appropriate notice or requisition to the Assessee or any other person for obtaining the information requisitioned by the AU within the specified time; In case a taxpayer fails to file response to the notice, the NeAC shall issue a notice under S 144 of the said Act calling upon the Assessee to show cause as to why the assessment should not be completed to the best of his judgement;
- The Assessee or any other person, as the case may be, shall file his/ her response to the notice within the time specified therein;
- Where request for seeking assistance from the VU or the TU, as the case may be, has been made by AU, the request shall be assigned by NeAC to any VU or TU under any one ReAC, through automated allocation system;
- Thereafter, the NeAC shall send the report received from VU or TU to the concerned AU;
- The taxpayer can file a response to the notice issued under S 144 hereinabove (refer pt. 2.4). However, if the taxpayer does not file a response, the NeAC shall inform the AU and thereafter the AU shall prepare a draft assessment order under best judgment assessment along with penalty proceedings, if any, send a copy of such order to NeAC;
- The NeAC shall examine the draft assessment order in accordance with the risk management strategy specified by the CBDT, including by way of an automated examination tool, whereupon it may decide to either, (i) finalise the assessment as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, on the taxpayer, alongwith the demand notice, (ii) 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, (iii) assign the draft assessment order to a RU in any one ReAC, through an automated allocation system, for conducting review of such order;
- After being referred, the RU shall conduct review of the draft assessment order and may decide to either (i) concur with the draft assessment order or, (ii) suggest such modifications, as it may deem fit;
- The NeAC shall, on receipt of RU’s concurrence finalise or provide an opportunity to the taxpayer as mentioned hereinabove (refer pt. 2.9);
- Further, NeAC shall, upon receiving suggestions for modifications from the RU, assign the case to an AU, other than the AU which has made the draft assessment order, through an automated allocation system;
- AU shall, after considering the modifications suggested by the RU, send the draft assessment order to the NeAC.
- NeAC shall, upon receiving final draft assessment order, finalise the draft assessment order, or provide an opportunity to the taxpayer in case a modification is proposed, as the case may be; and the taxpayer may, in a case where notice is issued for making submissions against the draft assessment order, furnish his/ her response to the NeAC on or before the date and time specified in the notice;
- NeAC shall, (i) where no response to the show-cause notice is received, finalise the assessment as per the draft assessment order, or (ii) in any other case, send the response received from the Assessee to the AU and thereafter the AU shall, after taking into account the response furnished by the taxpayer, make a revised draft assessment order and send it to the NeAC;
- NeAC shall, shall, upon receiving the revised draft assessment order, in case (i) where no modification prejudicial to the interest of the Assessee is proposed, finalise the order; (ii) where modification against the interest of the Assessee is proposed, provide an opportunity to the taxpayer for hearing and making submissions;
- Finally, the response furnished by the taxpayer shall be dealt with by the NeAC and the draft assessment order finalised;
The NeAC shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over such action as may be required under the law.