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September 29, 2020

Step wise process for Faceless Appeal in Income Tax

by shivam jaiswal in Income Tax

Step wise process for Faceless Appeal in Income Tax

To eliminate physical interface between tax officials and taxpayers, the income tax department made its appeals systems anonymous with immediate effect to move to the faceless regime. It is expected that the taxpayers under the faceless system would face lower incidents of corruption as the new system is expected to make the system more transparent. The faceless assessment of tax will ‘honour honest income tax payers in the country’

Under the Faceless Appeals, everything from e-allocation of appeal, e-communication of notice/ questionnaire, e-verification/e-enquiry to e-hearing and finally e-communication of the appellate order, the entire process of appeals will be online, dispensing with the need for any physical interface between the appellant and the Department. There will be no physical interface between the taxpayers or their counsel/s and the Income Tax Department. The taxpayers can make submissions from the comfort of their home and save their time and resources.

Appeal under the Faceless Appeal Scheme, shall be disposed of as per the following procedure:

Step 1 -The National Faceless Appeal Centre shall assign the appeal to a specific appeal unit in any one Regional Faceless Appeal Centre through an automated allocation system

If the appellant has filed the appeal after the expiration of time specified in section 249(2) of the Act, the appeal unit may:

  • in case, it is satisfied that the appellant had sufficient cause for not filing the appeal within the said time, admit the appeal; or
  • in any other case, reject the appeal, under intimation to the National Faceless Appeal Centre;

If the appellant applied for exemption from the operation of section 249(4)(b), the appeal unit may:

  • admit the appeal and exempt the appellant from the operation of provisions of the said clause for any good and sufficient reason to be recorded in writing; or
  • in any other case, reject the appeal, under intimation to the National Faceless Appeal Centre;

Step 2 – The National Faceless Appeal Centre shall intimate the admission or rejection of appeal, as the case may be, to the appellant.

Step 3 – Procedure to be followed if the appeal is admitted

The appeal unit may request the National Faceless Appeal Centre to:

  • obtain such further information, document or evidence from the appellant or any other person,
  • obtain a report of the National e-Assessment Centre or the Assessing Officer (AO), on grounds of appeal or information, document or evidence filed by the appellant
  • direct the National e-Assessment Centre or the AO, for making further inquiry under section 250(4) and submit a report thereof

The National Faceless Appeal Centre shall serve a notice upon the appellant or any other person, or the National e-Assessment Centre or the AO, to submit such information, document or evidence or report, as the case may be, as may be specified by the appeal unit or as may be relevant to the appellate proceedings, on a specified date and time;

Step 4 – Response to the Notice of National Faceless Appeal Centre

  • The appellant or any other person, shall file a response to the notice, within the date and time specified therein, or such extended date and time as may be allowed on the basis of an application made in this behalf, with the National Faceless Appeal Centre
  • The National e-Assessment Centre or the AO, shall furnish a report in response to the notice, within the date and time specified therein or such extended date and time as may be allowed on the basis of an application made in this behalf, to the National Faceless Appeal Centre

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Step 5 – Information provided to Appeal Unit

Where response is filed by the appellant or any other person, or a report is furnished by the National e-Assessment Centre or the AO, the National Faceless Appeal Centre shall send such response or report to the appeal unit, and where no such response or report is filed, inform the appeal unit

Step 6 – Procedure to be followed when the Appellant has filed additional grounds

The appellant may file additional ground of appeal in such form, as may be specified by the National Faceless Appeal Centre, specifying therein the reason for omission of such ground in the appeal filed by him. Where the additional ground of appeal is filed:

  • the National Faceless Appeal Centre shall send the additional ground of appeal to the National e-Assessment Centre or the AO, for providing comments, if any.
  • the National e-Assessment Centre or the AO, shall furnish their comments, within the date and time specified or such extended date to the National Faceless Appeal Centre
  • The National Faceless Appeal Centre shall send such comments to the appeal unit, and where no such comments are filed, inform the appeal unit
  • the appeal unit shall, after taking into consideration the comments, if any, received from the National e-Assessment Centre or the AO, as the case may be:
    1. if it is satisfied that the omission of additional ground from the form of appeal was not wilful or unreasonable, admit such ground; or
    2. in any other case, not admit the additional ground, for reasons to be recorded in writing and intimate the National Faceless Appeal Centre;
  • the National Faceless Appeal Centre shall intimate the admission or rejection of the additional ground, as the case may be, to the appellant;

Step 7 – Procedure to be followed when the Appellant has filed additional evidence

The appellant may file additional evidence, other than the evidence produced by him during the course of proceedings before the National e-Assessment Centre or the AO, in such form, as may be specified by the National Faceless Appeal Centre, specifying therein as to how his case is covered by the exceptional circumstances specified in rule 46A(1).

Where the additional evidence is filed:

  • the National Faceless Appeal Centre shall send the additional evidence to the National e-Assessment Centre or the AO, for furnishing a report within the specified date and time on the admissibility of additional evidence under rule 46A of the said Rules
  • the National e-Assessment Centre or the AO, shall furnish the report, to the National Faceless Appeal Centre within the date and time specified, or such extended date and time as may be allowed on the basis of an application made in this behalf, by the National Faceless Appeal Centre.
  • The National Faceless Appeal Centre shall send such report to the appeal unit, and where no such report is furnished, inform the appeal unit
  • The appeal unit may, after considering the additional evidence and the report, if any, furnished by the National e-Assessment Centre or the AO, admit or reject the additional evidence, for reasons to be recorded in writing, and intimate the National Faceless Appeal Centre
  • The National Faceless Appeal Centre shall intimate the admission or rejection of additional evidence, to the appellant and the National e-Assessment Centre or the AO

