The Central Board of Direct Taxes (CBDT) had notified1 Faceless Appeal Scheme, 2020 (Scheme 2020). 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.) has become faceless thereby dispensing with the need for any physical interface. Recently, the CBDT notified Faceless Appeal Scheme, 2021 (Scheme/Scheme 2021) in supersession of the Scheme 2020 with effect from 28 December 2021. The Scheme 2021 carves out an exception for acts done or omitted under the Scheme 2020 and further addresses several issues under the erstwhile Scheme.
We, at BDO in India, have analysed and summarized hereunder the said notification:
Appeals covered under Faceless
The Scheme 2021 shall be applicable for a person who has filed appeal under section 246A(1)2 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
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.
Appeal Units (AU)
- Facilitate the conduct of e-appeal proceedings;
- Perform the function of disposing appeal which includes admitting additional grounds of appeal, making such further enquiry as it thinks fit;
- Directing the Tax Officer 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 rectifying any 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 appeal may be transferred at any stage of the appellate proceedings, if considered necessary, by an order in accordance with section 1203 of the IT Act 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 Tax Officer.
- Where any order passed by the Commissioner (Appeals) is set-aside and remanded back to the Commissioner (Appeals) by the Tax Tribunal or High Court or Supreme Court, the NAC shall assign the order to a Commissioner (Appeals) for further action in accordance with the provisions of this Scheme.
Exchange of Communication
- All communication between NAC and taxpayer shall be exclusively exchanged by electronic mode;
- All internal communication between NAC, National Faceless Assessment Centre, AU and Tax officer shall be exclusively exchanged by electronic mode.
Personal appearance in Centres or Units:
- 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 concerned Commissioner (Appeals) may approve the request for personal hearing and communicate the date and time of hearing to the taxpayer.
- 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 notification4 wherein it has mentioned that Income-tax authorities which shall exercise the powers and perform functions, in order to facilitate the conduct of e-appeal proceedings, in respect of territorial area or person.
Some noteworthy changes compared to the Faceless Appeal Scheme 2020 are mentioned below -
- In Scheme 2020, the personal hearing through video conferencing was discretionary and the power to grant the same was with the Chief Commissioner of Income Tax. In Scheme 2021, personal hearing shall be granted upon request and this power is vested with the Commissioner (Appeals).
- The Scheme 2021 has restored the quasi-judicial authority of the Commissioner (Appeals) which is the only authority prescribed under the Scheme 2021 to discharge the quasi-judicial functions of the first-appellate authority.
- The role of NAC is restricted to being an intermediary for centralized processing of e-appeal proceedings.
- The role of Regional Faceless Appeal Centre facilitating the conduct of e-appeal proceedings having jurisdiction to dispose appeal is removed.
- The entire process of Draft Appellate Order, its review by another AU has been removed. Thus, entire appeal including admission of additional grounds/evidences or power to condone belated appeal etc. will be adjudicated by one Commissioner (Appeals).
2Section 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.
3Section 120 of the IT Act empowers tax authorities to exercise such powers and perform functions or assign such authorities in accordance with directions given by the CBDT.
4Notification No. 141/2021, dated 29 December 2021.