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Background

The Section 143(3A) / (3B) / (3C) of the Income Tax Act, 1961, vests power in the Central Government to make a scheme by notification to enhance efficiency, transparency, and accountability in income tax assessment. This scheme covers the assessment of Income Tax under Section 143(3) or Section 144 of the Income Tax Act, 1961.

Section 143(3A) of the Act authorizes the formulation of the scheme with the following objectives:
 

• Eliminating the interface between the assessing officer and assessee to the extent technologically feasible.
   
• Optimizing the utilization of resources through economies of scale and functional specialization.
   
• Introducing a team-based assessment with dynamic jurisdiction.
   

By virtue of Section 143(3A) of the Act, the Central Government notified the E-Assessment Scheme, 2019, vide Notification No. 61/2019 dated September 12, 2019. On October 7, 2019, the E-Assessment Scheme was officially launched with the inauguration of the National E-Assessment Centre (NEC).
 

However, many assessments remained outside the purview of the E-Assessment Scheme, leading to continued interactions between department officers and assessees. To address these shortcomings, the government amended the scheme and introduced the Faceless Assessment Scheme vide Notification No. 60/2020 dated August 13, 2020.
 

The CBDT (Central Board of Direct Taxes) further notified the Faceless Appeals Scheme, which prescribed a detailed procedure for conducting appeals in a centralized and automated manner. Appeals were assigned to an Appeal Unit in any Regional Faceless Appeal Centre (RFAC) through an automated selection process, and all communication between the appellant and the Appeal Unit (AU) took place via the National Faceless Appeal Centre (NFAC).
 

Procedure for Assessment
 

The assessment under the Faceless Assessment Scheme follows the below procedure:

1. Issuance of Notice
    

   • The National E-Assessment Centre (NEC) serves a notice to the taxpayer under Section 143(2) specifying the issues for case selection.
      
   • The taxpayer must file a response within 15 days of receiving the notice.
      

2. Case Assignment
    

   • The NEC assigns the case for e-assessment to a specific Assessment Unit (AU) in any Regional E-Assessment Centre (REC) through an automated allocation system.
      

3. Requests by the Assessment Unit
    

   • The Assessment Unit may request NEC for:
     • Additional information, documents, or evidence from the taxpayer or any other person.
        
     • Verification or inquiry by a Verification Unit (VU).
        
     • Technical assistance from a Technical Unit (TU).
        

4. Processing of Requests
    

   • If further documents or evidence are required, NEC issues a notice to the taxpayer.
      
   • If verification is required, NEC assigns the task to a Verification Unit.
      
   • If technical assistance is needed, NEC assigns the request to a Technical Unit in a Regional E-Assessment Centre.
      

5. Draft Assessment Order
    

   • The Assessment Unit considers all relevant material and prepares a draft assessment order, either:
     • Accepting the taxpayer’s declared income, OR
        
     • Modifying the taxpayer’s declared income.
        
   • The Assessment Unit submits the draft order to the NEC and includes details of any penalty proceedings, if applicable.
      

6. Review and Finalization
    

   • NEC examines the draft order using an automated risk management strategy and may:
     • Finalize the assessment and issue an order & demand notice to the taxpayer.
        
     • Provide an opportunity to be heard to the taxpayer.
        
     • Send the draft order for review to a Review Unit (RU).
        
   • If sent to the Review Unit, the RU may:
     • Approve the draft order.
        
     • Suggest modifications to the draft order.
        
   • The Assessment Unit considers suggested modifications and sends a final draft assessment order to NEC, which then finalizes the assessment or issues a notice to the taxpayer.
      

7. Response & Completion
    

   • The taxpayer may respond to a show-cause notice within the given time.
      
   • If the taxpayer does not respond, NEC finalizes the assessment as per the draft order.
      
   • If a response is received, the Assessment Unit reviews it and issues a revised draft order to NEC.
      

8. Post-Assessment Processing
    

   • NEC transfers the electronic records of the case to the Jurisdictional Assessing Officer (AO) for:
     • Imposing penalties.
        
     • Demand collection & recovery.
        
     • Rectifying mistakes.
        
     • Giving effect to appellate orders.
        
     • Submitting remand reports & other documents.
        
     • Seeking sanction for prosecution.
        

Procedure for Penalty
 

• Any unit can recommend penalty proceedings to NEC for non-compliance.
   
• NEC issues a show-cause notice to the taxpayer.
   
• The concerned unit evaluates the response and either:
  • Prepares a draft penalty order, OR
     
  • Drops the penalty proceedings and informs NEC.
     
• NEC issues the final penalty order to the taxpayer.
   

Procedure for Appeal
 

• If a taxpayer disagrees with an assessment order, they can file an appeal with the Commissioner (Appeals) having jurisdiction over the Assessing Officer (AO).
   

Communication & Electronic Records
 

• All communications between:
  • NEC & taxpayer → Conducted exclusively via electronic mode.
     
  • NEC & various units → Conducted exclusively via electronic mode.
     
• Taxpayers receive notifications through:
  • Registered Account.
     
  • Registered Email.
     
  • Mobile App Notifications.
     

Appearance of Taxpayer
 

• No physical appearance is required before NEC, REC, or any unit.
   
• If modifications are proposed, the taxpayer can:
  • Make electronic submissions.
     
  • Request a video conferencing hearing.
     
• Income-tax authorities may examine taxpayers via video conferencing.
   
• CBDT will establish video conferencing facilities as required.
   

Power to Specify Processes & Procedures
 

• The Principal Chief Commissioner/Principal Director General in charge of NEC lays down procedures for:
   
  • Service of notices/orders.
     
  • Receipt & acknowledgment of responses.
     
  • E-proceedings & status tracking.
     
  • Electronic storage & retrieval of records.
     
  • Grievance redressal.
     

Naveen Pandey & Associates Comments

The Faceless Assessment Scheme is a landmark step in reducing direct interactions between taxpayers and the Income Tax Department. It ensures quick case resolution while reinforcing the government’s trust in taxpayers.
 

If you are facing issues with the Income Tax Department, feel free to contact us at [email protected].