What is faceless tax assessment?

 

What is faceless tax assessment?

The framework of faceless Tax assessment:

The CBDT had vide Notification No. 61/2020-Income Tax dated 13th August, 2020 stipulated that all Income Tax Assessments shall henceforth be conducted in a faceless manner. It means that there shall be no direct interaction of the assessee or its representative with the Tax officer. Besides the jurisdiction for such assessments have been made seamless. Accordingly the different aspects of the assessment procedure can be assigned to any officer anywhere in the country. The Bill in this regard was also passed by Parliament recently. Some cases including those involving search and seizure action has been excluded presently from the ambit of the faceless assessment.

The CBDT has prescribed a structure for conducting the assessment procedure in a faceless manner. It consists of the National E assessment Centre(NeAC) at National Level and  Regional E assessment Centre(ReAC) at Regional level. Further there are units under it for conducting the various roles involved in the e-assessment proceedings i.e. Assessment Unit(AU), Verification Unit(VU), Technical Unit (TU) and Review Unit (RU). The procedure stipulates that there shall be no direct interaction of the Assessee with any of the said units. All communications is to be received/sent  from/to  the NeAC.

Contents

·         Roles assigned to the various Faceless Tax assessment units:

·         Brief procedure of the faceless tax assessment:

o    Primary Procedure:

o    Role of NEAC:

o    Final process of faceless tax assessment:

·         Care to be taken by the Tax Payer:

·         Other Issues:

·         Role of this site for your compliance:

·         FAQ

Roles assigned to the various Faceless Tax assessment units:

·         ‘Assessment units’ for identifying points or issues involved in the Income Tax Returns. It includes verification of claims made of deductions/exemptions. Besides it is compared with the information and intelligence gathered by the department. On the basis of the same questionnaire of the further information /documents required to verify the correctness of the claims are prepared.

·         All the said functions shall be routed through the NeAC. There shall be no interaction between the various constituent units for any purpose. Moreover the units need not be in one station and can be at different places with the linkages only through the electronic media.

Brief procedure of the faceless tax assessment:

Primary Procedure:

The Income Tax returns filed by the tax payers of the country are selected on the basis of certain parameters. In the last many years cases have been selected on the basis of system support and artificial intelligence and is known as CASS (Computer Assisted Scrutiny Selection). This was the main method of selection wherein more than 70-80% of the cases were selected. Besides there was the compulsory scrutiny guidelines issued every year for selection. It included search/survey cases and cases selected on the basis of specific information. Further there are cases where there has been regular addition/disallowances and reopened assessments. Besides it includes set aside cases as per directions of judicial authorities or CIT.

The NeAC shall assign such cases on a random basis to various Assessment Units. The AU shall examine the Return filed by the tax payer and the attachment/documents filed and also the details available with the Tax Authority from various sources. It shall prepare a detailed questionnaire including the requirement for completing the assessment.

Role of NEAC:

The Tax Authority shall sent the requirement to NeAC. The questionnaire is then forwarded to the tax payer for compliance. It is sent through digital mode including the e-assessment site, registered email and by mobile alerts. The tax payer has to respond to the same within the stipulated time which is generally 15 days. After receipt of the details it is assigned to a verification unit for examining. It includes  independent verification from third parties albeit through electronic mode. After such verification the findings are transmitted to the NeAC.

The NeAC shall provide the details to the AU for completion of the assessment proceedings or for conveying any further verification to be made.  The AU shall examine the details with the information available including from the ITR. After such verification the AU shall make a draft assessment order of the correct income and tax. Any adjustment shall be explained in the draft order. The draft order shall be sent to the NeAC which shall use their own risk management tools. It shall determine whether the AU has correctly comprehended the various issues and made a proper assessment of the tax payers income and tax payable.

Final process of faceless tax assessment:

If the Systemic examination indicates that there is certain issues to be properly determined the said draft order shall be sent to a Review Unit for reviewing . The RU will again examine the issues mandated and convey to NeAC whether the draft order requires any modification. In certain cases the RU may find the addition/disallowance or any other issues require further modification/examination. In such cases the same is conveyed back to NeAC. The NeAC after due examination shall if deemed necessary assign the case to another AU. It is not assigned to the same AU which has earlier prepared the Draft Order. The faceless process is again repeated as in the earlier cycle.

