Assessees in India often have to face harassment from the tax officials and henceforth for the benefit of such assessees, the GOI in September 2020 introduced the faceless Income tax assessment. The article explains the working of the faceless scheme along with its potential benefits. The article also provides a comparison between the faceless and conventional scheme to better gauge the impact of the new scheme.
Thu Jul 07 2022 | Govt. Agencies and Taxation | Comments (0)
Assessees in India often have to face harassment from the tax officials and hence, for the benefit of such assessees, the GOI, in September 2020, introduced the faceless Income tax assessment. Previously, the assessee had to go see the office of the I-T department if there was an error in the return and the same was the case if there is a dispute with a rule. The system will help for faceless tax assessments.
The procedure for the imposition of the penalty (for the underreporting of or misreporting of revenue u/s 270A) provided for in Section 274 of the Income Tax Act in accordance with Chapter XXI of the Act. In response to a notice issued by the Assessing Officer (AO), the assessee or his authorized representative was still required to visit the Assessing Officer's office. With the advent of the Faceless Assessment Scheme in 2019, and in order to ensure that the reforms initiated by the Department to remove the human interface from the system reach the next level, it was important to launch the Faceless Penalty Scheme in the context of the Faceless Assessment Scheme in 2019.
The Finance Act 2020 has introduced an allowable provision in the form of a new subsection (2A) in section 274 to provide that, in order to provide greater performance, transparency and accountability, the Central Government can notify an e-Scheme for the purposes of penalty imposition.
A central machine gathers tax returns for review based on risk criteria and mismatch under faceless scrutiny evaluation, and then assigns them to a team of officers randomly. This allocation is checked by officers at another randomly chosen location and a note is submitted by the centralized computer system only if it is accepted. It is possible to respond electronically to all such notices without the necessity of visiting a tax office or meeting any official. The only regulatory body for the faceless IT evaluation framework is the National E-Assessment Centre, Delhi. The Authority's regional centers will be located in Mumbai, Kolkata, Hyderabad, Chennai, Pune, Ahmedabad and Bengaluru.
Conventional Penalty Proceedings versus the new Faceless Penalty Proceedings under Faceless Penalty Scheme, 2021
Comparison of Faceless Penalty Proceeding to the Conventional Penalty Proceeding
| S. No. | Particulars | Conventional Penalty Proceedings | Faceless Penalty Proceedings under Faceless Penalty Scheme, 2021 |
| 1. | Applicability | All Penalty Proceedings disposed of up till 11.1.2021 | All pending and new Penalty Proceedings w.e.f. 12.1.2021. |
| 2. | Penalty Adjudicating Authority | Jurisdictional AO | Dynamic authority under the overall monitoring and oversight of the National Faceless Penalty Centre in every Penalty Unit in the Regional Faceless Penalty Centre (RFPC) (NFPC). |
| 3. | Penalty Notice Issuing Authority | Jurisdictional AO | National Faceless Penalty Centre (NFPC) |
| 4. | Assignment of Penalty Proceedings | There was no assignment of penalty proceedings and, in accordance with the assessment order, the Jurisdictional AO had a by-default and intrinsic right to initiate and adjudicate penalty proceedings. | By an automated random allocation scheme, the NFPC assigns the Penalty Proceedings to any Penalty Unit located in any one Regional Faceless Penalty Centre. |
| 5. | Inquiries/Adjudication during the course of penalty proceedings | For lack of more information/documents/records from the assessee, Jurisdictional AO used to issue Notices under section 274 read with 270A. | Reasonable notice or request u/s 274 read with 270A may be given by the NFPC to the assessee or NFAC/AO to obtain any further details, documents or facts, as requested by the Penalty Unit in the Regional Faceless Penalty Centre to which the NFPC has assigned the penalty proceedings. |
| 6. | Provision of Draft Penalty Order | There was no specific provision of passing a Draft Penalty Order. | The draft Penalty Order is to be adopted at the Regional Faceless Penalty Centre by the Penalty Unit to which the NFPC has allocated the penalty proceedings. NFPC will review this Draft Penalty Order on the basis of risk management criteria, and NFPC can submit this Draft Penalty Order to the Penalty Review Unit for review. |
In order to execute penalty proceedings in a faceless way, the CBDT establishes:
A taxpayer may face difficulties such as taxpayers who are not tech-savvy may be hesitant to reply online or they will have to appoint a specialist to assist with online responses, although the faceless assessment software has been launched in order to make it easier for taxpayers and tax authorities. In addition, because there is no face-to-face contact, the online submission must be well drawn up and detailed for the tax officer to better grasp the submissions and statements of taxpayers.
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