Months after it was unveiled by Prime Minister Narendra Modi, the income-tax appeals are all set to go faceless from Friday.
The income tax department has already rolled out pan-India faceless assessment facilities for all taxpayers from August 13. The Centre hopes that the faceless system will ease compliance and widen the tax base
India introduced a faceless assessment of tax on a pilot basis in October 2019, taking up about 58,000 cases. Of these cases, orders were passed in 11,000 cases and about 4,000-5,000 orders will be issued soon.
Faceless assessments will require a structural change for tax authorities as well as significant infrastructure support. The new regime calls for fresh training of officers in a bid to streamline assessments. Under faceless scrutiny assessment, a central computer picks up tax returns for scrutiny based on risk parameters and mismatch and then allots them randomly to a team of officers.
Why do we need faceless assessment?
The objectives sought to be achieved are exponentially faster clearance, a reduced interface between taxpayers and officers, and enhanced ease of doing business. Under the new regime, all cases other than those assigned to the central charges (serious frauds, major tax evasion, sensitive and search matters, black money and benami cases) and international tax charges are to be done through faceless assessment.
Implementation of a faceless scheme would eliminate the interface between the income tax authority and the assessees. It would also optimise utilisation of the resources through economies of scale and functional specialisation.
Extension of faceless assessment to all IT proceedings
The government had proposed to extend the faceless assessment scheme to almost all proceedings under the income tax law, including for collection and recovery of tax and gathering of information. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020 proposed to extend the faceless assessment scheme to at least eight processes in income tax law.
Besides, faceless collection and recovery of tax, faceless revision, and effect of orders and faceless approval or registration are proposed. The legislation also proposes faceless inquiry or valuation and a faceless collection of information.
The Bill also proposes to formulate a scheme for 'faceless jurisdiction of income-tax authorities' which would "impart greater efficiency, transparency, and accountability". Currently, the faceless scheme is already implemented for scrutiny assessment and would be extended to appeal cases beginning September 25.
Safeguard measures in place for e-assessment
The income tax department has put in place in-built safeguard mechanisms to address the rise in ad hoc additions in demand by tax officers due to a gap in understanding or inadequate submissions. Any additions in demand made by a tax officer under the faceless assessment process for over Rs 5 lakh of income will undergo a rigorous review process before a final demand order is passed.
With the department expected to carry out close to 200,000 faceless assessments by March 31, 2021, the in-built check is aimed at ensuring that no one-sided or ex-parte assessment goes unchecked. The review unit will see if the addition being made or tax being levied is genuine or not. Under Section 144 of the Income Tax Act, the assessing officer can carry out ex-parte or one-sided assessment after serving a notice on the non-filer to the best of his judgement.
Appeals will be filed in assessee's state, clarifies CBDT
Senior officials at the Central Board of Direct Taxes (CBDT) have clarified that the appeals at the tribunal or high court will be filed in the state where the assessee resides.
Though all appeals till the Commissioner of Income Tax (Appeals) level will go faceless, personal hearing might be allowed via video-conferencing in some cases after approvals from designated senior officers. CIT (Appeals) is the first level of appeal against a demand raised by the assessing officer. Appeals against orders at the CIT level can be filed at the Income Tax Appellate Tribunal (ITAT) and later in high courts and the Supreme Court.