Assessment and Appeal are prominent parts of Income Tax Act and required involvement of both assessee and departmental officers. Till 2019, the process of assessment and appeal was completely manual and entire proceedings required face to face interaction of both parties multiple times. However, this practice was adversely hampering integrity of departmental officers and transparency in assessment/appeal proceedings.
To overcome the issues of non-integrity, non-transparency and to promote digitalisation and bring efficiency, the government implemented “E-Assessment Scheme, 2020” i.e. faceless assessments scheme vide notification No. 61/2019 dated 12th September, 2019. However, all the assessment proceedings were not covered under such a scheme.
To cope up and make the tax system hassle free and transparent, our honourable Prime Minister in his recent speech came with a great initiative where he announced that now India has a new tax system which aims to be seamless, painless and faceless. He urges people to introspect and come forward to pay Income Tax.
Main concern of the Government is making every law and policy people centric and public friendly rather than power centric. For this Government launched a platform for “Transparent Taxation- Honouring the Honest” aimed at bringing transparency in the income tax system and empowering the taxpayers. Therefore, Scheme of “E-assessment” was replaced with “Faceless Scheme” vide notification No. 60/2020 and 61/2020 dated 13th August, 2020.
Referring to the faceless system, he said there is no need for direct contact between Taxpayer and Income Tax officer in all matters of scrutiny, notice, survey or assessment.
1. Key amendments made or proposed with effect from 13.08.2020
- Faceless assessment to be made effective from 13.08.2020 (N/No. 60/2020 dated 13th August, 2020)
- Faceless appeal to be made effective from 25.09.2020 (Press release dated 13th August, 2020)
- Extending scope of SFT (Notification to be issued)
- Taxpayers’ charter
Let us discuss each one in detail:
2. Faceless assessment
Section 143(3A)/(3B)/(3C) of Income Tax Act vest power in Central Government to make a scheme by notification for the purpose of making assessment to impart greater efficiency, transparency and accountability. This scheme can cover assessment under section 143(3) or Section 144 of Income Tax Act.
Section 143(3A) authorises to frame scheme through:
- Eliminating interface between assessing officer and assessee to the extent technologically feasible.
- Optimising utilisation of the resources through economies of scale and functional specialisation;
- Introducing a team-based assessment with dynamic jurisdiction.
By purview of Section 143(3A), Central Government notified E-assessment Scheme, 2019 vide N/No. 61/2019 dated 12th September, 2019. On 07.10.2019, E-assessment scheme was launched with the inauguration of the National E-assessment Centre (called NeAC).
However, there were still various assessments which were outside the purview of the “E-assessment Scheme” and therefore, the main purpose of no interaction between department officers and assessee was not getting solved. To overcome shortcomings of “E-Assessment Scheme”, the government amended such scheme with “Faceless Assessment Scheme” vide notification No. 60/20202 dated 13th August, 2020.
3. Difference between e-assessment and faceless assessment Scheme
|E-Assessment (Effective Up to 12.08.2020)||Faceless Assessment (Effective From 13.08.2020)|
|Applicable only in relation to assessment Proceedings under section 143(3).||Covers all assessments, except search & seizure as well as international tax assessments income tax cases|
|Following categories of assessments are kept outside the purview of E- Assessment:Reassessment u/s 147Search Assessment u/s 153ABest judgment assessment u/s 144Cases related to International Tax||B. Following categories of assessments are kept outside the purview of Faceless Assessment:Search Assessment u/s 153ACases related to International Tax|
4. Relevance of Faceless Assessment
Faceless assessment is a “big step in reducing Department’s interference from people’s lives” and ensures speedy assessment of cases. Further, another major cause is that the I-T department has been progressively reducing the percentage of cases picked up for scrutiny assessment so as to establish the fact that the department places trust on the taxpayer.
Now after the introduction of such scheme, except some cases (like survey and International Tax cases) all assessments will be covered where both Assessing officer and assessee will not be knowing each other. The taxpayer will not require to know where his assessing officer is seated and neither the assessing officer will get to know where the assessee is situated.
5. Faceless assessment centers
For the purpose of successful implementation of Faceless Assessment, board has set-up following:
- National e-assessment centre,
- Regional e-assessment centre,
- Assessment Units,
- Verification units,
- Technical units,
- Review unit.
6. Procedure to be followed for Faceless Assessment
- National e-assessment authority shall pick up a case for assessment based on facts or through an automated allocation system.
- Post completion of procedure, National E-assessment Centre (NeAC) shall forward the case to any one Regional e-assessment Centre selected through an automated allocation system. Please note that there is no requirement to select a jurisdictional assessment center. NeAC can select any assessment unit.
