4 min
22-Feb-2025
The Faceless Assessment Scheme is a digital initiative by the Income Tax Department of India aimed at ensuring transparency, efficiency, and accountability in tax assessments. Introduced under the E-Assessment Scheme, 2019, it eliminates physical interaction between taxpayers and tax officers, reducing the scope for bias and corruption.
This system is based on artificial intelligence (AI) and machine learning (ML) to allocate cases randomly to officers across India. It ensures that assessment proceedings are conducted through electronic means via the National E-Assessment Centre (NeAC) and Regional Assessment Units (ReACs).
The scheme applies to all taxpayers except cases related to serious fraud, tax evasion, or high-value transactions. It simplifies the assessment process and enhances ease of doing business by making compliance hassle-free. Taxpayers can submit responses electronically, reducing paperwork and delays.
By promoting data-driven assessments, the Faceless Assessment Scheme strengthens India’s tax administration while ensuring fairness and efficiency in the tax system.
The process is initiated by issuing a notice under Section 143(2), requiring the taxpayer to provide necessary documents and evidence supporting the return filed. The AO reviews the submitted information, may request additional details, and after thorough examination, makes an assessment of the total income or loss. Subsequently, the AO determines the tax payable or refundable based on the assessment. This process ensures transparency and accuracy in tax administration.
During this process, the system verifies the correctness of the tax paid, deductions claimed, and income reported. If discrepancies are found, an intimation is sent to the taxpayer, detailing the adjustments made and the resultant tax liability or refund. This automated process ensures efficiency and prompt processing of returns, facilitating quicker refunds and reducing the scope for errors.
With the introduction of the Faceless Assessment Scheme, the best judgment assessments under Section 144 are now conducted in a faceless manner. This means that the assessment is carried out electronically, eliminating the need for physical interaction between the taxpayer and the tax authorities. The National Faceless Assessment Centre (NFAC) facilitates this process, ensuring transparency, efficiency, and reducing the scope for discretion or bias.
The AO must have "reason to believe" that income chargeable to tax has escaped assessment. This belief should be based on tangible evidence or information, not mere suspicion. Upon establishing such belief, the AO can initiate proceedings by issuing a notice under Section 148, requiring the taxpayer to furnish a return of income for the relevant assessment year.
The reassessment process involves a thorough examination of the taxpayer's records, and the AO may recompute income, disallow deductions, or add undisclosed income. Taxpayers are granted an opportunity to present their case and provide explanations or evidence supporting their return. This process ensures fairness and transparency in addressing instances of income escaping assessment.
Under this scheme, assessments are conducted by the National Faceless Assessment Centre (NFAC), which coordinates with various Regional Faceless Assessment Centres (RFACs). The process involves the allocation of cases to assessment units through an automated system, ensuring anonymity and impartiality. Taxpayers receive electronic notices and are required to respond electronically, streamlining the communication process.
The faceless assessment procedure includes several stages: issuance of notice, submission of taxpayer's response, drafting of assessment order, and review by a separate unit to ensure accuracy and fairness. This structured approach reduces the scope for discretion and potential malpractices, fostering a more transparent tax administration system.
National e-Assessment Centre (NeAC): Serving as the central hub, the NeAC oversees the entire faceless assessment process. It is responsible for issuing notices, allocating cases to various units, and communicating assessment orders to taxpayers.
Regional e-Assessment Centres (ReACs): These centres operate under the NeAC and are located in different regions. They facilitate the assessment process by coordinating with various units and ensuring compliance with the procedures laid out under the scheme.
Assessment Units (AUs): Tasked with conducting assessments, AUs review the income tax returns and supporting documents submitted by taxpayers. They identify issues, seek additional information if necessary, and propose modifications to the income reported.
Verification Units (VUs): These units are responsible for verifying the information and documents provided by taxpayers. They authenticate evidence, conduct enquiries, and cross-verify data to ensure accuracy.
Technical Units (TUs): Comprising experts in various fields such as accountancy, taxation, and law, TUs provide technical assistance and advice on complex issues that arise during assessments.
Review Units (RUs): RUs review the draft assessment orders prepared by AUs. They ensure that the proposed orders are legally sound, consistent with applicable laws, and free from errors.
Issuance of notice: The NeAC initiates the process by issuing a notice under Section 143(2) to the taxpayer, informing them of the commencement of assessment proceedings.
Submission of response: Upon receiving the notice, the taxpayer is required to submit their response along with relevant documents within the specified timeframe through the designated online portal.
Allocation to Assessment Unit (AU): The NeAC assigns the case to a specific AU using an automated allocation system, ensuring anonymity and impartiality in the selection process.
