Written by Sandip Rauniyar and Vishal Gupta Dt. October 21st, 2020
Announcement of Faceless Appeal by Government and brief Information about the Faceless Appeal
Ministry of Finance introduced Faceless Appeal Scheme 2020 with effect from 25 September 2020 vide Notification No. S.O. 3296(E), allowing faceless hearing and filing of the appeals on the Income Tax matters. An automated allocation system will facilitate random allocation of cases by using artificial intelligence or any other suitable technology thereby, eliminating the discretion in the examination and selection of cases.
The proceedings in tax appeals will be through an ‘e-appeal’ facility under the registered account of the appellant in a specifically designated web portal for e-appeals.
Section 250(6A) of the Income Tax Act authorises the Central Government to notify an e-appeal scheme for the disposal of the appeal that will be resulting in eliminating the interface between the CIT(A) and the appellant in the course of appellate proceedings to the extent technologically feasible. Thereby, introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more CIT (Appeals).
Therefore, new platform will ensure that the tax site is transparent and will be allowing users to dispute any tax claim without consulting the authorities. This will allow taxpayers to make submissions from their homes and save time and resources.
What are Centres & Units in Faceless Appeal Scheme, 2020?
The board may set-up the following centres & units and specify their respective jurisdiction for the purpose of the Scheme:
- National Faceless Appeal Centre
- Regional Faceless Appeal Centres
- Appeal units
National Faceless Appeal Centre (NFAC): The purpose of the National Faceless Appeal Centre is to facilitate the conduct of e-appeal proceedings in a centralised manner, which shall be vested with the jurisdiction to dispose appeal in faceless manner.
Regional Faceless Appeal Centres (RFACs): Its major function is to facilitate the conduct of e-appeal proceedings. They shall be vested with the jurisdiction to dispose appeal in faceless manner.
Appeal Units: It shall perform the function of disposing faceless appeal. All communication with respect to information, document, evidence or any other details between the Appeal Unit and the appellant or any other person or the National e-Assessment Centre (NeAC) or the Assessing Officer (AO) shall be done through the NFAC.
What is the procedure to be followed under Faceless Appeal Scheme, 2020?
The procedure to be followed under the faceless appeal is discussed as follows:
Assignment of appeal: Through an automated allocation system*, the NFAC will assign the appeal to a specific appeal unit in any one RFAC.
*Automated allocation system means an algorithm for randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning, to optimise the use of resources.
Admission or rejection of appeal: Where an assessee has filed an appeal after the expiration of time specified in section 249(2) of the Income-tax Act, the Appeal Unit may admit such appeal if it is satisfied that the appellant had sufficient cause for not filing the appeal within the said time.
In any other case, it may reject the appeal. The Appeal Unit is required to intimate about such acceptance or rejection to the NFAC.
Calling upon information by the Appeal Unit: If an appeal is admitted by the Appeal Unit, it may request the NFAC to obtain such further information, document or evidence from the appellant or any other person, as it may specify.
The Appeal Unit may also request to NFAC to obtain a report of the NeAC or the AO on grounds of appeal or information, document or evidence filed by the appellant.
Notice by NFAC: The NFAC shall serve a notice, specifying date and time, to seek such information, document or evidence or report as may be specified by the Appeal Unit or as may be relevant to the appellate proceedings. The notice can be served on appellant, NeAc, AO or any other person.
Filing of response or submit report to notice issued by NFAC: The Appellant, the NeAC, the AO or any other person, as the case may be, shall file a response or submit a report in response to notice issued to them. The response shall be filed within the date and time specified in the notice, or such extended date and time as may be allowed on the basis of an application made in this behalf with the NFAC.
The response or report furnished pursuant to notice issued by NFAC shall be sent to Appeal Unit. In case no response or report is filed, same shall be informed to Appeal Unit.
Filing of Additional Ground: The appellant may file additional ground of appeal in such form, as may be specified by the NFAC, specifying therein the reason for omission of such ground in the appeal filed by him.
Filing of Additional Evidence: The appellant may file additional evidence, other than the evidence produced by him during the course of proceedings before the NeAC or the AO. The additional evidence to be filed by the appellant in form specified by the NFAC specifying therein as to how his case is covered by the exceptional circumstances specified Rule 46A(1) of the Income-tax Rules, 1962.
Production of documents relevant for appellate proceedings: NeAC or AO may request the NFAC to direct the appellant to produce any document or evidence or to examine any witness relevant to the appellate proceedings. If such request is received, NFAC shall send such request to the Appeal Unit.
The Appeal Unit, after considering such request, may prepare a notice directing the appellant to produce such document or evidence or for examination of any other person being a witness. Such notice shall be send to the NFAC.
Enhancement of assessment or penalty or reduction of refund: If the appeal unit intends to enhance an assessment or a penalty or reduce the amount of refund available to assessee, it shall prepare a show-cause notice containing the reasons for such enhancement or reduction and send such notice to the NFAC.
NFAC shall service such notice to appellant. The appellant shall file his response within the date and time specified in the notice or such extended date and time as may be allowed on the basis of application made in this behalf. NFAC shall send the response received from appellant to Appeal Unit. In case no response is received, NFAC shall inform the appeal unit.
Draft Order related to enhancement of assessment/penalty/reduction of refund: The Appeal Unit shall prepare draft order in accordance with the provisions of section 251 after considering:
- All the relevant material available on the record
- Response filed by the appellant or any other person
- Report furnished by the NeAC or AO
- 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.
Review of Draft Order: Upon receiving the draft order from Appeal Unit, it shall be sent to another Appeal Unit for review in case where the aggregate amount of tax, penalty, interest or fee, including surcharge and cess, payable in respect of disputed issues, exceed specified amount.
Assignment of appeal to another Appeal Unit: NFAC shall finalise the appeal as per the draft order if it has received concurrence of the Appeal Unit. However, if it has received any suggestion for variation then it shall again assign the appeal to another Appeal Unit in any one RFAC through an automated allocation system. This Appeal Unit shall be the unit other than the unit which has prepared or reviewed the draft order.
Passing of Final Appeal Order: The NFAC shall finalise the appeal, pass the appeal order and communicate such order to appellant, Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as per section 250(7), and NeAC or AO for such action as may be required under the Act.
Are there any deficiencies in the Scheme?
- There is no provision of providing hearing opportunity to appellant if the Appeal Unit has rejected the additional ground of appeal/additional evidence filed by appellant on the basis of report furnished by the NeAC or AO.
- This Scheme provides for penalty proceedings only in case where there is failure for non-compliance of any notice, direction or order. No procedure has been prescribed in case where penalty has been initiated under section 270A.
- This scheme gives right to dispose of rectification proceedings by any Appeal Unit selected by NFAC through an automated allocation system. As a general practice, the rectification proceedings is to be heard by same Income-tax authority who has disposed of the appeal.
The rules & procedures laid down by the Faceless Appeal Scheme, 2020 are on the similar lines with the Faceless Assessment Scheme, 2019. It seems that the Central Government has framed this scheme without understanding the difference between an assessment proceeding and appeal proceedings.
The Central Government is yet to notify such circumstances & such class of persons where the appellate proceedings shall be done in faceless manner according to this scheme. It is likely that Govt. might implement faceless appeal in phase manner like what we have seen under Faceless Assessment.
Sandip Rauniyar and Vishal Gupta