FACELESS ASSESSMENT – A COMPLETE PARADIGM SHIFT OF INCOME TAX ASSESSMENTS IN INDIA

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What is Faceless Assessment?

Faceless Assessment, in generic terms, means assessing taxpayers in a way where they do not have to visit the Income Tax Departmentand do not come face-to-face with any Income Tax officials.

It aims to eliminate human interface in the direct taxation functioning of the country and introduce widespread adoption and usage of data analytics and artificial intelligence (AI).  

However, the most striking feature of the faceless assessment scheme is the introduction of team-based assessment with dynamic jurisdiction which replaces the conventional territorial or jurisdictional based assessment.

Overview of Assessment Procedures

Apart from a structural change as deliberated above, there is also a fundamental change in the way assessments will be carried out in the course of this Scheme.

For instance, an assessee who resides in Mumbai; his/ her Income Tax return may be assigned by the NeAC to any AU of say, Gujarat and the draft assessment order (DAO) may be reviewed by an officer in say, West Bengal. However, the assessment order will not mention these details. It will only make mention of the NeAC.

All assessment orders shall be passed by the NeAC only and all communication among the units of the ReACs shall be facilitated through the NeAC exclusively by electronic mode by affixing a Digital Signature Certificate (DSC).

Scope of the Scheme

The scheme covers the following cases and aspects under its ambit:

1) All existing cases where the notice for scrutiny was issued by the NeAC under the erstwhile e-Assessment Scheme, 2019.

2) All other cases where:

a) Returns of income are filed and selected for scrutiny under the extant guidelines by issuing notices;

b) Notices to assessees seeking additional documents/ evidences have been issued for filing the returns and no return thereon has been furnished;

The assessee has not furnished return of income under section 148 and a notice under section 142(1) calling for information has been issued.

Conclusion

India has taken a giant leap in moving towards a digital nation by launching this Scheme. Compliances will be easier, assessments will be faster and disputes will be lower.

In the last few years, tax scrutiny cases have reduced from 0.71% earlier to now 0.25%6. This is a reflection of the trust that the government is placing on the taxpayers.

Time only will tell the effectiveness and efficiency of the Scheme but as honest taxpayers, it is definitely something to look forward to.

About author

Hansal Bavishi is a practicing Chartered Accountant based out of Mumbai, founder of  Hansal Bavishi and Associates. He is also a contributor to various professional journals and columns.

Please feel free to address all your queries on office@hbca.in

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