Assessment and information request: The AU examines the submitted information and may request additional details or clarifications from the taxpayer through the NeAC. All communications are routed electronically to maintain transparency.
Verification and technical assistance: If necessary, the AU can seek assistance from VUs for verification of information or TUs for expert advice on complex matters.
Draft assessment order: After considering all information and responses, the AU prepares a draft assessment order, which may include proposed additions or modifications to the taxpayer's reported income.
Review of draft order: The draft assessment order is then reviewed by an RU to ensure accuracy, legal compliance, and adherence to prescribed procedures.
Finalisation of assessment: Upon approval by the RU, the NeAC communicates the final assessment order to the taxpayer, along with details of the determined tax liability or refund, as applicable.
With features like online submissions, automated reviews, and digital dispute resolution, faceless assessment simplifies compliance while upholding taxpayer rights. This initiative strengthens India’s financial governance, making tax administration more robust and credible. If you are looking for safe investment option, then you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.85% p.a.
This system is based on artificial intelligence (AI) and machine learning (ML) to allocate cases randomly to officers across India. It ensures that assessment proceedings are conducted through electronic means via the National E-Assessment Centre (NeAC) and Regional Assessment Units (ReACs).
The scheme applies to all taxpayers except cases related to serious fraud, tax evasion, or high-value transactions. It simplifies the assessment process and enhances ease of doing business by making compliance hassle-free. Taxpayers can submit responses electronically, reducing paperwork and delays.
By promoting data-driven assessments, the Faceless Assessment Scheme strengthens India’s tax administration while ensuring fairness and efficiency in the tax system.
Faceless assessment under Income Tax Act
Faceless assessment, introduced under the Income Tax Act, aims to make tax administration impartial and seamless. This system eliminates human intervention, ensuring fairness and preventing undue influence. Here are some of the fey features of faceless assessment:- Elimination of human interaction – The process is entirely online, minimising face-to-face interactions between taxpayers and officers.
- Randomised case allocation – Cases are assigned to tax officers randomly across different locations, ensuring neutrality.
- Automated decision-making – AI-driven data analysis is used to process tax assessments efficiently.
- Digital communication – All notices and orders are communicated electronically through the Income Tax Department’s online portal.
Assessment under Section 143(3)
Section 143(3) pertains to the scrutiny assessment process. In this procedure, the Assessing Officer (AO) conducts a detailed examination of the taxpayer's return to verify the accuracy of income declared and deductions claimed. The primary objective is to ensure that the taxpayer has not understated income, claimed excessive losses, or underpaid taxes.The process is initiated by issuing a notice under Section 143(2), requiring the taxpayer to provide necessary documents and evidence supporting the return filed. The AO reviews the submitted information, may request additional details, and after thorough examination, makes an assessment of the total income or loss. Subsequently, the AO determines the tax payable or refundable based on the assessment. This process ensures transparency and accuracy in tax administration.
Assessment under Section 143(1)
Section 143(1) deals with the preliminary assessment of income tax returns. In this mechanism, the return filed by the taxpayer is processed electronically to check for any mathematical errors, internal inconsistencies, tax calculation mistakes, or incorrect claims. The Centralised Processing Centre (CPC) carries out this assessment without any human intervention.During this process, the system verifies the correctness of the tax paid, deductions claimed, and income reported. If discrepancies are found, an intimation is sent to the taxpayer, detailing the adjustments made and the resultant tax liability or refund. This automated process ensures efficiency and prompt processing of returns, facilitating quicker refunds and reducing the scope for errors.
Faceless Assessment [Section 144]
Section 144 pertains to the best judgment assessment, which is invoked when a taxpayer fails to comply with the requirements of the Income Tax Act. This includes situations where the taxpayer does not file a return, fails to respond to notices, or does not provide necessary information. In such cases, the AO is empowered to make an assessment based on available information and evidence.With the introduction of the Faceless Assessment Scheme, the best judgment assessments under Section 144 are now conducted in a faceless manner. This means that the assessment is carried out electronically, eliminating the need for physical interaction between the taxpayer and the tax authorities. The National Faceless Assessment Centre (NFAC) facilitates this process, ensuring transparency, efficiency, and reducing the scope for discretion or bias.
Assessment under Section 147
Section 147 of the Income Tax Act empowers the Assessing Officer (AO) to reassess income that may have escaped assessment. This provision ensures that any income not initially assessed or under-assessed is brought to tax, maintaining the integrity of the tax system.The AO must have "reason to believe" that income chargeable to tax has escaped assessment. This belief should be based on tangible evidence or information, not mere suspicion. Upon establishing such belief, the AO can initiate proceedings by issuing a notice under Section 148, requiring the taxpayer to furnish a return of income for the relevant assessment year.
