Faceless assessment Centres and units
To facilitate the conduct of e-proceedings, the CBDT has set up the following centres and units to ensure and has specified their specific jurisdiction and functions -
- A National Faceless Assessment Centre(NaFAC), the fulcrum of the scheme which will centrally coordinate between the taxpayer and the regional centres and units.
- Regional Faceless Assessment Centres(ReFAC), to undertake the assessment through the following units set up under its jurisdiction:
- Assessment unit (AU)
- Verification unit (VU)
- A Technical unit (TU)
- A Review unit (RU)
The roles and responsibilities assigned to the above units are as follows:
The procedure under faceless assessment
2.1. Service of notice by NaFAC
The NaFAC shall serve a show-cause notice on the taxpayer under section 143(2) of the Act. The taxpayer must file his response to such notice within 15 days from the date of receiving the notice.
Note: NaFAC to intimate the taxpayer that the following assessments shall be completed under section 144B in a faceless manner and not through the erstwhile ‘physical hearing.’
i) If the taxpayer had filed his return:
- under section 139 or
- as a response to notice under section 142(1) or section 148 and a notice is issued under section 143(2) (for assessment or re-assessment under section 143(3)/147)
ii) If the taxpayer has not filed a return in response to notice under section 142(1) and show cause notice has been issued under section 144 (for best judgement assessment under section 144)
iii) If the taxpayer has not filed a return in response to notice under section 148(1) and notice under section 142(1) has been issued (for re-assessment or best judgement assessment under section 147 or 144)
2.2. Assignment of the case to ReFAC
The NaFAC shall assign the case selected for e-assessment under this scheme to a specific assessment unit (AU) in any one of the ReFACs through an automated allocation system.
For further information, documents or evidence from the taxpayer or any other person, it shall request NaFAC to obtain them.
NaFAC shall issue notice to the taxpayer or other person to submit the information, documents or evidence and other details within the timelines given in the notice. The information, documents or evidence so received by NaFAC shall be forwarded to the AU.
2.3. Verification units and technical units
AU may also request conducting an inquiry through the verification unit or seeking technical assistance from the technical unit.
The NaFAC would then assign such a request to the verification or technical unit, as required, under any ReFAC, through an automated allocation system.
The report received from such verification, or technical unit would then be forwarded by the NaFAC to the concerned assessment unit.
2.4. Taxpayer’s failure to comply with the notice to furnish details, etc.
Where the taxpayer fails to comply with the following:
- the notice to produce information, documents or evidence; or
- the notice issued under section 142(1) of the Act; or
- the special audit directions given under section 142(2(A)
the NaFAC shall serve a show-cause notice to the taxpayer under section 144, providing an opportunity to the taxpayer to show cause as to why best judgement assessment should not be made.
If the NaFAC receives the taxpayer’s response within the time prescribed or extended time allowed: If his response is satisfactory, then best judgement under section 144 shall not be done. However, if the response received is not satisfactory, NaFAC will intimate the AU to make the best judgement assessment.
If the NaFAC does not receive the taxpayer’s response within the time prescribed or extended time allowed: NaFAC will intimate such failure to the AU, and the AU shall make the best judgement assessment.
2.5. Draft assessment order to be passed by assessment unit.
After considering the relevant material available on record or a reference from the NaFAC, the AU would pass a draft assessment order to the best of its judgment. Such order shall be passed under section 143(3), 144, 147 of the Act. The assessment unit would send a copy of such an order to the NaFAC. The assessment unit would also indicate the details of penalty proceedings to be initiated in such a draft assessment order.
