Direct Tax Alert - Certain matters excluded from Faceless Penalty Scheme

Background

Finance Act, 2020 had amended section 274 of the Income-tax Act, 1961 (IT Act) to grant power to make a Faceless Penalty Scheme. Under the said power, the Central Board of Direct Taxes (CBDT) had notified1 the Faceless Penalty Scheme, 2021 (Faceless Penalty Scheme) which is effective from 12 January 2021. Please click here to read our analysis of the Faceless Penalty Scheme. The Scheme excluded certain types of proceedings from the ambit of the Faceless Penalty Scheme.

Subsequently, the Central Board of Direct Taxes (CBDT) issued two more orders2 to further add to the list of exclusions.

Recently, the CBDT has issued another order3 to further exclude certain penalty proceedings from the scope of the Faceless Penalty Scheme.

We, at BDO in India, have summarised this Order and provided our comments on its impact hereunder:

What kind of penalties will remain outside the purview of the Faceless Penalty Scheme?

Penalty proceedings in cases where the pendency could not be created on ITBA4 because of technical reasons or cases not having a Permanent Account Number.

BDO Comments

This will bring clarity to the taxpayer who were facing technical challenges. However, it is pertinent to note that by this exclusion, the said proceedings would now be handled by the jurisdictional tax officer. Hence, the taxpayer would now be required to make the submission with tax officer directly and not to National Faceless Penalty Centre.


1Notification No. 2/2021 [F.No. 370142/51/2020-TPL] and Notification No. 3/2021 [F.No. 370142/51/2020-TPL], dated 12 January 2021

2F No. 187/4/2021-ITA-I dated 20 January 2021 and dated 26 February 2021

3F No. 187/4/2021-ITA-I dated 10 March 2022

4The Income Tax Department has created the Income Tax Business Application (ITBA), an assessment module for selection of various income tax proceedings under Computer Assisted Scrutiny Selection (‘CASS’)

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