Faceless Assessment - Income Tax Act, 1961 - Section 144B introduced via The Taxation and Other Laws Act, 2020

Faceless Assessment Scheme u/s. 144B has been inserted in the Income tax Act, 1961 with effect from 1 April 2021. 

You can access the link to the Act mentioned by clicking here. 

Some characteristics of the provisions introduced are as under;

The Section is notwithstanding any other contrary provisions in this Act. Hence Section 144B is an overriding provision to anything contrary mentioned in the Act.

Faceless Assessment is applicable for Assessment cases which are to be made as per Section 143(3) and Section 144 (best judgement Assessment). The board is further empowered to specify territory, persons, class of persons, income or classes of income, cases or classes of cases to whom such faceless assessment is to be made applicable.

Following Procedure is to be followed for completing the Assessment in a faceless manner

Initiation of Assessment and collection of Information

• National Faceless Assessment Centre (‘NFAC’) to serve notice u/s. 143(2) to the Assessee. (Applicable in cases even where AO has already issued notice u/s. 143(2). NFAC shall intimate the Assessee about completion of his Assessment in a Faceless manner)
• Assessee shall reply to the above notice within 15 days of receipt.
• NFAC shall assign the case to one of the Assessment Unit (‘AU’) of any Regional Faceless Assessment Centre (‘RFAC’) under automation allocation system.
• For the assigned case, the AU can request the NFAC for any of the following;
• Obtaining information, etc. from the Assessee or any other person.
• Conducting enquiry, verification to be done by the Verification Unit (‘VU’).
• Seeking technical Assistance from Technical Unit (‘TU’).
• The NFAC shall issue the appropriate notice as required in above point. (i.e. all the communication shall be made from NFAC.) Further the request of the AU shall be allocated to the TU / VU of any RFAC on the basis of automated allocation system.
• In case information is asked from the Assessee, and such Assessee fails to submit the information to the NFAC within the prescribed time, the NFAC shall issue a show cause notice as to why the assessment should not be completed in Best Judgement Assessment case.

Preparing the Draft Assessment Order (‘DAO’) and passing the Final Assessment Order (‘FAO’)

• All the information received from the Assessee, TU and VU shall be forwarded to the AU by the NFAC. The AU in turn prepare a Draft Assessment Order (‘DAO’) and send the copy of the DAO to the NFAC. Such DAO shall also provide the details of penalty proceedings to be initiated therein.
• The DAO shall be examined as per the Risk management strategy (Prescribed by CBDT which includes the Automated Examination Tool) and the NFAC may decide to
• Finalise the Assessment and send a copy to the Assessee along with demand notice – Applicable only where there is no variation to the Income declared by the Assessee in the Return of Income.
• In case of any addition to the return of income is proposed to be made – NFAC to provide an opportunity to the Assessee by issuing a show cause notice. The Assessee shall furnish its response to NFAC on or before the specified dates in the show cause notice. (* - continued below)
• Assign the DAO to a Review Unit (‘RU’) of any one RFAC under automated allocation system. The Review unit shall further conduct review of the DAO and may decide upon
• Concur with the DAO and intimate the NFAC, wherein NFAC will either finalise or provide an opportunity to the Assessee as mentioned above
• its changes in the DAO to the NFAC, wherein NFAC will assign the case to the AU which had prepared the DAO. The AU shall after considering the variations proposed by the RU send the final DAO to the NFAC. Further NFAC will either finalise or provide an opportunity to the Assessee as mentioned in above bullet points.
• * - Assessee might furnish its reply to the NFAC or not.
• In case where no response is furnished by the Assessee and where there is any proposed variation, forward the DAO or final DAO to the Assessee
• In case no response is furnished by Assessee, and where no variation is proposed to the income disclosed under return of Income, NFAC to finalise the Assessment as per the DAO or Final DAO + Penalty notice if any + demand notice
• In case if any response is received from the Assessee by NFAC, the NFAC shall forward the same to the AU and the AU shall after considering the response filed by the Assessee, make a revised DAO and send it to NFAC.
• After receipt of the revised DAO , there may be 2 scenarios
• Revised DAO is not prejudicial to the interest of the Assessee as compared to the original DAO or the final DAO, in such cases NFAC shall;
• Finalise the assessment and serve a copy of such order + Penalty notice, if any + Demand Notice to assessee;
• In case of eligible Assessee [refer 144C(15)(b)], forward the revised DAO to the Assessee
• Revised DAO is prejudicial to the interest of the Assessee as compared to the original DAO or the final DAO, in such cases NFAC shall carry out the procedures as mentioned above (show cause to Assessee, and so on)

