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

by EzyBiz India Tax & Accounting Consulting Firm

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-

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

Assessment Units
Verification Units
Technical Units
Review Units

Characteristics of Income Tax Faceless Assessment:

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

The scheme is faceless, and there is no human interface; the taxpayer is not required to visit the tax department.
The cases are selected for scrutiny through artificial intelligence and data analytics.
Cases are allotted to assessment units through an automated system.
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.
The response against the notice issued for scrutiny can be submitted electronically by the taxpayer.
The Assessment and the review of the taxpayer’s documents are team-based.
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:

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.
The assessee is required to file a reply against the notice within 15 days from the date of receiving the notice.
The NeAC assigns the scrutiny case under the faceless income tax assessment to an official of an Assessment Unit under the ReAC.
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.
All the units are required to provide every information to the NeAC regarding the Assessment.
The NeAC collects all this information and provides it to the ReAC.
After proper examination of the information and documents, the ReAC prepares a draft Income Tax assessment order.
The drafted Income Tax assessment order is sent to the NeAC.
The assessee is given a chance to defend their case wherever applicable, or else they are charged a penalty as required.
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.