There are cases whe In such cases if need be the draft order is sent to the assessee for conveying objections, if any. In case rein additions/disallowances has been made as compared to the returned Income of the tax payer.of any objection the order is sent to the RU. The RU again examines for any requirement for reviewing the order. If necessary the process of intimating to NeAC and the related process of assigning to another AU is followed. After the entire process is complete the order is finalised and sent to the assessee with the tax calculation sheet and demand notice.

Care to be taken by the Tax Payer:

Considering that the process is entirely faceless it is imperative on the part of the tax payer to ensure that the correct electronic communication details in the nature of e-mails/mobile numbers are mentioned in their returns. Many times some employees or Tax representatives numbers are provided which changes and the tax payer is not aware. The faceless assessment provides that in case of non compliance ex-parte assessments can be passed after reasonable opportunity. The tax payer should ensure that such situation does not arise and they are not burdened by avoidable tax demand and further litigation cost.

It is seen as per data available that the initial years of e-assessment has resulted in several non compliance. Consequently ex-parte orders were passed in such cases raising high tax demand due to non compliance. Moreover the scheme of faceless assessment does not provide for any tax official informing the tax payer directly of the non compliance other than the prescribed electronic and other faceless mode.

Other Issues:

Another aspect to be realized is that the tax payer or their representative should comprehend the exact requirement of the Tax department as requisitioned in the notices sent during the faceless assessment. The experience so far indicates that many taxpayer does not properly comply with the requirement. In some cases the questionnaires are partly replied to whereby certain claims in the Return of Income cannot be verified. The requirements are generally originating from the tax payers Return. It may also be from other information as per Annual Information returns filed by various agencies. The tax payer should verify the questionnaire sent by the tax authorities with its statement of affairs and comprehend the exact requirement of the Tax Officer.

The tax payer should be aware that the present scheme of seamless jurisdiction faceless assessment is only the assessment function of the tax authorities. The other regular works like rectification /appeal effects etc. shall be done by the jurisdictional Tax Authority though mainly in a faceless manner . For the said purpose the Government is bringing various notifications including for handling of appeals in faceless manner. The same shall be dealt with later in a detailed manner. However there has been a drastic change in jurisdiction consequent to the implementation of the faceless assessment.

The tax payer may ascertain its jurisdiction from the link provide by the Income tax department of https://www1.incometaxindiaefiling.gov.in/efilingGS/Service/ Know Your Jurisdiction Link.html. They can sent their request for rectification/appeal effects and others through the e-filing site https://www.incometaxindiaefiling.gov.in/home or even through email for matters other than assessment. The email of the concerned jurisdictional officers are generally of the pattern of city. officers designation (with dots between the numbers)@incometax.gov.in. For example if it is the ACIT/DCIT -1(1)(1),Mumbai it will be mumbai.dcit1.1.1@incometax.gov.in and for ITO-1(1)(1),Mumbai it will be mumbai.ito1.1.1@incometax.gov.in.

Role of this site for your compliance:

This site is primarily to assist the small and medium taxpayer in the process of faceless assessment. We shall ensure that there is no additional burden of appointing high end professionals for addressing the limited issues that arise from their tax returns. For this purpose it is required that the tax payer immediately comprehends the issues being examined. Further they should understands the requirement of the tax officer for the assessment. It shall ensure the smooth completion of the assessment at the correct taxable income of the tax payer and avoid the hassles of tax demand and litigation.

This site also aims at assisting the tax payer in understanding the requirement of the Tax Officer and source from which the details can be collated. We shall also guide the taxpayer of the manner in which it has to be presented before the Tax Officer. It shall ensure that there is complete transparency in the conducting of the faceless assessment. Besides there should be proper comprehending of the facts and law by both the tax payer and the Tax Officer. The various issues that are generally examined and what  is to be provided shall be mentioned in the next blogs.

What is the meaning of scrutiny assessment and cases being selected for scrutiny to which faceless assessment is applicable?

Scrutiny assessment indicates that the Income Tax Return filed by you showing a certain income and claiming deductions/exemptions are being scrutinized or looked into deeply. Normally most of the Income Tax Returns filed are accepted in a summary manner without any scrutiny with only certain adjustment wherein there was a clear error. Only a small percentage of less than 1% are selected for detailed scrutiny. The cases will be selected on the basis of artificial intelligence on parameters prescribed or certain cases on the basis of guidelines issued by the Tax Department.

How will I know that my case has been selected for scrutiny assessment?

You shall receive a mail in this regard on your official email communicated in your return of income and an SMS on your registered mobile. Besides you can download the notice u/s 143(2) of the I.T Act 1961 from your e-filing site by logging with your user id and password.

