Faceless Assessment under Income Tax- A welcome step in Indian Judiciary

One of the main focus areas of the Modi Government right from inception has been tax reforms in the country and to make it more transparent.

From Goods and Services Tax (GST) Bill to the technological advancements in the Income Tax Assessment procedures, the government is not leaving a single stone unturned. Every tax reform that has been made is in line with the “Ease of Doing business in India”, Digital India Initiative”, Start-up India project and with an intention to boost the confidence of tax payers and corporates in Indian tax system. 

In this article, we will be discussing about the faceless Income Tax assessment, one of the major steps taken to change the way of assessment procedure followed from past so many decades.

India is one the few nations that has adopted this type of system. The new faceless Assessment scheme has the following features-

Features of Income Tax Faceless Assessment Scheme

1.  It has brought an epitome shift in the assessment process by eradicating the human interface and making it paperless.
2. Centralized National e-Assessment Centre (NeAc) has been introduced which will be single point of contact between the tax payers and assessing officers for issuance of all the Income Tax notices, communications and smooth conduct of faceless Income Tax Assessment and passing of final income tax assessment order.
3. The scrutiny cases are transferred to assessment units through an automated procedure and randomly by computer algorithms.
4. The National e-Assessment Centre (NeAC) issues the assessment notice electronically to the taxpayer through their e-filling account. Therefore, the identity of the assessing officer is also not disclosed.
5.  It follows an approach that is team-based and makes use of technology.

Some Advantages of faceless income tax assessment are as under:

1. It provides automation and uniformity to entire procedure of Income Tax assessment.
2.  Since it involves team of tax officials, its introduction has removed all the unwanted and unnecessary procedures that could lead to subjective judgments and also individual biases.
3. The uniformity in the assessment process has helped in achieving a corruption-free, justified and truthful assessment order for the taxpayer.
4. It has become time bound
5. No physical interaction with the tax officials are required which will reduce the corruption as well as harassment of honest tax payers.
6.  It reinforces the trust of tax payers in tax officials and entire tax assessment procedure.
   

In addition to above, a revised Form 26AS has been notified by the Ministry of Finance, where all the additional details of the financial transactions of higher value done by a taxpayer during a financial year can be filed. It contains details like property purchases, any cash deposits and withdrawals made by the assessee. The Form 26AS will help, in facilitating the required data to the tax department during the primary phase of the income tax faceless assessment.

The process of the faceless income tax assessment is carried forward in the following way-

1. The NeAC which is the central cell serves a notice to the assessee. It is to be specified in the notices as to why their case has been selected for assessment.
2. The taxpayer has to provide with a response to the notice served to them within 15 days of receiving the notice through the IncomeTax Return e-filing portal.
3. Through an automated procedure the assessment case is allocated to one of the assessment centre.
4.  If there are any prejudicial modifications in the income tax returns of the taxpayer, NeAC provides with an opportunity of being heard to the assessee. The taxpayer can provide suitable documents in support of their explanations before a conclusion is made in the case.
5. The taxpayer can also request for a video conferencing facility to put forward their points.
6. Once the faceless income tax assessment is completed, a draft order is issued and the electronic records are transferred to the Authorized jurisdictional tax office. All further proceeding regarding any imposed penalty or fine, demand recovery, prosecution proceedings are to be done by the tax officer.
   
7. Once the proceedings are done, a best judgment assessment order is to be provided to the taxpayer or assessee.
   

Faceless Assessment- New mechanism for doing Income Tax Assessment in India

In the last few years, the Indian Government has adopted digitalization and technology for governing various processes and services. In this regard, the Digital India Initiative has been started. One such step is the Faceless Income Tax Assessment Scheme 2020.

Faceless Assessment is a step towards the ease of setup business in India. Also, it will help in bringing certainty as well as transparency in tax-related matters.

The scheme was launched in the year 2020 for making the tax administration more effective and efficient. India has become one of the few countries that have adopted this advanced method scheme. 

 

Mode of operation of faceless Assessment in India:

The faceless Assessment works through various units and assessment centres as set up by the tax department. All these have its role specified and importance in the assessment process. The centres established for faceless assessment income tax are-

1. National e-Assessment Center (NeAC): It is the centralized organization situated in New Delhi.

2. Regional e-Assessment Centre (NeAC): These are the regional organizations situated in eight different cities of India, namely; Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi and Pune.

Apart from these units, operating under them are as follows-

1. Assessment Units

2. Verification Units

3. Technical Units

4. Review Units

Characteristics of Income Tax Faceless Assessment:

The new Income Tax Faceless Assessment has the following features and advantages-

1. The scheme is faceless, and there is no human interface; the taxpayer is not required to visit the tax department.

2. The cases are selected for scrutiny through artificial intelligence and data analytics.

3. Cases are allotted to assessment units through an automated system.

4. The new Income Tax faceless Assessment has abolished the territorial jurisdiction; taxpayers in a particular city can be scrutinized or assessed by any Assessing Officer in another city.

5. The response against the notice issued for scrutiny can be submitted electronically by the taxpayer.

6. The Assessment and the review of the taxpayer’s documents are team-based.

7. There is only a single point of contact between the tax department and taxpayer, which is too faceless.

The procedure of faceless Assessment:

Under the new scheme, Income Tax Assessment will be conducted in the following manner:

1. A centralized processing centre in the form of the National e-Assessment Centre (NeAC) would be formulated, which will issue a notice to the taxpayer for the Assessment.

2. The assessee is required to file a reply against the notice within 15 days from the date of receiving the notice.

3. The NeAC assigns the scrutiny case under the faceless income tax assessment to an official of an Assessment Unit under the ReAC.

4. It is the NeAC that communicates among the assessee, the verification and the technical unit. Therefore, there would be the single point of contact between the assessee and various assessment units and other units.

5. All the units are required to provide every information to the NeAC regarding the Assessment.

6. The NeAC collects all this information and provides it to the ReAC.

7. After proper examination of the information and documents, the ReAC prepares a draft Income Tax assessment order.

8. The drafted Income Tax assessment order is sent to the NeAC.

9. The assessee is given a chance to defend their case wherever applicable, or else they are charged a penalty as required.

10. The assessee can also ask for virtual hearing via video conferencing or video calling for explaining its case if He is not satisfied with the draft assessment order.

The faceless Income Tax Assessment has been quite successful in its first year after being launched. It has been really helpful for the tax department and the taxpayers in conducting a transparent assessment process. Moreover, it has made the process more consistent even in times of pandemics. And hopefully, it will be more fruitful in the upcoming years.