Income Tax Faceless Assessment, everything you should know
There were many complains and problems faced by assessee when they were called in the Income Tax Offices, popularly known as ITO by the Income Tax Officials for the scrutiny or representations and other cases. Some of the common complains faced are-
And many other reasons such as traveling distant locations just for an attendance.
After facing the repetitive complains from the assesses and from the officers as well. Government of India tried to acknowledge the problem with the help of their vision of “Digital India” and introducing the concept of “Faceless Assessments”.
Including the above reasons there are many more reasons which also act as an advantage of the “Faceless Assessments” are discussed here
Advantages of Faceless Assessment-
1. It eliminated the interface between the Assessing Officer and the assessee during the course of proceedings, to the extent that is technologically feasible;
2. Optimisation of the utilisation of resources through the economies of scale and by using the method of functional specialisation;
3. Introduced a team-based determination of arm’s length price with dynamic jurisdiction.
As we saw both the reasons and advantages for the Introduction of “Faceless Assessment scheme”
Now let us see about it in details.
Brief of Faceless Assessment scheme
The E-Assessment scheme of 2019 scheme was amended on 13th August 2020, now known as the Faceless Assessment scheme. But this Faceless Assessment scheme applied only to scrutiny assessment and best judgment assessment, not for any other purposes.
Now since, we know about the scheme it’s time to understand its structure in details for our better understanding.
1. Structure for faceless assessment
Now, faceless assessment will be purely made as per provisions of the Income Tax Act, 1961 and not to forget its Rules. The Central Board of Direct Taxes (CBDT) is the one who has got the responsibility of deciding the scope, reach and extension of the faceless assessment which relates to-
- territorial area
- class of persons
- Class of incomes
- Class of cases to whom this faceless assessment is applicable.
- They are the ones who would set up the below ‘centers’ and ‘units’ and specify their respective jurisdiction.
Different centers will be setup for delegation of responsibility for smooth work. Like-
- The ‘National E-Assessment Centre’ will be facilitated for centrally controlling the E-Assessment.
- Then ‘Regional E-AssessmentCentre’ under the jurisdiction for making assessment.
- Separate ‘Assessment units’ will be set up for identifying points and issues, relevant for the determination of any liability including refund, analysing information, and many other functions.
- Also ‘Verification units’ will be set up for enquiries, cross verifications, examination of books of accounts, witnesses and recording of statements, and such other functions.
- Then there will be ‘Technical units’ for technical assistance,also any assistance or advice on legal, accounting, forensic, information technology, valuation, audit, transfer pricing, data analytics, management or any other technical matter.
- Finally, ‘Review units’ 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.
National E-Assessment Centre will handle the communication between these Centres’s for the purpose of making an assessment under this scheme.
Now, after we discussed about the scheme let us see the procedure of faceless assessment in detail.
2. Procedure in faceless assessment
The procedure is as follows:
- A notice under section 143(2) would be served by the National E-Assessment Centre, containing the specifications of the issues for selection of taxpayer’s case under this scheme.
- The taxpayer gets a period of fifteen days for responding towards the notice with the National E-Assessment Centre.
- After that the taxpayer’s case gets assessed under E-Assessment if they
- Are furnishing the voluntarily income tax return under section 139
- Furnished income tax return in response to notice under section 142(1) or 148(1) or 143(2)
- Or fails to furnish an income tax return in response to a notice under section 142(1)
- Or fails to furnish an income tax return in response to a notice under section 148(1)
Assessments will include assessments under section 143(3) and under section 144. Scrutiny and summary assessment will be through faceless assessment.
- Now as per the case, The National E-Assessment Centre will assign the case selected for the purposes of E-Assessment to a specific ‘assessment unit’ mentioned above via an automated allocation system.
- After assignment ,units may make a request to the National E-Assessment Centre for:
a) Information, documents or evidence from the taxpayer or any other person, as per the requirement
b) May conduct of certain enquiry or verification by verification unit; and
c) Seeking technical assistance from the technical unit.
- After request being made by the assessment unit for the requirements, the National E-Assessment Centre shall issue appropriate notice or requisition regarding the assessee or person authorized for theseto collect the information, documents or evidence requisitioned by the assessment unit.