2.6. Draft assessment order to be examined by the NaFAC.
The NaFAC shall examine the draft assessment order in accordance with the risk management strategy specified by the CBDT, by way of an automated examination tool and take any of the following course of action -
(i) Finalise the assessment contained in the draft assessment order and issue a copy of such order to the taxpayer. It shall also issue a notice for initiating penalty proceedings if any, and the demand notice/refund as the case may be or
(ii) Assign the draft assessment order to a review unit under any ReFAC, through an automated allocation system, for a review of the draft order. In such a case, the review unit may either concur with the draft order or propose such changes, as it may deem fit and intimate the same to the NaFAC. If no variations are suggested, refer to point (i) above
In case variations are proposed, the NaFAC will assign the case to an AU other than the one that made the draft assessment order through an automated allocation system. After considering the suggestions of the RU, the new AU shall send the final draft assessment order to NaFAC, and point (iii) shall be considered if the suggested variation is prejudicial to the taxpayer’s interest (say an increase in tax payable, reduction of refund, disallowance of expenditure etc.) or
(iii) Provide an opportunity of being heard to the taxpayer, where a suggested variation to the income is prejudicial to the taxpayer’s interest. Such an opportunity shall be given by serving a notice upon him to show cause as to why the proposed variation should not be made; or
2.7. DRP and final assessment order
In the aforementioned point, where NaFAC has provided the taxpayer with an opportunity to be heard:
(A) Taxpayer files a response to NaFAC on or before the date and time specified or extended:
1- NaFAC shall send such a response received to the AU
2- After considering the taxpayer’s response, AU shall make a revised draft assessment order and send it to NaFAC.
3- The subsequent variations made in the revised draft order, if any:
- are prejudicial to the taxpayer’s interest in comparison to the draft assessment order or draft final assessment order, then NaFAC shall again provide an opportunity of being heard to the taxpayer.
- are not prejudicial to the taxpayer’s interest in comparison to the draft assessment order or draft final assessment order or draft final assessment order, then NaFAC shall forward the revised draft assessment order to the taxpayer who is an ‘eligible taxpayer’ under section 144C and a final assessment order to all other taxpayers along with a notice for initiating penalty proceedings, demand notice- specifying the sum payable, or refund of any amount available to him based on such assessment.
B) Taxpayer does not file a response to NaFAC on or before the date and time specified or extended:
1- Suppose the taxpayer is an eligible taxpayer as per section 144C. In that case, NaFAC will forward the draft assessment order or final draft assessment order to the taxpayer, who may file objections to such variations with the dispute resolution panel.
Note: "eligible taxpayer" means,—
(i) any person in whose case the variation arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and
(ii) any foreign company
2- Suppose the taxpayer is not an eligible taxpayer as per section 144C. In that case, NaFAC will finalise the assessment based on the draft assessment order or final draft assessment order and send the taxpayer a copy of the order, notice for initiating penalty proceedings, demand notice- specifying the sum payable, or refund of any amount available to him based on such assessment.
Where the taxpayer files objections with the Dispute Resolution Panel, the assessment would be completed as follows -
a) Dispute Resolution Panel shall issue the directions under section 144C(5) of the Act;
b) NaFAC shall forward such directions to the assessment unit;
c) The assessment unit shall, based on in conformity with the directions issued by the Dispute Resolution Panel, prepare a draft assessment order and forward a copy of such order to the NaFAC;
d) On receipt of the draft assessment order from the assessment unit, the NaFAC shall finalise the assessment within the specified time and serve a copy of the order and the demand notice- specifying the sum payable or refund of any amount available to him, along with notice to initiate penalty proceedings, if any, to the taxpayer based on such final assessment.
After completion of the assessment, the NaFAC shall transfer all the electronic records of the particular case to the Assessing Officer(AO) having jurisdiction over the said case for such action as may be required under the Act.
Procedure for penalty briefly explained
In case of non-compliance of any direction, notice or order issued during the assessment proceedings, NaFAC or any income-tax authority may:
- initiate penalty proceedings by issuing a show-cause notice to the taxpayer or
- send recommendations to National Faceless Penalty Centre for initiating penalty proceedings against the taxpayer under the Act.
Upon receipt of such reference above, the National Faceless Penalty Centre will assign such a case to a particular penalty unit in any Regional Faceless Penalty Centres through an automated allocation system.
On examination of all the material available on record, the penalty unit may decide to either:
(a) agree with the recommendation of initiating penalty proceedings and prepare a draft notice requiring the taxpayer or any other person, as the case may be, to show cause as to why penalty applicable under various provisions of the Act should not be levied or
(b) disagree with the recommendation outlining reasons for the same.
And send such draft notice or intimate the reasons, as the case may be, to the National Faceless Penalty Centre.
