The Hon’ble Prime Minister (PM) of India, Shri Narendra Modi, had unveiled a platform for Transparent Taxation – Honouring the Honest to bring about structural reforms. The three main pillars of this platform are: faceless assessment, faceless appeal and taxpayer’s charter. Please click here for our alert on Transparent Taxation – Honouring the Honest.
While two main pillars viz. faceless assessment and taxpayer’s charter were introduced during his speech, it was announced that Faceless Appeal Scheme was to be introduced effective from 25 September 2020. In this regard, recently, the Central Board of Direct Taxes (CBDT) has issued notification notifying Faceless Appeal Scheme, 2020 (Scheme). With introduction of this Scheme, the entire process of appeals (i.e. allocation of income tax appeal, communication of notice / questionnaire, verification / enquiry to hearing, finally communication of the appellate order etc.) will be faceless and thereby dispensing with the need for any physical interface.
We, at BDO in India, have analysed and summarised hereunder the said notification:
Appeals covered under Faceless Appeal Scheme
The scheme shall be applicable for a person who has filed an appeal under section 246A (1) or section 248 (in relation to non-requirement withholding tax from payment to non-resident) of the Income-tax Act, 1961 (‘IT Act’). Further, for the purpose of the Scheme, various terms such as automated allocation system, automated examination tool, designated portal, electronic record, email, etc. have been defined.
Functions of different Units
1. National Faceless Appeal Centres (NAC)
Facilitate the conduct of e-appeal proceedings in a centralised manner, which shall be vested with the jurisdiction to dispose appeal in accordance with the provisions of this Scheme.
2. Regional Appeal Centres (RAC)
Facilitate the conduct of e-appeal proceedings, which shall be vested with the jurisdiction to dispose an appeal in accordance with the provisions of this Scheme.
3. Appeal Units (AU)
- Facilitate the conduct of e-appeal proceedings;
- Perform the function of disposing an appeal which includes admitting additional grounds of appeal, making such further enquiry as it thinks fit;
- Directing the National e-Assessment Centre (NeAC) / Tax Officer, as the case may be, for making further inquiry, seeking information or clarification on admitted grounds of appeal, providing opportunity of being heard to the taxpayer, analysis of materials furnished by the taxpayer, review of draft order;
- Such other functions as may be required under this Scheme.
Procedure to Faceless Appeals
Process flow for Faceless Appeal
There may be situation where the taxpayer may either file additional grounds of appeal or additional evidence. Further, the AU may want to enhance the assessment or penalty or reduce the refund amount. The Scheme has prescribed process for the same.
Process flow for admission of additional grounds of appeal
Process flow for admission of additional evidence
Process flow for enhancement of assessment or penalty or reduce the refund amount
Procedure to Penalty proceedings
Procedure to Rectification proceedings
With a view to rectify a mistake apparent from the record, the NAC may amend any order passed by it, by an order to be passed in writing. The process flow for rectification proceedings is briefly explained hereunder:
Transfer of appeal
The Principal Chief Commissioner or the Principal Director General, in charge of National Faceless Appeal Centre, may at any stage of the appellate proceedings, if considered necessary, transfer, by an order, the appeal with the prior approval of the Board to such Commissioner (Appeals) as may be specified in the order.
- An appeal against the order passed by NAC shall lie before the Tax Tribunal having jurisdiction over the tax officer.
- Where any order passed by the NAC or Commissioner (Appeals) is set-aside and remanded back to the NAC or Commissioner (Appeals) by the Tax Tribunal or High Court or Supreme Court, the NAC shall pass the order in accordance with the provisions of this Scheme.
Exchange of Communication
- All communication between the NAC and the taxpayer shall be exclusively exchanged by electronic mode.
- All internal communication between NAC, RAC, NeAC, AU and tax officer shall be exclusively exchanged by electronic mode.
Personal appearance in Centres or Units
- A taxpayer or his authorised representative is not required to be personally present in connection with any proceedings under this Scheme before the Revenue Authority at NAC or RAC or AU set-up under this Scheme.
- The taxpayer or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the AU under this Scheme.
- The Chief Commissioner or the Director General, in charge of the RFApC, under which the concerned unit is set up, may approve the request for personal hearing if he is of the opinion that the request is covered by the specified circumstances.
- Such personal hearing shall be conducted exclusively through video conferencing or video telephony, including use of any telecommunication application software which supports video conferencing or video telephony, in accordance with the procedure laid down by the CBDT.
Apart from issuing the notification, the CBDT has also issued a press release wherein it mentioned that all the Income tax appeals (except appeals relating to serious frauds, major tax evasion, sensitive and search matters, International Tax and Black Money Act) will be covered under this Scheme.
Similar to Faceless Assessment Scheme, under the Faceless Appeal Scheme, 2020 the AU and the taxpayer may be located miles apart. There will be complete anonymity of the identity of both the taxpayer and AU. For taxpayer, all the communication pertaining to the appeal will be with NAC. With the communication being made on the registered email address and registered mobile number, any change in the email address and mobile number should be communicated to the Revenue Authority as early as possible. Further, there is a likelihood that the notice is updated on the web portal but due to technical glitch or otherwise, the taxpayer does not receive any intimation. Hence, the taxpayer would now need to check the web-portal on a regular basis so that they do not miss any important communication. Also, where additional ground / additional evidences are proposed to be rejected, no additional opportunity is being provided. Hence, the taxpayer needs to meticulously cover all the factual and legal aspect and should be part of the submissions. There is no time-limit prescribed in the provisions and hence the same can be filed at any time. However, it is pertinent to take cognisance of the fact that post the first opportunity, the taxpayer may not be given an additional opportunity to make a further submission and hence if the additional ground / additional evidence is not filed in a timely manner, there could be a possibility that the appeal unit will pass the order before filing such additional ground / additional evidence. Further, where the appeal has been heard but the order is awaited from the First Appellate Authority, will such an appeal will be transferred to / assigned to AU? A timely clarification on this front will avoid the genuine hardship faced by the taxpayer.
 Notification No. 76/2020 [S.O. 3296(E)] and Notification No. 77/2020 [S.O. 3297(E)], dated 25 September 2020
 Section 246A(1) of the IT Act provides the list of orders that are appealable before the First Appellate Authority. Some instances are normal scrutiny order, reassessment order, rectification order, penalty order etc.
 CBDT Press release, dated 25 September 2020