- In response theyneed to submit a response to the notice within the deadline mentioned in the notice.
- When certain enquiry or verification like above, the request shall be assigned by the National E-Assessment Centre to verification unit through an automated allocation system
And, same process goes with the request when madeof Technical Assistance shall be assigned by the National E-Assessment Centre to a technical unit in any one Regional E-Assessment Centre through an automated allocation system
- Then, the report received from the verification unit or technical unit will be sent to the concerned assessment unit by National E-Assessment Centre.
- In case a taxpayer fails to file response to the notice, National E-Assessment Centre will send the notice to the allocated Regional unit.
- And Centre will issue a notice under section 144 for making a best judgment assessment.
- But assesee needs to file a response in response of the notice issued under section 144. But, if the taxpayer does not file a response, the National E-Assessmentcentre will inform the assessment unit they will prepare a draft assessment order under best judgmnet assessment (section 144).
- The ‘assessment unit’ shall, after considering all the relevant material gathered as above, will pass a draft assessment order either accepting the returned income of the taxpayer or modifying the returned income of the taxpayer, as the case may be, and send a copy of such order to the National E-Assessment Centre
- The ‘assessment unit’ shall, while making draft assessment order, and if any penalty is applicable then unit will provide details of the penalty proceedings to be initiated therein,
- Ultimately, The National E-Assessment Centre shall examine the draft assessment order as per the risk management strategy specified, including by way of an automated examination tool, they will :
- Finalise the assessment according to the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings.And, alongwith the demand notice, specifying the sum payable by, refund if any on the basis of such assessment;
- They maybe provide with an opportunity to the taxpayer,If modification is proposed, notice will be served using Show cause Notice as per assessment order.
- Assign the draft for review to review unit in a Regional E-Assessment Centre, through an automated allocation system, for review of such order
- After reviewing of the draft assessment order, they may decide to:
a) Concur the order and intimate the National E-Assessment Centre of concurrence; or
b) Suggest modification, if required, and inform National E-AssessmentCentre of the same.
- Then National Centre shall, after receiving concurrence review, will finalise the draft or provide an opportunity of modification if proposed.
- Now, The National E Centre shall, after receiving suggestions for modifications from the review unit, will assign the case to an assessment unit, except the one who was allocated earlier.
- Then assessment, will considering suggested modification of reviewing after which the final draft assessment order; will be sent to the National E-Assessment Centre.
- They will prepare the final draft assessment order, after finalising the draft assessment order, or opportunity if payer proposes any modification.
- The taxpayer may, in a case where notice is issued for making submissions against the draft assessment order, furnish his response to the National E-Assessment Centre on or before the date and time specified in the notice.
- The National E-Assessment Centre shall:
a) In a case where no response to the show-cause notice is received, draft assessment order will be finalised; or
b) In any other case, send the response to the assessment unit.
- The assessment unit shall, will check the response furnished by the taxpayer, and make a revised draft assessment order and then will send it to the National E-Assessment Centre.
- The National E-Assessment Centre shall, after receiving the revised draft assessment order:
a) In case of no modification requirement comes,thenfinalise the draft assessment; or
b) In case a modification suggested, assessee is proposed with reference to the draft assessment order, provide an opportunity to the taxpayer for hearing and making submissions
- The response furnished by the taxpayer will be dealt by centre and the finalise the draft.
- If objections with the Dispute Resolution Panel are filed by the taxpayer, the Centre shall forward such directions received from Dispute Resolution Panel to the concerned assessment unit
- Then the assessment unit will prepare a draft assessment order after confirming from the Dispute Resolution panel; send a copy of order to the National Faceless Assessment Centre.
- The National Faceless Assessment Centre will finalise draft assessment order received from assessment unit and serve a copy of order and notice for initiating penalty proceedings, if any to the assessee. And shall issue a demand notice, specifying the sum payable by, or refund of any amount due to the assessee on the basis of such assessment.
- After completion of assessment, all the electronic records of the case will be transferredto the Assessing Officer having jurisdiction over such action as may be required under the law.
- The National E-Assessment Centre may at if felt necessary can transfer the case to the Assessing Officer having jurisdiction over such case with the prior approval of the Board.
Read Also: Income Tax Important changes you must know
The author of the above article is Sneha Bhalotia.
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