Step 8 – Procedure to be followed where the additional evidence is admitted:

  • The appeal unit shall, before taking such evidence into account in the appellate proceedings, prepare a notice to provide an opportunity to the National e-Assessment Centre or the AO, within the date and time specified therein to examine such evidence or to cross-examine such witness, as may be produced by the appellant, or to produce any evidence or document, or any witness in rebuttal of the evidence or witness produced by the appellant, and to furnish a report thereof, and send such notice to the National Faceless Appeal Centre
  • The National Faceless Appeal Centre shall serve the notice, upon the National e-Assessment Centre or the AO
  • The National e-Assessment Centre or the AO, shall furnish the report, to the National Faceless Appeal Centre, within the date and time specified, or such extended date and time, by the National Faceless Appeal Centre
  • The National Faceless Appeal Centre shall send the report to the appeal unit or where no such report is furnished, inform the appeal unit

Step 9 – Procedure to be followed where the National Faceless Appeal Centre directs the production of any document or evidence by the appellant or the examination of any witness.

The National e-Assessment Centre or the AO, may request the National Faceless Appeal Centre to direct the production of any document or evidence by the appellant, or the examination of any witness, as may be relevant to the appellate proceedings;

Where such request is received:

  • the National Faceless Appeal Centre shall send such request to the appeal unit;
  • the appeal unit shall consider such request and if it deems fit, prepare a notice and send such notice to the National Faceless Appeal Centre
    1. directing the appellant to produce such document or evidence, as it may specify; or
    2. for examination of any other person, being a witness;
  • the National Faceless Appeal Centre shall serve the notice upon the appellant or any other person, being a witness, as the case may be
  • the appellant or any other person, as the case may be, shall file his response to the notice, within the date and time specified in the notice or such extended date and time, to the National Faceless Appeal Centre
  • The National Faceless Appeal Centre shall send such response to the appeal unit, or where no such response is filed, inform the appeal unit

Step 10 – Procedure to be followed where the appeal unit intends to enhance an assessment or a penalty or reduce the amount of refund

  • The appeal unit shall prepare a show-cause notice containing the reasons for such enhancement or reduction and send such notice to the National Faceless Appeal Centre.
  • The National Faceless Appeal Centre shall serve such notice upon the appellant.
  • The appellant shall, within the date and time specified in the notice or such extended date and time file his response to the National Faceless Appeal Centre.
  • The National Faceless Appeal Centre shall send such response to the appeal unit, or where no such response is filed, inform the appeal unit

Step 11 – Draft Order by Appeal Unit

The appeal unit shall, after taking into account all the relevant material available on the record, including the response filed by the appellant or any other person, or report furnished by the National e-Assessment Centre or the AO, and after considering any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised in the appeal:

  • prepare in writing, a draft order in accordance with the provisions of section 251; and
  • send such order to the National Faceless Appeal Centre along with the details of the penalty proceedings, if any, to be initiated therein;

Step 12 – Procedure to be followed by National Faceless Appeal Centre upon receipt of the draft order

The National Faceless Appeal Centre upon receipt of the draft order shall:

  • where the aggregate amount of tax, penalty, interest or fee, including surcharge and cess, payable in respect of issues disputed in appeal, is more than a specified amount, as referred in paragraph 13(x) of the said Scheme, send the draft order to an appeal unit, other than the appeal unit which prepared such order, in any one Regional Faceless Appeal Centre through an automated allocation system, for conducting review of such order.
  • in any other case, examine the draft order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide to:
    1. finalise the appeal as per the draft order; or
    2. send the draft order to an appeal unit, other than the unit which prepared such order, in any one Regional Faceless Appeal Centre through an automated allocation system, for conducting review of such order;

Step 13 – Review of Draft Order by Appeal Unit

The appeal unit shall review the draft order, referred to it by the National Faceless Appeal Centre, whereupon it may decide to:

  • concur with the draft order and intimate the National Faceless Appeal Centre about such concurrence; or
  • suggest such variation, as it may deem fit, to the draft order and send its suggestions to the National Faceless Appeal Centre;

Step 14 – Finalisation of Order by National Faceless Appeal Centre

The National Faceless Appeal Centre shall, upon receiving concurrence of the appeal unit, finalise the appeal as per the draft order

Step 15 – Procedure for variation from the appeal unit

The National Faceless Appeal Centre shall, upon receiving suggestion for variation from the appeal unit, assign the appeal to an appeal unit, other than the appeal unit which prepared or reviewed the draft order, in any one Regional Faceless Appeal Centre through an automated allocation system

The appeal unit, to whom appeal is assigned, shall, after considering the suggestions for variation:

  • where such suggestions intend to enhance an assessment or a penalty or reduce the amount of refund, follow the procedure laid down in Step 10 and prepare a revised draft order as per the procedure laid down in Step 11 or
  • in any other case, prepare a revised draft order and send such order to the National Faceless Appeal Centre along with the details of the penalty proceedings, if any, to be initiated therein

Step 16 – The National Faceless Appeal Centre shall after finalising the appeal or upon receipt of revised draft order, pass the appeal order and:

  • communicate such order to the appellant
  • communicate such order to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as per section 250(7)
  • communicate such order to the National e-Assessment Centre or the AO, as the case may be, for such action as may be required under the Act;
  • where initiation of penalty has been recommended in the order, serve a notice on the appellant calling upon him to show cause as to why penalty should not be imposed upon him under the relevant provisions of the Act.

The faceless appeal will provide taxpayers with not only great convenience, but will also ensure just and fair appeal orders and minimise any further litigation. The new system will also be instrumental in imparting greater efficiency, transparency and accountability in the functioning of the Income Tax Department.

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