Faceless Assessments — Tax system for the 21st century

‘Faceless Assessment’ scheme is going to be a game changer and could along with newly introduced Citizens Charter provide a seamless and painless tax administration system for taxpayers. The most significant aspect of ‘Faceless Assessment’ scheme is that it has done away with human interface — no physical meeting between tax officers and taxpayers.

Also, the single territorial jurisdiction has been abolished and concept of dynamic jurisdiction has been introduced. Wide discretion and subjective assessment are being replaced by team based assessment. You now have a system where your draft order is issued in one city, review is done in another city and finalisation is yet in another city. There will also be other features such as centralised issuance of notice (by the National e-assessment Centre).

Well certainly it is not old wine in new bottle, although the first steps were taken as early as 2018. The canvas of the ‘Faceless Assessment’ scheme is much larger although it has been rechristened from e-assessment scheme 2019. For starters, the faceless assessments will cover all assessment orders. Under the e-assessment scheme 2019, only limited number of cases were selected under the scheme.

However, under the ‘Faceless Assessment’ scheme — launched on August 13, 2020 — effectively all assessments/reassessments, pending or new, has become faceless. The only exception to this rule are matters that include serious frauds, major tax evasion, sensitive and search matters. It also includes matters pertaining to international taxation, black money Act and Benami law. International tax charges will continue to be assessed by the jurisdictional assessing officer.

Any assessment order passed outside the ‘Faceless Assessment’ scheme (barring the exceptions stated above) will be considered to have been not passed at all. The scope of the ‘Faceless Assessment’ scheme has been expanded to include best judgement/ex-party assessment under Section 144 of the Act. Taxpayers can now seek extension of time for filing response to details in relation to its assessment proceedings under the scheme. A personal hearing (only through video conferencing) may be granted to the taxpayer.

Not really. Taxpayers may henceforth not be able to adopt conventional approach of strategising of representation before tax authorities, drafting of submissions and furnishing of evidence. Given the reduced timelines for completion of assessment proceedings, reasons such as inability to travel etc can hardly be grounds for seeking adjournments. Taxpayers may not have much time time for collating details, carrying out legal research and preparing submissions.

With all specialists such as forensic, transfer pricing, valuation, data analytics, IT, legal in the armoury of the Tax Department, you can certainly expect improvement in quality of the assessment orders.

While the system and processes under ‘Faceless Assessment’ scheme will evolve over time and settle, the Central Board of Direct Taxes (CBDT) will have to ensure that ‘faceless assessment’ does not lead to arbitrary adjustments and thereby unnecessary litigation. With ‘Faceless Assessment’ along with Computer Aided Scrutiny Selection (CASS) in place, the standard of uniformity in income tax assessments is highly anticipated.

The proof of the pudding is in the eating and in this situation, if an adverse inference were to be drawn by the Tax Department after a ‘faceless assessment’, will the taxpayer get due opportunities of physical hearing to establish his case and submit his viewpoints? Only time will tell.

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