After filling Income Tax Return, Income Tax authorities may select certain tax returns for detailed scrutiny and request that the individual submit documents evidencing the claims made in the return of income, referred to as an assessment. Earlier, the assessments were carried out by personal representations/visits to tax offices and the physical filing of submissions.
Indian government introduced the concept of faceless assessments, whereby scrutiny assessments are carried out in a faceless manner, that is, without any physical meeting or submission of physical documents. The National Faceless Assessment Centre (NFAC), along with other centres and units, have been established by the Central Board of Direct Taxes (CBDT).
The scheme seeks to eliminate the human interface between the taxpayer and the income tax department. and instead involves the electronic interface right from the selection of the cases for the scrutiny purpose with the help of an ‘automated allocation system’Â involving an algorithm for randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning, with a view to optimising the use of resources, and the conduct of assessments exclusively in electronic mode via the ‘e-Proceedings
These assessments are referred to as ‘Jurisdiction-less’ because these are conducted by a Team/Group of Expert Income Tax Officers at multiple-level units, viz. National Faceless Assessment Centre (NaFAC), Assessment Unit, Verification Unit, Technical Unit and Review Unit, and are not conducted by an individual jurisdictional assessing officer. The cases shall be assigned by NaFAC to an assessment unit based on an ‘automated allocation system’ involving an algorithm for the randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning.
All regular assessments in Section 143(3), income escaping assessments or re-assessments in Section 147, and best judgement assessments in Section 144 of the Income Tax Act, except those cases falling under the Central Charges, i.e., search and survey cases, and international taxation charges, are to be conducted in a faceless manner, as per the procedure and manner stipulated in Section 144B of the Income Tax Act, 1961.
Section 144B(1)Â stipulates the modified procedure of the conduct of faceless assessments as under:
(1)Â Â Assignment of case on an automatic allocation basis and intimation to the assessee by NaFAC:Â The National Faceless Assessment Centre (NaFAC) shall assign the case selected for the purposes of faceless assessment to a specific assessment unit (AU) through an automatic allocation system and intimate the assessee that assessment in his case shall be completed as per the said section.
(2)  Serving of notice & furnishing of response by the assessee through NaFAC: The assessee shall be served a notice under Section 143(2) or under Section 142(1) of the Act through the NaFAC. The assessee may file his response to the aforementioned notice, within the date specified in such notice, to the NaFAC, which shall forward the same to the AU.
(3)Â Â Requisition for further information from the assessee by AU through NaFAC:Â The AU may make a request, through the NaFAC, for obtaining such further information, documents or evidence from the assessee or any other person, as it may specify, and the NaFAC shall serve appropriate notice or requisition on the assessee or any other person for obtaining the same.
(4)Â Â Request by AU through NaFAC for assistance in the enquiry by Verification Unit:Â The AU may also make a request, through the NaFAC, for conducting enquiry or verification by Verification Unit (VU), and the request shall be assigned by the NaFAC to a VU through an automated allocation system.
(5)Â Â Request by AU through NaFAC for technical assistance by Technical Unit:Â The AU may also make a request for a reference to the Technical Unit (TU) for seeking technical assistance in respect of the determination of arm’s length price, valuation of property, withdrawal of registration, approval, exemption or any other technical matter and the request shall be assigned by the NaFAC to a TU through an automated allocation system.
(6)Â Â Sending reports received from VU & TU by NaFAC to AU:Â The NaFAC shall send any report received from the VU or TU to the AU.
(7)Â Â Furnishing of response by Assessee:Â The assessee or any other person, as the case may be, shall file his response within the specified or extended time, in compliance with the said notice served by NaFAC, at the request of AU, to the NaFAC, which shall forward the reply to the AU.
(8)  Intimation of failure of the assessee to respond: If the assessee fails to comply with the said notice served by NaFAC, at the request of AU, or the earlier notice under Section 143(2) or under Section 142(1), the NaFAC shall intimate the same to the AU.
(9)  Issuing of show cause notice (SCN) under Section 144 to assessee: The AU shall serve upon the assessee, through NaFAC, a show cause notice under Section 144 giving him the opportunity to explain why the assessment in his case should not be completed to the best of its judgement.
(10)Â Â Furnishing of response by the assessee to SCN:Â The assessee shall file his response to the show-cause notice under Section 144 of the Act, within the time specified in such notice or approved extended time, to the NaFAC which shall forward the same to the AU.
