Faceless Assessment Scheme Under Section 144B of Income Tax Act

Section 144B of the Income Tax Act lays down the procedure for the Faceless Assessment scheme introduced by the central government. This scheme aims to eliminate direct interface between the assessee and the assessing officer while improving transparency, efficiency, and accountability in income tax assessments.

As part of this framework, the assessee and the assessing officer interact electronically for income tax return (ITR) assessments without physical interaction. In this blog, we will explore Section 144B of the Income Tax Act, covering its meaning, working mechanism, procedures, exemptions, and more, for both NRIs and Indian residents.

What is the Faceless Assessment Scheme Under Section 144B?

Section 144B primarily prescribes the procedure for faceless assessment under the Income Tax Act. The broader faceless assessment initiative originated from the E-Assessment Scheme (2019) and subsequent reforms aimed at improving transparency, reducing discretion, and enhancing efficiency in tax administration.

Under this framework, tax authorities (Assessing Officers) and taxpayers conduct assessments electronically, significantly reducing the need for physical interaction.

All income tax assessments under this scheme are conducted through the National Faceless Assessment Centre (NFAC), which coordinates with different faceless assessment units. Cases are allocated through an automated system to ensure objectivity and minimize jurisdiction-based bias.

The concerned taxpayer receives electronic notices and must respond electronically, streamlining the entire communication process.

The faceless assessment procedure generally includes several stages, starting from issuing a notice, submission of the taxpayer’s response, drafting of the assessment order, and review by a separate unit to ensure fairness and accuracy.

Key Features of the Faceless Assessment Scheme

The key features of faceless e-assessment include:

Zero physical interface: The assessment process is conducted electronically, meaning the assessing officer and taxpayer generally do not interact in person. Personal hearings, where required, are typically conducted through video conferencing.

Team-based assessment: The process is handled by specialized units with defined functions, ensuring expertise at each stage.

Dynamic Jurisdiction: Cases are not assigned based on geographical location but according to expertise, risk parameters, and workload.

Technological use: The Income Tax Department uses data analytics, digital tools, and automated systems to support risk assessment and case selection.

Transparency and accountability: The faceless assessment structure is designed to maintain transparency through documented electronic records and review mechanisms, reducing discretionary practices.

Convenience and compliance: Taxpayers can communicate electronically with the tax department, saving time and administrative effort.

Benefits of Faceless Assessment for NRIs

The Faceless Assessment scheme is particularly beneficial for NRIs because it enables seamless electronic communication with Indian tax authorities during assessments.

Some key benefits include:

• Reduced need to travel to India for hearings or submissions.
• Flexibility to respond electronically from different time zones.
• Easy document upload through the Income Tax portal.
• Option to appoint an authorized representative or Chartered Accountant in India if required.

Types of Income Tax Assessments in India

Under Indian Income Tax law, there are broadly four types of assessment proceedings:

• Assessment Under Section 143(1): Processing of return through summary checks without detailed scrutiny.
• Assessment Under Section 143(2): Scrutiny assessment involving detailed examination.
• Assessment Under Section 144: This is the Best Judgment Assessment.
• Assessment Under Section 147: Income escaping assessment (reassessment).

Faceless procedures primarily apply to scrutiny, best judgment, and reassessment cases, significantly reducing physical interface.

Structure of the Faceless Assessment System

The Central Board of Direct Taxes (CBDT) notifies the faceless assessment framework, while the National Faceless Assessment Centre (NFAC) administers the process.

National Faceless Assessment Centre (NFAC)

This center allocates assessment cases to different units through an automated allocation system and acts as the single communication interface with taxpayers.

Assessment Unit

These units scrutinize income tax returns using available data. If additional information is required, they submit a request to NFAC, which then issues notices to taxpayers under Section 143(2) or Section 142(1).

When NFAC receives responses, it forwards them to the assessment unit.

Verification Unit

This unit performs verification functions, including examination of records, inquiries, or witness statements where required.

If verification is needed, the assessment unit requests NFAC to allocate the matter to a verification unit through automated allocation.

Technical Unit

Where specialized expertise is required, the assessment unit may request NFAC to assign the matter to a technical unit.

Technical assistance may involve legal interpretation, accounting, information technology, valuation, forensic analysis, audit matters, transfer pricing, data analytics, or related domains.

Review Unit

This unit reviews draft assessment orders prepared by the assessment units to ensure legal compliance, procedural accuracy, and completeness before finalization.

Procedure of Faceless Assessment

There is a systematic procedure for conducting a faceless assessment. The main steps include:

1. Issuance of Notice

NFAC issues a notice under Section 143(2) informing the taxpayer about the initiation of assessment proceedings.

Note: Where a taxpayer voluntarily files a return under Section 139, a scrutiny notice may subsequently be issued electronically.

2. Response Submission

Taxpayers must submit responses along with required documents within the specified timeframe through the designated online portal.

3. Case Allocation

NFAC allocates cases to assessment units through an automated system to ensure objectivity and anonymity.

4. Requests by Assessment Units

Assessment units may request NFAC for:

• Additional information or evidence from taxpayers or third parties.
• Verification or inquiry through the verification unit.
• Technical assistance from the technical unit.

5. Issue of Notice to Assessee

If additional documentation or clarification is required, NFAC issues notices electronically to the concerned assessee.

The taxpayer must submit responses within the timeframe specified in the notice.

6. Verification or Technical Review

NFAC assigns cases to verification or technical units as required. Reports from these units are forwarded to the concerned assessment unit.

7. Non-Response Scenario

If the taxpayer fails to respond, NFAC may initiate best judgment assessment proceedings under Section 144.

8. Draft Assessment Order

After considering all information, the assessment unit prepares a draft assessment order, including proposed additions or modifications.

The review unit examines this draft for accuracy and compliance with law.

9. Final Assessment Order

Once approved, NFAC communicates the final assessment order electronically to the taxpayer along with details of tax liability, demand, or refund, as applicable.

Communication and Electronic Records

Under this scheme, all communication between NFAC and the taxpayer or authorized representative is conducted electronically.

Internal communication among faceless assessment units also takes place electronically. Personal hearings, where permitted, are generally conducted through video conferencing.

NFAC authenticates all electronic records issued under this scheme. Notices, orders, or other electronic communication may be delivered through:

• Placement of an authenticated copy in the taxpayer’s registered e-filing account.
• Sending an authenticated copy to the registered email address of the taxpayer or authorized representative.
• Uploading an authorized copy to the taxpayer’s mobile application with real-time alerts.

Professional Assistance for Faceless Assessments

A revolutionary step taken by the Income Tax Department of India is the Faceless Assessment Scheme. Eliminating human interaction, this scheme ensures that the tax assessments are unbiased, fair, and legally compliant in all aspects. The random case allocations and AI-driven process have ensured that everything remains efficient and free from corrupt practices. Under section 148, the ITD permits the assessing officer to reopen an assessment case if there is any suspicion regarding concealment or underreporting of the income.

However, if you are looking for an expert NRI ITR consultation service, we are here to help you out! Savetaxs, a leading firm in the domain of taxation, has been helping NRIs for decades now with their taxation issues and more. Our team of experts brings more than 30 years of experience, ensuring you don't have to stress about any tax assessments or legal notices. Savetaxs is every NRI's best mate because we understand the mindset of our clients and the root cause of the problem, and then tailor strategies for every client, ensuring complete security and accuracy in every service we offer.