The first appeals against the Assessment Orders can be filed before the concerned Commissioner of Income Tax (Appeals). The procedures for disposal of these appeals have been changed under the Faceless Appeal Scheme implemented from 25th September 2020. The objective of the scheme after the faceless assessments is to eliminate human interface from the first appellate system too. The Prime Minister has unveiled the ‘Transparent Taxation–Honouring the honest’ platform on 13 August 2020 releasing taxpayer’s charter and a Scheme for Faceless Appeals inter alia which has been notified by the Central Board for Direct taxes (CBDT) vide Notifications dated September 25, 2020, bearing No. 76 of 2020-Income Tax and No. 77 of 2020-Income Tax. The Finance Act, 2020 (2020) 428 ITR 1 (St) vide amendment in section 250(6C) of the Income-tax Act, 1961 (Act) expanded the scope of e-assessment to include e-appeals.
The Faceless Appeal Scheme will not be applicable for Income-tax proceedings in relation to serious fraud, major tax evasion, and matters pertaining to searches, international tax, the Black Money Act and other sensitive issues. The functions and procedures of taxpayers and the NFAPC will remain largely the same during and after appellate proceedings, as they do in the current ‘physical hearing’ environment. Furthermore, with regard to the internal functioning and procedures of the NFAPC and its various units, these will be similar to faceless assessment proceedings. The entire process of an appeal, from the communication of notice, questionnaire, verification, enquiry filing of additional grounds, admission of additional evidence, penalty proceedings for non-compliance of notices and rectification proceedings. And finally, communication of the appellate order will be online, will dispense with the need for any physical interface between taxpayers and their authorized representatives and the Income-tax authorities.
THE NEW FRAMEWORK
Through the above mentioned two orders and notifications, the Central Board of Direct Taxes (CBDT) has set up the following centres/units for the purpose of facilitating faceless appeals in a centralised manner:
(1) National Faceless Appeal Centre (NFAC)
(2) Regional Faceless Appeal Centre (RFAC)
(3) Appeal Unit (AU)
At the top of the pyramid is the NFAC has facilitated the conduct of e-appeal proceedings in a centralised manner to act as the nodal point i.e. single point of contact, for communication among the taxpayer, AU and the National Faceless Assessment Centre (NFAsC), which is the nodal agency for faceless assessments/Assessing Officer (AO). The NFAC will be responsible for the overall conduct of the appeal proceedings in a centralised manner. All communication between the appeal unit and the taxpayer or any other person, or the NFAC or the Assessing Officer with respect to the information, documents, evidence or any other details, as may be required, will be routed through the NFAC, exclusively through the electronic mode.
The NFAPC will send notices to taxpayers on their e-filing portals registered email IDs and the Income-tax department’s mobile app. This will be followed by a real-time alert. (B) Under the NFAC, there will be the RFAC, which will be responsible for facilitating appeal-related proceedings and disposal of appeals. Every RFAC will have multiple Appeal Units and each Appeal unit will have one or more CITs (A) and other Income-tax authority or staff, as required by the CBDT. The NFAC will assign the appeal to an AU, in any one RFAC, through an automated allocation system. The RFAC has also facilitated the conduct of e-appeal proceedings. Each RFAC is consisting of various AUs. The AU comprising of one or more senior tax officials is performing the function of disposing of the appeal. Its main functions include admitting additional grounds/evidence, directing the NFAsC / AO to make further inquiries, providing an opportunity to the taxpayers of being heard, and analysing of material furnished. It is pertinent to note that the AU will not directly interact with the taxpayer and all the interactions will be done through the NFAC.
The functions and procedures of taxpayers and the NFAC will remain largely the same during and after appellate proceedings, as they do in the current ‘physical hearing’ environment. Furthermore, with regard to the internal functioning and procedures of the NFAC and its various units, these will be similar to faceless assessment proceedings.
PROCESS TO FILE FORM -35 ONLINE
a. Pay the necessary fee.
b. Login in your Account using User credentials to Income Tax Portal.
c. Go to e-File, then Income Tax Forms & Select File Income Tax Forms
d. Select File Now
e. Select the Assessment Year for which you want to file an Appeal
f. Order Selection Screen – with or without DIN ( Din is applicable from 1st October 2019)
g. DIN to be mention if marked against DIN in affirmative. Section and Sub Section to be the mention from down rolling list, Assessment Order number to be given, Date of Order, and date of service of the order to be mention.
h. Now start filing various screens of Form No 35 Online. You will get some details Pre-filed and fill remaining editable details properly. Following screens will appear onward.
a. Basic Information- Name, PAN, Address, and Mobile Number will be prefilled. Land Line phone number can be added. Address to which notice sent is prefilled. Mention TAN if available, Choose yes or No for communication on email.