The National Faceless Penalty Centre shall:
i)On receipt of the draft notice, serve a show-cause notice on the taxpayer or any other person specifying the deadline for filing a response or
ii)On receipt of the reasons for disagreement, it will not initiate a penalty
The response filed by the taxpayer shall be sent to the penalty unit, and in case no response is filed, it shall be informed to the penalty unit.
Based on the material on record, the penalty unit shall propose for imposition or non-imposition of a penalty and send such proposal along with the draft order or reasons to the National Faceless Penalty Centre. The National Faceless Penalty Centre shall either:
- Pass the penalty order based on the draft order or
- Drop the penalty and inform the taxpayer of the same or
- Assign the case to a penalty review unit for review of such a proposal.
Procedure for the faceless appeal
4.1. The CBDT has set up the National Faceless Appeals Centre (NFAPC), Regional Faceless Appeal Centres (RFAPCs) and Appeal Units to conduct faceless appeal proceedings. An appeal can be filed before the Commissioner (Appeals) against an assessment order or penalty order made by the NaFAC or the National Faceless Penalty Centre under this scheme. The appellate functions and procedure of appeals are essentially the same as the erstwhile ‘physical hearing’.
4.2. The appeal unit may request the NFAPC to:
- Obtain such evidence, information and other documents from the appellant or any other person or
- Obtain a report from the NaFAC or the AO on the grounds for appeal, or the information, documents, or evidence submitted by the appellant; or
- Direct the NaFAC or AO to make further inquiries under section 250(4) of the Act and report their findings.
4.3. The NFAPC may serve a notice on the appellant, any other person, or the NaFAC or AO to submit information, documents, evidence, or other reports as required by the AU or as may be relevant for the appeal proceedings by a specified deadline. Where the information is received by the fixed or extended (as allowed based on an application made to the NFAC) deadline, the NFAPC forwards the response, report, etc., to the appeal unit. Where no such information is received, the NFAPC intimates the appeal unit accordingly.
4.4. Where the appeal unit intends to increase an assessment or penalty or reduce the amount of a refund, it shall prepare a show-cause notice outlining the reasons for the same and send the notice to the NFAPC. The NFAPC serves the show-cause notice on the appellant.
Upon receiving the appellant’s response, the NFAPC forwards the appellant’s response to the appeal unit or notifies the appeal unit where no response is received.
4.5. The appeal unit, after taking into account all the relevant material available, including any report furnished by the NaFAC/AO, or response filed by the appellant or any other person and any matter (whether raised in the appeal or not) arising out of the appeal proceedings, prepares a draft order under section 251 of the Act and submit it to the NFAPC along with details of any penalty proceedings to be initiated.
4.6. A notable feature here is the proposal to review the draft order. Under the scheme, a draft appeal order will be reviewed by an Appeal Unit other than the Appeal Unit that has issued the draft appeal order:
- suppose the aggregate amount of tax, penalty, interest, or fee, including surcharge and cess payable in respect of issues disputed in the appeal, exceeds the threshold prescribed by the CBDT, a review is mandatory and
- for other orders, these will be subject to review, based on the risk management strategy specified by the CBDT
4.7. To initiate the draft order review, NFAPC shall send it to an Appeal Unit other than the Appeal Unit that has issued the draft appeal order.
4.8. The new appeal unit reviews the draft order and may either:
- Agree with the order and notify the NFAPC accordingly; or
- Suggest a variation and send such suggestions to the NFAPC.
4.9. The NFAPC finalises the appeal in line with the draft order, where the AU agrees with the draft order or
The NFAPC assigns the appeal to a new appeal unit in a ReFAC via an automated allocation system, where the appeal unit suggests a variation to the draft order.
4.10. After considering the suggestion for a variation, the appeal unit:
- If it relates to an increase in an assessment or penalty or a reduction of a refund, follows the procedure in 4.4 above and prepares a revised draft order following the procedure outlined under 4.5, above; or - In any other case, prepares a revised draft order following the procedure outlined under 4.5 above.
The appeal unit sends the order to the NFAPC and details of any penalty proceedings to be initiated.
4.11. After finalising an appeal under either 4.6 or 4.8 above, or on receipt of a revised draft order following 4.10 above, the NFAPC shall pass an appeal order and communicates it to the:
- Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner following section 250(7) of the Act; and
- NaFAC or AO.
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