Income Tax Department is placing thrust and importance upon the usage of modern & advanced technology in the tax administration systems by bringing in this scheme “Faceless Assessment & Faceless Appeals” so as to achieve greater Efficiency, Transparency and Accountability in the Systems.
A new Taxation platform” Honoring the Honest” was launched by Honorable PM Shri Narendra Modi on 13th August, 2020 and major thrust of this platform is on “Faceless Assessment & Faceless Appeals” scheme. Earlier in September 2019, E-assessment Scheme 2019 was launched with the setting up of National e-assessment Centre (NeAC) on a pilot basis. However with effect from 13th August, 2020, this E-assessment Scheme 2019 has been replaced by the Faceless Assessment scheme.
Objective of the Scheme
Objective of the scheme is that End to End functions should be online, Transparent, Jurisdiction- less and faceless so that Transparency, Efficiency and accountability should be achieved.
Key Features of Faceless Assessment and Faceless Appeal Scheme
As the name suggests, this assessment scheme is referred to as faceless because the Income tax authorities and Tax Payers/Authorized Representatives will not be able to see faces of each other in Layman terms.
Assessment Functions have been taken from Assessing Officers and given to National e-assessment centres (NeAC). Now the assessments will not be conducted by territorial Jurisdictional officers but by a dynamic team of Income tax officials comprised in the National e-assessment Centre’s (NeAC), Assessment Units (AU) in the Regional e-assessment centre’s (ReAC) with the technical assistance from the Technical units, verification units and Review units.
However, residuary functions such as Demand & Tax recovery, Rectification proceedings, Giving Appeal effect to appellate orders, follow up of cases in appeal etc still lies with the jurisdictional Assessing officers but these residuary functions may become online and faceless in future as well.
Scrutiny cases will be picked on risk parameters and mismatch and will be assigned on random allocation basis by NeAC to any particular Assessment Units (AU) in Regional e-assessment centre’s (ReAC).
In this scheme one particular case of North India can even go to the assessment unit (AU) of South India or vice versa and it will not be the discretion of officers posted in NeAC to decide which case will go to which officer.
Everything has been designed in such a manner that any kind of physical interface/discretion of officers in selecting the cases is eliminated and this will happen automatically through central computer in a transparent manner.
Faceless Appeal Scheme has also been launched with effect from 25th September, 2020 and for the purpose of conducting appeals in faceless manner, the National faceless Appeal centres (NFAC) & Regional faceless appeal centres (RFAC) and appeal units comprising of one or more Commissioner of Income Tax appeals CIT (A) are in the process of being set up.
Now the appeals of the assessee’s will not be adjudicated by the jurisdictional CIT (A) but will be disposed off by the dynamic team of income tax officials in the NFAC & RFAC.
These two bold reforms in Income Tax will play an important role in tax compliance systems.
Why such a change is needed?
There was some perception in some quarters that the taxation system which we had in the country, the process is not much transparent & opaque and at some stage in the assessment proceedings causing harassment to the assessee’s /tax payers which somehow lead to trust deficit between the taxpayer and the department.
This trust deficit now has been taken care of by bringing in such a huge reform in the form of this Faceless Assessment scheme. This scheme is one the most transparent systems as this will be completely technology driven.
Primary job of Income tax department is to determine the correct income of the tax payer. With the introduction of this scheme, this job now has been changed and whether your case will be picked for scrutiny or not has also been changed as the scheme is technology driven.
With such a huge change in the system, it is bound to have some apprehensions both by the tax payers and as well as tax administration about how smoothly the scheme will function.
Advantages and challenges
This scheme is going to have various advantages from taxpayer’s point of view and will also throw some challenges to the department with the course of time.
One of the advantages that can be discussed here is that now the assessments will not be done by an individual officer but by a team of officials where supervisory officials will be involved from the very beginning of the cases and there will be fewer chances of arbitrariness and high pitch assessments.
So Taxpayers will be now saved from the tyranny of the individual officers as sometimes wrongdoings may happen because of ignorance of law on part of the assessing officer which often leads to high pitch assessments and by the time assessment order is passed by the assessing officer, one is left with the option of only going to the appeal.
One of the challenges in front of the tax administration system will be “System Driven allocation of work”. Since there is no human interface, so the machine doesn’t know the person there is a possibility that the assessments in case of big assessee’s may get allocated to some Assessment Units (AU) in the Regional e-assessment centre’s (ReAC) where the officials placed may not have handled the assessments in case of big assessee’s. Hopefully the department will solve the issue as and when it arises.
It is advisable to the taxpayer’s to maintain correct and accurate records and ensure timely submission of replies and compliances to the department. Taxpayers should now ensure their Email Id’s and mobile numbers are updated on the portal as every communication from the department will be online.
It is important to note that all the communications will happen from only National-e assessment centre (NeAC), any kind of unauthorized approach should be reported to the department by the taxpayer’s.
Further, since there is no face-to-face interaction, the online submission should be well drafted and quality of submission will be of prime importance in framing the assessment order.
The government has taken such a huge step by introduction of this scheme to create trust between taxpayers and the department.
Tax payers should reciprocate the trust to the department by filing correct return of income as almost everything is now auto populated in 26AS and finally every stake holder must contribute towards the success of this scheme.
Author is a chartered accountant in practice