- All requests of additional information, documents or enquiry etc. shall be sent by the Assessment unit to NeAC and then NeAC shall transfer such request to the concerned person.
- Upon finalisation of assessment, Assessment order shall be shared by the Assessment unit with NeAC who in turn will transfer the same to assessee..
7. Exchange of communication exclusively by electronic mode-
For the purposes of Faceless Assessment Scheme-
(a) all communications between the National e-assessment Centre(NeAC) and the assessee, or his authorised representative, or any other person shall be exchanged exclusively by electronic mode and
(b) all internal communications between the National e-assessment Centre, Regional e-assessment Centres and various units shall be exchanged exclusively by electronic mode.
*NeAC facilitates conduct of e-assessment proceedings in a centralised manner, vested with jurisdiction to make assessment.
8. Authentication of electronic record-
For the purpose of amended scheme, an electronic record shall be authenticated by –
(i) the National e-Assessment Centre by affixing its digital signature; and
(ii) the assessee or any other person, by affixing his digital signature if he is required to furnish his return of income under digital signature or under electronic verification code.
9. Effect after introduction of Faceless Scheme
1. Increase in use of electronic channels:
Prior to the said scheme, if modification is proposed in the draft assessment order, an opportunity of being heard is provided to assessee by issuing him a show cause notice as to why the assessment should not be completed, the assessee or his authorised representative may request for personal hearing so as to make his oral submissions or present his case before the income-tax authority.
Now after the introduction of Faceless Assessment Scheme, the authority under which proceedings is going on, if approved the request for personal hearing shall be conducted exclusively through video conferencing, including the use of any telecommunication application software which supports video telephony, in accordance with the procedure laid down by the Board.
2. Concept of jurisdictions has been removed as assessment can get assigned to any assessment unit through an automated allocation system. Assessee is not required to visit his jurisdiction AO. E.g. Assessee may pertain to State of Delhi and Assessment unit may pertain to Karnataka State.
3. Cases of scrutiny shall be selected through an automated allocation system.
4. No physical interaction between Assessee and Assessing officer as all details shall be shared electronically.
10. Faceless appeal
Department has made an effort to digitise the appeal process also with effect from 25.09.2020.
Appeal will be allotted to officers on a random basis and taxpayers will not need to visit offices or meet any officials. The identifiers of the officers deciding the appeal will remain unknown. The facility of faceless appeal will be available for citizens across the country from 25th September 2020.
By launching these platforms “Transparent Taxation – Honoring the Honest” will incentivise taxpayers to be more honest and transparent in their filings and lead to gradual rise in the direct tax collections. They will enjoy the benefits of relatively less documentation and greater ease of compliance, increased liquidity and flexibility of investment choices. Faceless assessments and appeals will give confidence to the taxpayer of fairness and fearlessness.
11. Extending scope of SFT (Specified Financial Transactions)
Income Tax Department aims at keeping a watch on consumption and investment pattern of assessee and wants to collect maximum information related to incomes to avoid tax evasion. For this purpose, the Department has proposed to expand the scope of reporting under SFT by adding various transactions such as payment of insurance premium, health premium etc.
Details of Specified financial Transaction can be accessed here.
12. Taxpayers’ charter
A Taxpayer’s Charter is supposed to safeguard the rights of a taxpayer. The taxpayers’ charter announced in the Budget 2020-21 by inserting section 119A with effect from 01.04.2020 to empower CBDT to adopt and declare a taxpayer’s charter and empower citizens by ensuring time-bound services by the Income-Tax Department. It emphasized that there is an urgent need for the creation of a trust-based tax environment. The FM announced that a Taxpayer’s Charter shall be enshrined in the income-tax law. She proposed to amend the provisions of the Income-tax Act to mandate the Central Board of Direct Taxes (CBDT) to adopt a Taxpayers’ Charter.
Here’s what the taxpayer charter says about its commitment to taxpayers.
- To provide fair, courteous and reasonable treatment: The tax department will provide prompt, courteous and professional assistance in dealings with the taxpayer.
- Treat taxpayer as honest: The income tax department shall treat every taxpayer as honest unless there is a reason to believe otherwise.
- To provide mechanism for appeal and review: The tax department shall provide a fair and impartial appeal and review mechanism.
- To provide complete and accurate information: The department shall provide accurate information for fulfilling compliance obligations under the law.
- To provide timely decision: The department shall take decision in every income-tax proceeding within the time prescribed under the law.
- To collect the correct amount of tax: The department shall collect only the amount due as per the law.
- To respect privacy of taxpayers: The department will follow the due process of law and be no more intrusive than necessary in any inquiry, examination or enforcement action.
- To maintain confidentiality: The department shall not disclose any information provided by the taxpayer to the department unless authorized by law.