Finalisation of Assessment in case of Eligible Assessee ( where option for DRP route exists)

• Where the draft Assessment order is received by the Eligible Assessee, shall file its reply (either Acceptance or objections);
• In case of Acceptance of Draft Assessment order by the Eligible Assessee, or where no reply is received by NFAC within the 30 days of receipt of the DAO;
• Finalise the assessment within the time allowed as per 144C(4) of and serve a copy of order + Penalty notice if any+ demand notice to the Assessee
• Where the eligible assessee files objections with DRP, NFAC shall after receipt of directions by DRP under 144C(5), forward such directions to the concerned AU; and the AU shall in conformity of the directions of DRP prepare a DAO in accordance with 144C(13) and send a copy to NFAC and NFAC in turn, finalise the assessment as  per 144C(13) and serve a copy order + Penalty notice if any, + demand notice to the Assessee.
• NFAC shall after completion of the Assessment, transfer all the electronic records of the case to the AO having jurisdiction over the said case for further actions.

Setting up of Faceless Assessment Scheme:

The CBDT has been empowered to set up the Centres (NFAC, RFAC), units (AU, TU, VU, RU as mentioned above), etc. and to specify their respective jurisdictions.

The Authorities to be appointed for the respective units are specified below;

• Additional Commissioner / Director or Joint Commissioner / Director;
• Deputy Commissioner / Director or Assistant Commissioner / Director or Income-tax Officer; 
• Other income-tax authority, ministerial staff, executive or consultant, as considered necessary by CBDT.

The communications among the units, Assessee or any other persons for the purposes of making a faceless assessment shall be through the NFAC.

All communications between the NFAC and Assessee or any other person or all internal communications between NFAC, RFAC, units shall be only through electronic mode. This will not be applicable for enquiry / verification carried out by VU conducted by the verification unit in certain circumstances.

Procedures to be carried out in the Faceless Assessment Scheme:

• All electronic records to be authenticated by
• the NFAC through digital signature.
• Assessee or any other person through digital signature if the Assessee is required to furnish his ROI under digital signature. In other cases, option for Digital signature or electronic verification code as mentioned below
• Every notice / order / communication shall be delivered to Assessee through
• Assessee’s registered Account + Real time alert, or
• Registered email address + Real time alert, or
• Upload of copy in the Mobile App + Real time alert
• Any response filed by the Assessee through the registered account the acknowledgement is sent by NFAC containing the has result generated on successful submission of response. Such response shall be deemed to be authenticate.
• No physical presence of any assessee is required before NFAC / RFAC. Assessee can request for a personal hearing against any show-cause notice issued under this scheme so as to make his oral submissions before the Income Tax Authorities. Such request can be approved by the Chief Commissioner / Director General in charge of the RFAC. Personal hearing in such cases is to be carried out through video conferencing, video telephony, etc. as per the procedures to be set up by the Board.
• The authorities are also allowed to carry out examinations, recording statement of the Assessee / other person, through video conferencing, video telephony, etc. as per the procedures to be set up by the Board.
• It is the responsibility of the board to establish suitable facilities for video conferencing / telephone including application software etc. to ensure that the Assessee / AR is not denied of the benefit of faceless Assessment merely on the basis of inaccessibility to vide conferencing, etc.
• The Principal Chief Commissioner or Principal director General in charge of NFAC with prior approval of the board shall lay down the procedures, standards, etc. for effective functioning of the NFAC and RFAC.
• It is to be noted that the principal Chief Commissioner or the Principal director general is empowered to transfer the case to the AO having the jurisdiction with prior approval of CBDT.
• It is also to be noted that any procedures carried out which is not as per the procedure laid down in Section 144B, the Assessment shall be non-est.