Faceless Assessments represent a transformative approach in India's tax administration, introduced through the E-Assessment Scheme 2019. This method aims to modernize the tax assessment process by reducing direct taxpayer-officer interactions and leveraging technology. The following detailed analysis outlines the legislative framework, implications for non-residents, and judicial interpretations.
1. Overview of Faceless Assessments
Faceless Assessments aim to:
- Enhance Transparency: Minimize personal interactions to reduce biases.
- Increase Efficiency: Streamline processes and optimize resource utilization.
Components of the Faceless Assessment Framework:
| Component | Description |
|---|---|
| National Faceless Assessment Centre (NaFAC) | Central hub coordinating faceless assessments. |
| Assessment Unit | Conducts the assessment process. |
| Verification Unit | Responsible for verifying documents and facts provided by the taxpayer. |
| Technical Unit | Offers technical support and expertise. |
| Review Unit | Reviews assessments to ensure compliance with the process and legal standards. |
| Anonymity | Taxpayers will not know the identity of their assessing officers, ensuring impartial and unbiased assessments. |
2. Legislative Framework
a. Section 144B of the Income Tax Act
| Aspect | Details |
|---|---|
| Introduced By | The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 |
| Applicability | - Regular Assessments: Under Section 143(3) - Income Escaping Assessments: Under Section 147 - Best Judgment Assessments: Under Section 144 |
| Procedure | Section 144B outlines the procedures for conducting faceless assessments, detailing the roles of different units and the process from initiation to completion. |
b. Section 151A of the Income Tax Act
| Aspect | Details |
|---|---|
| Purpose | Allows the central government to establish schemes for faceless assessments, reassessments, and related processes. |
| Scope | - Faceless Assessment/ Reassessment: Under Section 147 - Issuance of Notices: Under Section 148 |
c. E-Assessment of Income Escaping Assessment Scheme 2022
| Notification | No. 18/2022/F. NO. 370142/16/2022-TPL (PART1), dated 29th March 2022 |
|---|---|
| Scope | - Faceless Assessment: Conducted for assessments, reassessments, or recomputations under Section 147 - Issuance of Notices: Automated allocation under Section 148 |
| Procedure | - Automated Allocation: Based on risk management strategies formulated by the Board. - Faceless Process: Includes all procedures as specified under Section 144B. |
3. Implications for Non-Residents
Faceless Assessment Framework for Non-Residents:
| Aspect | Details |
|---|---|
| Section 144B(1) | Outlines the faceless assessment procedure applicable to all cases under this section. |
| Section 144B(2) | - CBDT Specifications: Defines territorial areas, persons, incomes, or cases subject to faceless assessments. |
| Exceptions | - Assessment Orders: Faceless procedures do not apply to cases involving Central Charges and International Tax Charges. - Issuance of Notices: Faceless issuance of notices under Section 148 is applicable to all cases, including international taxation. |
4. Judicial Interpretations
Key Judicial Decisions and Their Implications:
| Case | Court | Summary of Findings |
|---|---|---|
| Sri Venkataramana Reddy Patloola v. Dy. CIT | Telangana High Court | Validated that Section 144B and CBDT orders provide an exemption from faceless procedures only for assessment orders in central and international tax cases. |
| CapitalG LP v. Asstt. CIT | Bombay High Court | Clarified that the exemption does not extend to proceedings under Section 148A and Section 148; faceless procedures must apply to these stages as well. |
| Kankanala Ravindra Reddy v. ITO | Telangana High Court | Affirmed the requirement for two mandatory conditions: automated allocation and faceless reassessment per Section 144B. |
| Hexaware Technologies Ltd. v. Asstt. CIT | Bombay High Court | Interpreted that "to the extent provided in Section 144B" pertains only to assessment and reassessment of total income or loss. Notices under Section 148 are not constrained by this limitation. |
5. Conclusion
Based on the detailed analysis of legislative provisions and judicial interpretations:
- Issuance of Notices: Must be conducted facelessly under Section 148, applicable across all cases, including those involving international tax charges.
- Assessment Orders: Generally subject to faceless procedures, with specific exceptions for central and international tax charges.
