Overview on Faceless Tax Assessment Scheme
The Faceless Tax Assessment Scheme is a fiscal measure adopted by the government where the physical interaction between the assessee and the assessment officer is done away with. According to the scheme, the tax payment will become more transparent, efficient and accountable. By launching such a scheme, India has become the first country in the world to introduce a faceless tax administration where tax assessments and appeals are conducted without the direct contact between the taxpayer and the assessing officer.
Before this faceless assessment system, the process of assessment of the assessee’s filings would involve innumerable visits at the Income Tax Office, direct questioning with the Assessing Officers, and long hours of sitting at the office and countless waiting time. Now, with the advent of this new faceless system, the assessee no more knows the identity of the AO who would be scrutinising his/her returns. Now, the scrutinising has been shifted to a team based working with the help of specialised units where the assessee no more required to meet the Assessing Officer.
Features of the Faceless Assessment Scheme
- The single point of contact between the tax payer and revenue department shall be National Faceless Assessment Centre (NFAC) which will act as the nodal agency.
- The Regional Faceless Assessment Centres shall carry out the assessment proceedings using support of different units such as Technical unit, Assessment Unit, Review Unit etc.
- The written submissions shall be sent digitally to the Revenue Department.
- The NFAC shall pass all the assessment orders in a digital format except for the prescribed ones.
- If the orders are not passed in conformity to the prescribed scheme, then they will be treated as if the orders were never passed in the first place.
- The Dispute Resolution Panel proceedings shall also become faceless.
- The personal appearances will be prohibited and the Revenue department will lay down standards and procedures for the personal hearing of the assessee which again is restricted to video conferencing only.
Functions to be carried out in a Faceless Manner by NFAC and RFAC
The following functions will be carried out in a faceless manner by the NFAC and RFAC:
- Reassessment proceedings
- Revisions proceedings
- Transfer pricing
- Approvals and registrations
- Appeals and appellate orders
- Stay of demand and recovery of taxes
- Application for NIL or lower tax withholding certificate
Benefits of Faceless Tax Assessment Scheme
Following are the benefits associated with Faceless assessment scheme:
- No human interference means negligible chances of corruption;
- Ease in filing of returns and other compliances with digital filing;
- Transparent and efficient system because of digital filing;
- Quality of assessment increases
- Disposal of cases in an expeditious manner;
- Specialisation in assessment because of special units.
Framework of the National Faceless Assessment Scheme
The taxpayer shall file his returns with the National Faceless Assessment Centre wherefrom the work is diverted to the Regional Faceless Assessment Centres where their respective units such as Assessment Units, Verification Units, Technical Units, and Review Units do the necessary work.
Functions of Regional Faceless Assessment Scheme
Following are the key functions related to the Regional Faceless Assessment Scheme.
- Assessment Unit:
- Identifies the issues which are relevant to conduct an assessment
- Ask for information on the contentious issues
- Analysis of the information filed by the assessee
- To frame draft assessment policy
- Verification Unit:
- This unit is entrusted with the task to conduct enquiries, cross verification of the information supplied, examination of books of accounts, witnesses etc.
- To record statements through the mode of video conferencing
- Technical Unit:
- To assist the other units with technical assistance in domains of legal, forensic, audit, data analytics, transfer pricing and other technical domains.
- Review Unit:
- It reviews draft assessment orders on the mandate of NFAC
- Reviews the applicability of judgments quoted to justify the assessment
What is Faceless Appeal Scheme?
As the name suggests, the Faceless Appeal Scheme removes any human interference in the process of the assessee and the Commissioner of Income Tax (CIT) which is the first appellate authority. The Faceless Appeal Scheme removes the physical interface between the appellate authority and the assessee.
Features of Faceless Appeal Scheme
- The National Faceless Appeal Centre (NFApC) will become point of contact between the revenue department and the Assessee.
- The NFApC will carry out the appellate proceedings with the help of multiple appeal units.
- Using the technologies of Artificial Intelligence and Data analytics the NFApC shall automatically allocate the appeal filed by the taxpayer to the Regional Faceless Appeal Centres (RFApC)
- However, the following matters have been kept outside the system of faceless appellate scheme such as serious frauds, money laundering, major tax evasion, international tax etc.
- Similar to the case of Faceless Assessment, personal appearance is prohibited and the revenue department will make the rules for the personal appearance of the taxpayer in certain exceptional circumstances with the prior approval of Central Board of Direct Taxes (CBDT). This personal appearance too is restricted to video conferencing mode only.
- The appeal from NFApC lies at the Income Tax Appellate Tribunal (ITAT).
How Faceless Tax Administration is important?
The new faceless tax administration has forced taxpayers to make certain changes in their approach of scrutinising of assessments and their respective appeals. Now, the skills of argumentation have to be displayed in writing which were shown earlier by physical arguments before the concerned authorities. In order to clear the doubts or objections raised by the Revenue Officer, excellent submissions have to be made by the assessee through writing only since physical hearings have been prohibited. Such submissions have to be made in a time bound manner and should be drafted so well that it clears the doubts of the AO otherwise the matter can go for appeal. In this new faceless tax administration, written submissions will be more important than they have ever been.
Following points have to be abided in this new tax administration scheme:
- Now, that the tax filings will be done through digital means, it is important that the assessee takes precautions at the filing of returns and taking favourable but cautious tax positions without getting the AO interested in your matter.
- The issues that can be disputed by the AO must be properly documented and explained in a lucid manner using diagrams and flow charts so that confusions of any kind do not give rise to litigation.
- The written legal submissions must be of highest standards with drafting having pin-point accuracy. The relevant extracts of the judgements must be attached instead of submitting the whole judgements. All other aspects of legal submissions such as indexing, numbering, putting in the factual matrix, relevant judicial precedents must be made which will not only be useful at the assessment and appellate stage but also be of extreme help at the litigation stage before the courts and the respective tribunals.
- This faceless tax administration has reiterated the importance of filing the necessary submissions in a time bound manner because of absence of human interference. The system alone shall be keeping record of the trail and also of the responses made by the Revenue department.
- The assessee needs to install such systems in place which will be able to store copious amounts of data and also have functions of seamless submission making process, search option within the data, tracking and linking functions etc.
- Use of Artificial Intelligence driven technology to automatically find out data for expected questions for monotonous tasks.
- Upgradation of the existing IT infrastructure of the assessee to summarise and cull out information from the historic records, exchange data, summarisation of data for any future use. For example in cases of appeals, rectifications etc.
- Training of the in-house tax team to be realigned according to the needs of the new faceless tax administration scheme.
How Enterslice will assist you?
We at Enterslice have always been proactive in providing quality services to our clients. We have developed a standardised system for fulfilling all the compliances in the Faceless Assessment Scheme and Faceless Appellate Scheme.
Following services are extended in relation to Faceless Assessment Scheme and Faceless Appeal Scheme:
- Drafting articulated and well researched legal submissions
- Installing the technological framework such as ERP systems to ensure seamless compliance of legal requirements take place without hampering the functioning of business
- Preparing responses to the queries raised during the RFAC and RFApC
- Advising on the areas where the scope of law is not clear
- Developing a tailor-made tax strategy suited to the needs of your business
- Advisory, support and presentation before the appellate forums