When are the cases selected for scrutiny assessment?

The case is selected under the regular provisions of section 143(2) of the I.T Act 1961 within 6 months from the end of the Financial Year in which the Income Tax Return is filed i.e. For A.Y 2020-21 which is relevant to the taxable income received during the period from 1st April 2019 to 31st March 2020 the ITR will be filed during the Financial year beginning from 1st April 2020 to 31st March 2020 and such ITRs filed during the said year can be selected for scrutiny before 30th September 2021.

What are the notice issued for scrutiny and when should I reply to the notices issued?

The first notice for selection of a case for scrutiny is generally issued u/s 143(2) of the Income Tax Act and requires the tax payer to  attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return filed by him. The time and date of compliance is provided in the notice and normally allows a time of at least 7 to 15 days for compliance.

What is the procedure of issue of notices and compliance in scrutiny assessment?

The first notice u/s 143(2)  is generally for compliance to the provisions of the I.T Act that the case is to be selected for scrutiny within 6 months from the end of the Financial Year in which the return is filed. Subsequently the NeAC in faceless assessment shall issue notice u/s 142(1) of the I.T Act along with details of requirement for completion of the assessment of Income and Tax payable of the Tax payer. The taxpayer should ensure that all the requirements mentioned in the notice are complied to. The tax payer may receive multiple notices u/s 142(1) on later dates also from the Tax officer to provide further details as required for completion of the assessment.

How do I sent my replies and documents in the faceless assessment scheme?

You have to sent your reply through the e-assessment portal in e-proceeding after logging into your e-filing portal by using your user id and password. There is a facility to upload your reply. However please note that large data may be difficult to upload and it is better to compress the data before uploading.

Do I get enough opportunity if there is any non compliance due to being unaware of my case being selected for scrutiny?

Yes, The NeAC shall give reasonable opportunity to enable you to comply with the requirements and try to reach you through electronic mode by SMS, emails and e-filing portal to ensure compliance. However it is the duty of the tax payer to ensure that all its electronic communication addresses/numbers are correct failing which in the scheme of faceless assessment it shall be difficult for the Income Tax Department to reach you through the faceless electronic mode.

What are the consequences of non compliance to notices?

The Income Tax Act provides for penalties /prosecution for non compliance to notices issued during the course of assessment proceedings. In addition to the same the Act also provides for completion of assessment on the basis of best judgement from the details available with the Tax Officer. The best judgement may lead to disallowance of claims which are not conclusively proved or addition to income of receipts which may be evident from various information/sources available with the Tax officer leading  to high tax demand and avoidable financial/legal consequences to the tax payer.

How do I know what are the information and documents to be submitted?

The notice issued clearly indicates the requirement of the Tax officer. The tax payer should examine his ITR and other documents submitted to the Tax Department to understand how and why the Tax Officer has raised the query and what will have to be submitted on the basis of the notice. There are certain queries on the basis of other information available with the Assessing Officer which may be from the Annual Information Returns filed by other agencies or outside information. The Tax payer should provide all details related to such issues.

How do I avoid my case being selected for scrutiny?

In order to avoid your case being scrutinized ,you should file your return properly with clear disclosure of the income and deductions and exemptions with basis of eligibility. It should be ensured that the correct ITR applicable to you is filled and all the details are populated. If it is clear from the ITR that the income has been correctly declared there may not be any reason for selection for scrutiny.

In the new scheme of faceless assessment do I get to raise my objection to any additions/disallowance made to my Income Tax Return before the order is finalized?

Even in the earlier procedure of assessment you are given sufficient opportunity to present your case when the Assessing Officer is proposing any addition/disallowance. The Tax Officer sends a detailed show cause before  finalization of the order. In faceless Assessment in normal course you will be given sufficient opportunity to present your case and in addition you shall be provided the draft order (though the modalities are not yet available in the public domain) to raise your objection if any to the proposed adjustment to the income declared by you . The same will be taken into consideration before finalizing the order.

What is the remedy if there is any adjustment to my disclosed income?

If the adjustment according to you is incorrect , you can file an appeal against the order before the jurisdictional Commissioner of Income Tax (Appeals) within 30 days of receipt of the order. However if the adjustment is correct or there are legal/factual interpretations against you on the issues by Higher appellate forums it is better to pay the taxes. It shall ensure  that you can get immunity from levy of penalty/prosecution subject to certain criteria as per the Income Tax Act

 

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