b. Details of Order against which an appeal is filed- Mark A Y. DIN of order, an appropriate section is prefilled, Order number to be mention. Provide details related to Filed ITR, selected for Scrutiny and against which Appeal is to be filed.
c. Pending appeals if any- Provide details and their status.
d. Appeals details- Now provide details of the order to be appealed against.
e. Details of Tax Paid- Provide details of Tax Paid.
f. Statement of facts, Grounds of Appeal & additional evidence u/s 46 A- Now Provide details related to Statements of facts, Grounds of Appeal, and Additional Evidence-related information which is not made available at the time of Assessment. Legal grounds relating to limitation, natural justice, jurisdictional issues, etc should be raised at the beginning of the submission. Adequate attention needs to be paid while preparing Facts and Grounds of Appeal. These are the points on which, your case will proceed further. Each matter on which there is controversy/ matter of disputes between the assessee and the Assessing Officer needs to be explained properly. All facts should be adequately drawn because in case of appeal before ITAT also these Grounds of Appeal play a very crucial role.
The decisions if any relied upon should be referred. Also if any decision is relied upon by AO in the assessment order, the assessee should distinguish the same or there has to be an explanation why the same is not applicable to the facts of the case.
g. Appeal filing details
Evidence related the information which is not made available at time of Assessment and Additional Evidences u/s 46 A
i. Form of Verification.
KEY TAKEAWAY – FACELESS APPEALS
Condonation of delay
An appeal should be filed within a period of 30 days of the service of the Assessment order along with notice of demand. Orders are uploaded on the portal. However, CIT (A) has the power to condone the delay in filing an appeal within the prescribed time period. In case of delay, please provide the reasons for the delay. The reason should be genuine. An application for condonation of delay along with an affidavit stating the reasons for the delay should be filed along with the appeal. The Hon’ble Calcutta High Court in Charki Mica Mining Co. Ltd. vs. CIT (1978) 111 ITR 193 has held that the limitation period commences from the date of receipt of notice of demand by the Assessee and not from the date of receipt of the Assessment order. Affidavits should be properly drafted and notarized. Vague reasons should be avoided. In Collector of Land Acquisition v. Mrs. Katiji & Others 167 ITR 471 (SC) the Hon’ble Supreme Court has held that the Courts should have a pragmatic & liberal approach in admitting the appeal beyond the period of limitation. While drafting the application and the affidavit for condonation of delay the following Legal Principle culled out from various decisions should be kept in mind.
In matters of condonation of delay a highly pedantic approach should be eschewed and a justice-oriented approach should be adopted and a party should not be made to suffer on account of technicalities. g. In every case of delay, there can be the same lapses on the part of the litigant concerned, but that alone is not enough to shut the door against him. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated.
If appeal requires any additional grounds for appeal filed by an appellant is to be forwarded to the AO or the NFAC for their comments before such grounds are admitted. It is important to emphasize here that Income-tax Law empowers absolute discretion to the CIT (A) for admission of any additional ground, on being satisfied that the omission is not wilful or unreasonable. Hence, it seems that such provisions may increase litigation.
Can it be done? Is it a New Ground or Amendment of Existing Ground? S. 250(5) – CIT (A) may, at the hearing of an appeal, allow appellant to go into any ground of appeal not specified in grounds of appeal, if he is satisfied that omission of that ground from the Form of appeal was not wilful or unreasonable.
Explanation to S. 251 – In disposing of an appeal, the CIT (A) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the CIT (A) by the appellant
Madras High Court in M/s Ramco Cements Ltd. vs. DCIT Tax case Appeal No. 916/2014 – It is to be noted herein that the Act does not contain any express provision preventing the assessee from raising new grounds in appeal and there is no provision in the act restricting the Appellate Authority to entertain such new ground in the appeal. In the absence of a statutory bar, the appellate authority is vested with the power, which is co-terminus with that of original authority, to allow the assessee to raise new ground, if the fresh grounds are bonafide, not wilful or reasonable
Additional evidence u/s 46A
If the assessee is been prevented by good, sufficient, or reasonable cause or adequate time is not allowed during assessment proceeding, the assessee is entitled to produce such fresh evidence before the appellate authority by making an Application U/R. 46A. The CIT(A) is entitled to send one copy to the Assessing Officer and obtains a remand report. The assessee should state in the application what prevented him by good, sufficient, or reasonable cause or adequate time is not allowed to produce such fresh evidence before AO. The application must state what the relevance of the documents in the matter is. Opportunity to Assessing the officer to examine documents and evidence should be given by the appellate authority. Rule embodies provision of natural justice: Under Rule 46A (4) the CIT(A) on its own discretion can ask the assessee to produce documents or evidence. Additional evidence gathered by the CIT(A) on his own is not required to be produced before Assessing Officer for his comments.