The reassessment process involves a thorough examination of the taxpayer's records, and the AO may recompute income, disallow deductions, or add undisclosed income. Taxpayers are granted an opportunity to present their case and provide explanations or evidence supporting their return. This process ensures fairness and transparency in addressing instances of income escaping assessment.
Section 144B of the Income Tax Act
Section 144B introduces the Faceless Assessment Scheme, aiming to enhance transparency, efficiency, and accountability in income tax assessments. This scheme eliminates the need for physical interaction between taxpayers and tax authorities by conducting assessments electronically.Under this scheme, assessments are conducted by the National Faceless Assessment Centre (NFAC), which coordinates with various Regional Faceless Assessment Centres (RFACs). The process involves the allocation of cases to assessment units through an automated system, ensuring anonymity and impartiality. Taxpayers receive electronic notices and are required to respond electronically, streamlining the communication process.
The faceless assessment procedure includes several stages: issuance of notice, submission of taxpayer's response, drafting of assessment order, and review by a separate unit to ensure accuracy and fairness. This structured approach reduces the scope for discretion and potential malpractices, fostering a more transparent tax administration system.
Structure for faceless assessment
The Faceless Assessment Scheme, introduced by the Central Government, aims to enhance transparency, efficiency, and accountability in income tax assessments by eliminating direct interactions between taxpayers and tax authorities. This scheme is structured around a centralised framework comprising several key components:National e-Assessment Centre (NeAC): Serving as the central hub, the NeAC oversees the entire faceless assessment process. It is responsible for issuing notices, allocating cases to various units, and communicating assessment orders to taxpayers.
Regional e-Assessment Centres (ReACs): These centres operate under the NeAC and are located in different regions. They facilitate the assessment process by coordinating with various units and ensuring compliance with the procedures laid out under the scheme.
Assessment Units (AUs): Tasked with conducting assessments, AUs review the income tax returns and supporting documents submitted by taxpayers. They identify issues, seek additional information if necessary, and propose modifications to the income reported.
Verification Units (VUs): These units are responsible for verifying the information and documents provided by taxpayers. They authenticate evidence, conduct enquiries, and cross-verify data to ensure accuracy.
Technical Units (TUs): Comprising experts in various fields such as accountancy, taxation, and law, TUs provide technical assistance and advice on complex issues that arise during assessments.
Review Units (RUs): RUs review the draft assessment orders prepared by AUs. They ensure that the proposed orders are legally sound, consistent with applicable laws, and free from errors.
Procedure in faceless assessment
The Faceless Assessment Scheme outlines a systematic procedure to conduct income tax assessments electronically, minimising physical interactions between taxpayers and tax authorities. The procedure involves the following steps:Issuance of notice: The NeAC initiates the process by issuing a notice under Section 143(2) to the taxpayer, informing them of the commencement of assessment proceedings.
Submission of response: Upon receiving the notice, the taxpayer is required to submit their response along with relevant documents within the specified timeframe through the designated online portal.
Allocation to Assessment Unit (AU): The NeAC assigns the case to a specific AU using an automated allocation system, ensuring anonymity and impartiality in the selection process.
Assessment and information request: The AU examines the submitted information and may request additional details or clarifications from the taxpayer through the NeAC. All communications are routed electronically to maintain transparency.
Verification and technical assistance: If necessary, the AU can seek assistance from VUs for verification of information or TUs for expert advice on complex matters.
Draft assessment order: After considering all information and responses, the AU prepares a draft assessment order, which may include proposed additions or modifications to the taxpayer's reported income.
Review of draft order: The draft assessment order is then reviewed by an RU to ensure accuracy, legal compliance, and adherence to prescribed procedures.
Finalisation of assessment: Upon approval by the RU, the NeAC communicates the final assessment order to the taxpayer, along with details of the determined tax liability or refund, as applicable.
Conclusion
The Faceless Assessment Scheme is a revolutionary step in India’s tax administration. By eliminating human interaction, it ensures fair, unbiased, and transparent tax assessments. The system’s automation, AI-driven processing, and random case allocation prevent corruption and improve efficiency.With features like online submissions, automated reviews, and digital dispute resolution, faceless assessment simplifies compliance while upholding taxpayer rights. This initiative strengthens India’s financial governance, making tax administration more robust and credible. If you are looking for safe investment option, then you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.85% p.a.