(11)Â Â Preparation of income or loss determination proposal by AU:
 a) If the assessee fails to respond, the NaFAC shall intimate the same to the AU. After taking into account all the relevant material available on the record, the AU shall prepare in writing an income or loss determination proposal where no variation prejudicial to the assessee is proposed and send the same to the NaFAC.
 b) In any other case, the AU shall serve a show cause notice on the assessee stating the variations proposed to be made to the income of the assessee and calling upon him to submit why the proposed variation should not be made through the NaFAC.
 c) The assessee shall file his reply to such show cause notice, to the NaFAC, on the date and time as specified in the notice or within the approved extended time, and NaFAC shall forward the reply to the AU.
 d) If the assessee fails to respond within the specified or extended time, the NaFAC shall intimate the same to the AU.
 e) After considering the response of the assessee or the intimation of failure of the assessee to file a response received from NaFAC and all relevant material available on the record, the AU shall prepare an income or loss determination proposal and send the same to the NaFAC.
(12)Â Â Personal Hearing through Video Conferencing
 a) in a case where a variation is proposed in the income or loss determination proposal or the draft order, and an opportunity is provided to the assessee by serving a show cause notice upon him, the assessee 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 income-tax authority of the relevant unit.
 b) Where the request for a personal hearing has been received, the income-tax authority of the relevant unit shall allow such a hearing through NaFAC, which shall be conducted exclusively through video conferencing or video telephony, to the extent technologically feasible, in accordance with the procedure laid down by the Board.
 c) Any examination or recording of the statement of the assessee or any other person (other than the statement recorded in the course of survey under section 133A) shall be conducted by an income-tax authority in the relevant unit, exclusively through video conferencing or video telephony, to the extent technologically feasible, in accordance with the procedure laid down by the Board.
(13)Â Â Action on income or loss determination proposal & preparation of draft order in case of assessee other than eligible assessee under Section 144C:
a) Upon receipt of such income or loss determination proposal, with or without any variations proposed to the income of the assessee, as the case may be, the NaFAC may, on the basis of guidelines issued by the Board, convey to the AU to prepare draft order in accordance with the income or loss determination proposal, and the AU shall thereafter prepare a draft order.
b) The NaFAC may also assign the income or loss determination proposal to a Review Unit (RU) through an automated allocation system, which shall conduct a review of such order, prepare a review report and send it to NaFAC.
c) The NaFAC shall forward the review report received from the RU to the AU, which had proposed the income or loss determination proposal. The AU may accept or reject some or all of the modifications proposed in such review report, prepare a draft order accordingly, and send it to NaFAC.
(14)Â Â Passing of final assessment order in case of assessee other than eligible assessee under Section 144C:
 a) In any case, other than that of the eligible assessee under Section 144C, the NaFAC shall convey to the AU to pass the final assessment order in accordance with such draft order, which shall thereafter pass the final assessment order and initiate penalty proceedings, if any, and send it to the NaFAC.
 b) The NaFAC shall serve a copy of the final assessment order, notice for initiating penalty proceedings, if any and the demand notice to the assessee.
(15)  Preparation of draft order & passing of final assessment order, in case of eligible assessee under Section 144C:
 a) The NaFAC shall, upon receiving a draft order in a case of an eligible assessee, where there is a proposal to make any variation which is prejudicial to the interest of such assessee under Section 144C(1), serve such draft order on the assessee.
 b) An eligible assessee, as referred to in Section 144C, has to file his acceptance of the variations proposed in such draft order or file objections, if any, to such variations with the Dispute Resolution Panel, under Section 144C and the NaFAC, within the period specified in sub-section (2) of the said section.
 c) In case the variations proposed in the draft order are accepted by the assessee or not objected to within the time given in Section 144C(2), the NaFAC shall inform the AU of the same, which shall pass the assessment order, on the basis of the draft order, within the time allowed under Section 144C(4) and initiate penalty proceedings, if any, and send the order to the NaFAC.
 d) Where the eligible assessee files objections with the Dispute Resolution Panel against the variations proposed in the draft order in his case, the NaFAC shall send such intimation along with a copy of such objections to the AU.
 e) Upon receipt of the directions issued by the Dispute Resolution Panel in the case of an eligible assessee, the NaFAC shall forward such directions to the AU.
 f) The AU shall complete the assessment within the time allowed in Section 144C(13) and initiate penalty proceedings, if any, in conformity with the directions issued by the Dispute Resolution Panel under Section 144C(5), and send a copy of the assessment order to the NaFAC.
 g) The NaFAC shall, upon receipt of the final assessment order, in the case of an eligible assessee under Section 144C or in other cases, serve a copy of such order and notice for initiating penalty proceedings, if any, on the assessee, along with the demand notice.
(16)Â Completion of faceless assessment & transfer of assessment records to Jurisdictional Assessing Officer (JAO) :
The NaFAC shall, after completion of the assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Income-tax Act.
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