Bombay High Court in Smt. Prabhavati S. Shah vs. CIT  231 ITR 1 – AAC should have admitted additional evidence in the exercise of power u/s 250(5) as well as under Rule 46A(1)(c) considering the fact that AO had considered loan as income only on the ground that summons issued to lenders were returned unserved and didn’t provide an opportunity to the assessee during assessment proceedings
High Court of Delhi in CIT vs. Manish Build Well (P) Ltd. in ITA No.928/2011 dated 15.11.2011 (2011) 63 DTR 369 – after admission of additional evidence, it is mandatory to follow Rule 46A(3) of the Rule. It was found that the AO only objected to the admissibility of additional evidence and restricted himself to comment on the merits of the evidence. Therefore, the Hon’ble court observes that the ld. CIT (A) did not follow the mandatory procedure for consideration of additional evidence at the first appellate stage.
ITAT Chandigarh, ITO Vs Bhagwan Dass, Contractor IT Appeal No. 383 (Chd.) of 2011. On a plain reading of Rule 46A, it is clear that it is introduced to place fetters on the right of the appellant, to produce before 1st Appellate Authority, any evidence, whether oral or documentary, other than the evidence produced by him, during the course of proceedings before the AO, except in the circumstances set out therein. It does not deal with the power of the 1st the appellate authority, to make further inquiry.
Review of order
A notable feature in the Faceless Appeal scheme is its proposal for the review of orders. Under the scheme, a draft appeal order will be mandatorily reviewed by an Appeal Unit other than the Appeal Unit that has issued the draft appeal order, if the aggregate amount payable in respect of issues disputed in appeal exceeds the threshold to be prescribed by the CBDT. With respect to other orders, these will be subject to review, based on the risk management strategy specified by the CBDT.
The NFAPC will have to send a draft order to another Appeal Unit for preparing a revised draft appeal order, if it has been sent the draft order to a review appeal unit and which has provided its comments on the order. In this process, it seems that the original appeal unit may not have an opportunity to give its comments, which may not fit into the basic tenets of judicial principles. Therefore, it is suggested that an appeal exceeding the threshold limits should be heard by larger appeal units, which meet the requirements of the judicial process, and are efficient as well as beneficial to taxpayers who can present their cases to all the concerned units.
As far as a personal hearing is concerned, taxpayers or their authorized representatives will have to make a request for such hearings. The Chief Commissioner or the Director-General of the RFAPC may approve their request. In the context of faceless appeals, the Delhi High Court has recently admitted27 a petition where non-granting of a personal hearing has been challenged on the plea that it is ultra vires to Article 14 of the Indian Constitution.
Exchange of communication
Para 9 of the Scheme prescribes that, all communications between the NFAC and the appellant, or his authorized the representative shall be exchanged exclusively by electronic mode; and all internal communications between the NFAC, the RFAC, the NeAC, the AO, and the AU shall be exchanged exclusively by electronic mode.
As per section 282 of the Act, dealing with service of notice generally, the Explanation – For the purposes of this section, the expressions “Electronic mail” and “Electronic mail message” shall have the meanings as assigned to them in Explanation to section 66A of the Information Technology Act,2000 (21 of 2000). Explanation to 66A reads as under “ Explanation – For the purpose of this section, terms “ electronic mail” and “ The electronic message” means a message or information created or transmitted or received on a computer, computer system, computer resource, or communication device including attachments in text, image, audio, video, and any other electronic record which may be transmitted with the message”
In a case where ‘Appeal Unit’ intends to enhance an assessment or a penalty or reduce the amount of refund, it needs to prepare and send a show-cause notice containing the reasons for such enhancement or reduction, as the case may be, to NFAC, whereupon NFAC will (i) serve a show-cause notice on the taxpayer, and (ii) act as a communication the channel between the taxpayer and the Appeal Unit.
Circumstances in which manual appeal proceedings can be conducted
The scheme also provides that Principal Chief Commissioner or the Principal Director General, in charge of NFAC, may at any stage of the appellate proceedings, if considered necessary, transfer the appeal with the prior approval of the CBDT to such CIT (A) as may be specified in the order.
No personal appearance
The Scheme provides that the taxpayer will not be required to appear either personally or through its authorized representative in connection with any proceedings under the Scheme before NFAC or RFAC or Appeal Unit. The taxpayer may request for personal hearing to make oral submissions to present his case. The Chief Commissioner or the Director General, in charge of the RFAC under which the concerned unit is set up, may approve the taxpayer’s request for personal hearing (an electronic hearing through video conferencing) provided such a request is covered under the prescribed circumstances (circumstances yet to be notified).
