• In the year 2020, the Government introduced a Faceless Assessment Scheme that is applicable to scrutiny assessments and best decision assessments. The main aim of this scheme is to put an end to the human interface between the taxpayer and the Income Tax Department. This process shall be conducting a faceless evaluation via electronic mode.
  • This scheme falls under the campaign of ‘Transparent Taxation’ started by the Central Government to achieve exponential growth in the economy by formulating the ease of doing business. It will optimize the utilization of the resources through economies of scale and functional specialization.
  • Under this scheme, all the cases of domestic disputes such as frauds, tax evasion, black money, sensitive matter, and Benami cases and International Tax matters shall be resolved through faceless assessment.

Scrutiny Assessment

According to the report, 6.75 crore people file Income Tax returns in India. The majority of the returns are accepted and then processed by the Income Tax department as there are no chances of fraudulent information provided by the honest taxpayer. But, on the other hand, some percentage say around 5-7 Lakh are selected on the random basis are set aside for further verification by the Tax authorized officer, this shall be called as Scrutiny Assessments.

Income Tax Assessment

The Income Tax filling criteria is completely monitored by the Income Tax Department. Keeping in mind, the authority selects some of the cases or randomly raised cases for a thorough examination. This process is for the comprehensive examination of the defected Income Tax Returns that shall be called as Income Tax Investigation and Assessment. In order to inform the taxpayer, a notice shall be sent under Section 143(2) of the Income Tax Act, 1961, mentioning that his/her ITR has been under the investigation.

Structure for Faceless Assessment

  • Under this faceless Assessment, the Central Board of Direct Taxes has prescribed the following criteria and framework for the implementation of this scheme:
  • A National E-Assessment shall be set for facilitating electronic assessment and centralized control.
  • Under the jurisdiction of the Principal Chief Commissioner, Regional E-Assessment Centres shall be constituted to conduct assessment accurately.
  • In order to recognize and eliminate the errors, assessment units shall be formed for determining any liability that includes refunds, analyzing the information, and other important aspects.
  • The faceless assessment shall also include accounting, legal, IT, auditing, data analytics, valuation technical customer support by setting up technical units
  • For the verification of books of accounts, cross-examination, and recording of statements shall be done under the verification units.
  • Review units shall review all the drafted assessment and check all the information whether correct or not.

Guidelines for Faceless Assessment 

  • The framework for e-assessment is as follows:
  • The National E-Assessment will serve notice as per the section 143(2) of the Income Tax, 1961 on the email ID of assessee and alert of the same shall be sent on the mobile through SMS.
  • The reply by the taxpayer shall be filed within fifteen days to the National E-Assessment Centre.
  • On failing to submit the ITR, the case shall be assessed under e-assessment only.
  • The power to assign the selected case for e-assessment to a specific assessment unit of the Regional e-assessment Centres with the help of automatic allocation system.
  • On the successful submission of the case to an assessment unit, then National e-assessment Centre will conduct an assessment as per the Section 143(3) of Income Tax Act, 1961 that deals with Scrutiny Assessment with a detailed assessment.

Challenges in Faceless Assessment Scheme

  • The Faceless Scheme is no doubt a great step towards the development and making the taxation section transparent on the digital platforms but it might face some loopholes unless necessary changes are not complied with. The provisions of the tax bill have eliminated ambiguity regarding the coverage of the scheme to a certain extent. Likewise, it has been explained that conflicts pertaining to search, dispute, and international tax are kept outside the purview of this scheme.
  • On the other hand, the procedure for the conduct of proceedings is not defined under the law but there is a provision of initiation of penalty by any unit as prescribed above. The question that arises herein is why the penalty proceedings are kept out in this scheme.

Conclusion

The taxpayer and concerned authorities must support themselves and make sincere efforts in promoting the oneness in the tax system of the country. The taxpayer shall remain up to date in terms of the documentation, submissions, updating the e-filing portal, and replying to the notice within a specified time. The Government shall also make reasonable responses and clarifications in terms of the new mechanism.

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