Further appellate proceedings
The Scheme provides that an appeal against an the order passed by the NFAC will lie before the Income Tax Appellate Tribunal (ITAT) having jurisdiction over the jurisdictional tax officer. Subject to the provisions as may be prescribed, where any order passed by the NFAC or CIT(A) is set aside and remanded back to the NFAC or CIT(A) by the ITAT or High Court or Supreme Court, the NFAC will pass the order in accordance with the provisions of the Scheme.
The scheme also provides for the initiation of penalty for non-compliance of any notice, direction, or order issued under the Scheme. The Appeal Unit may send recommendations to the NFAC whereupon NFAC will (i) serve a show-cause notice on the taxpayer, and (ii) act as a communication channel between the taxpayer and the Appeal Unit which recommended the initiation of penalty.
Mode of communication
All exchange of communications between the NFAC and the taxpayer as well as all internal communications between NFAC, RFAC, NeAC, tax officers, and Appeal Units will be strictly through electronic mode.
Authentication of electronic record
Para 10 of the Scheme prescribes that an electronic record shall be authenticated by the NFAC by affixing its digital signature. The appellant or any other person, by affixing his digital signature if he is required under the Rules to furnish his return of income under digital signature, and in any other case by affixing his digital signature or under electronic verification code “Electronic verification code” shall have the same meaning as referred to in rule 12 of the Rules.
Delivery of electronic record
Every notice/order/any other electronic communication will be delivered to the taxpayer by way of placing in the taxpayer’s registered e-filing account or sending it to the registered email address or uploading on the income-tax department’s mobile application that has been downloaded on the taxpayers’ registered mobile number followed by a real time alert. The taxpayer is required to file responses to any notice or order or any other electronic communication under this Scheme through his or her registered account.
Service & delivery through social media
Every notice, order, or other electronic communication is delivered to the addressee (i.e., the appellant) via: Placing an authenticated copy of the communication in the appellant’s registered account; Sending an authenticated copy of the communication to the registered email address of the appellant or the appellant’s authorized representative, or Uploading an authenticated copy on the appellant’s mobile application; followed by a real-time alert (defined under the scheme to mean any communication sent to the appellant, via short messaging service (SMS) on a registered mobile number, an update on a mobile application, or an email to a registered email address).
The appellant files the response or any other electronic communication under the scheme through the registered account. Once an acknowledgment is sent by the NFAC containing the hash result generated upon successful submission of the response, the response is deemed to be authenticated.
The Hon’ble High Court of Bombay in the case of Kross Television India Pvt Ltd vs. Vikhyat Chitra Production dated March 23, 2017 Suit (L) No. 162 of 2017 (BOM) (HC)held that the purpose of service is put the other party to notice and to give him a copy of the papers. The mode is irrelevant. The rules and procedure are not so ancient or rigid that only antiquated methods of service through a bailiff or by the beat of the drum is acceptable. E-Mail & Whatsapp are not formally approved but if service is shown to be affected and is acknowledged it cannot be said that the Defendants had ‘no notice’. Defendants who avoid and evade service by regular modes cannot be permitted to take advantage of that evasion.
Withdrawal of Appeal
Appeal once filed cannot be withdrawn by the appellant. However, the appellate authority in its discretion may allow withdrawal of appeal and dismiss the same as not pressed. Application for withdrawal of appeal may be filed with Application for withdrawal of appeal may be filed with sufficient reasons for withdrawal of the appeal. CIT v.Rai Bahadur Hardutroy Motilal Chamaria(1967) 66 ITR 443 (SC)
Procedure in e-appeals:
The Scheme lists down inter alia the procedures to be followed for the purpose of disposal of appeals. In summary, it provides as under:
a. The appeals will be allocated by NFAC to any appeal unit in a random manner (with the help of suitable technological tools, including artificial intelligence and machine learning).
b. The ‘Appeal Unit’ may make a request to NFAC for:
c. The ‘Appeal Unit’ after considering the response/submissions filed by the taxpayer and on perusal of information available on record will pass a draft order in writing and send such draft order to NFAC along with details of any penalty proceedings to be initiated, if any.
d. The NFAC upon receipt of draft order in case where:
e. The aggregate amount of tax, penalty, interest or fee, including surcharge and cess, payable in respect of issues disputed in appeal is more than the amount as may be prescribed, will send the draft order to Appeal Unit other than the Appeal Unit which prepared the draft order through automated allocation system for conducting review of such order;
f. In any other case, examine the draft order (with the help of suitable technological tools, including artificial intelligence and machine learning to reduce the scope of discretion), whereupon it may decide to:
g. The NFAC after finalizing the order, will send the copy of order to: