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All You Need to Know & Do in Faceless Appeals Regime!!
This Article penned down by Sh. Mayank Mohanka, FCA, Founder Director of TaxAaram India Pvt Ltd, has been published in the renowned website Taxmann.com with the Citation (2020) 122 taxmann.com 179 (Article).
Knowledge is meant for sharing, so for the benefit of our worthy Readers, this Article is now being shared here.
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change”- Charles Darwin
1.Faceless Appeals: A New Era of Anonymous Adjudication
Friends, let me begin with an interesting question….
“What comes across your mind when you hear of these terms, viz. artificial intelligence, machine learning, automated random allocation system, automated examination tool, hash function, video telephony. Any science fiction movie or any space science mission???”
Well, I am not referring to any of these, but simply paraphrasing some of the terminology being used in the New Legislative Scheme of the ‘Faceless Appeals Scheme, 2020’.
The usage of the above technical jargon in the new legislative scheme of faceless appeals, itself speaks volumes about the thrust and importance which the income tax department has placed upon the adoption of modern and advanced technologies in the tax administration and compliance systems so as to impart greater transparency, efficiency and accountability in the systems.
The filing of appeals before Commissioner (Appeals) in the prescribed Form 35, had already been enabled in an electronic mode, since long. A taxpayer can file appeal through his registered account on the e-filing portal. However, the appellate proceedings that followed after e-filing of appeal in Form 35, till 25.9.2020, were neither electronic nor faceless.
2. Insertion of Enabling Legislative Provisions:
In order to ensure that the reforms initiated by the Government to eliminate human interface in the assessment proceedings reach the next level of appellate proceedings, the Finance Act, 2020 have inserted new sub-sections (6A), (6B) and (6C) in section 250 of the Act for empowering Central Government to notify an e-appeal scheme for disposal of appeal in a faceless manner so as to impart greater efficiency, transparency and accountability and introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals).
3. Launch of New Faceless Appeal Scheme, 2020
Our Hon’ble PM Sh. Narendra Modi on 13th August, 2020, while launching the Faceless Assessment and Taxpayers’ Charter as part of “Transparent Taxation - Honoring the Honest” platform, have announced launching of Faceless Appeals w.e.f. 25th September, 2020, on the birth anniversary of Pt. Deen Dayal Upadhayay.
Consequent to the announcement of the new platform for transparent taxation by our Hon’ble PM, the Central Board of Direct Taxes (CBDT), in exercise of the powers conferred by sub section (6B) of section 250 of the Income Tax Act, 1961, has legislated the ‘Faceless Appeal Scheme, 2020’, vide its Gazetted Notification bearing F.No. S.O. 3296 (E), dated 25.9.2020.
Under the new Faceless Appeals Scheme, 2020, w.e.f. 25.9.2020, all Income Tax appeals before the CIT (Appeals), will be finalised in a faceless manner under the faceless ecosystem with the exception of appeals relating to serious frauds, major tax evasion, sensitive & search matters, International tax and Black Money. All the pending and new appeals of the taxpayers before the CIT(Appeals) w.e.f. 25.9.2020, will be adjudicated and disposed of by the dynamic jurisdiction and not by the jurisdictional CIT(Appeals).
Under the faceless appeals eco-system, 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 before the CIT (Appeals) will be online, dispensing with the need for any physical interface between the appellant and the CIT (Appeal). There will be no physical interface between the taxpayers or their counsel/s and the CIT (Appeal).
For the purpose of conducting faceless appeals, the National Faceless Appeal Centre and the Regional Faceless Appeal Centres and the Appeal Units comprising of one or two CIT(Appeals) are in the process of being set up.
The Faceless Appeals system will include allocation of cases through Data Analytics and AI under the dynamic jurisdiction with central issuance of notices which would be having Document Identification Number (DIN). As part of dynamic jurisdiction, the draft appellate order will be prepared in one city and will be reviewed in some other city resulting in an objective, fair and just order.
As per data with CBDT, as on date there is a pendency of almost 4.6 lakh appeals at the level of the Commissioner (Appeals) in the Department. Out of this, about 4.05 lakh appeals, i.e., about 88 % of the total appeals will be handled under the Faceless Appeal mechanism and almost 85% of the present strength of Commissioners (Appeals) shall be utilised for disposing off the cases under the Faceless Appeal mechanism.
4. Difference between Conventional Appeals before CIT (Appeals) & Faceless Appeals under Faceless Appeal Scheme, 2020
The easiest way to understand the practicalities and nuances of any new/amended piece of legislation is to compare and analyse it with the existing provisions. So, for better and clear understanding of the worthy readers, the points of distinction between the manner and mode of conducting of the conventional appeals before CIT (Appeals) and the new faceless appeals being conducted under the Faceless Appeal Scheme, 2020. are being tabulated as under:
|
S. No. |
Particulars |
Conventional Appeals before CIT (Appeals) |
Faceless Appeals under Faceless Appeal Scheme, 2020 |
|
1. |
Applicability |
All Appeals before CIT(Appeals) disposed of uptill 24.9.2020 |
All pending and new appeals before CIT (Appeals) w.e.f. 25.9.2020 except relating to serious frauds, major tax evasion, sensitive & search matters, International tax and Black Money. |
|
2. |
Appellate Authority |
Jurisdictional Commissioner (Appeals) |
Dynamic Jurisdiction comprised in any Appeal Unit in Regional Faceless Appeal Centre (RFAC) under the overall monitoring and supervision of National Faceless Appeal Centre (NFAC). |
|
3. |
Appeal Notice under section 250 Issuing Authority |
Jurisdictional Commissioner (Appeals) |
National Faceless Appeal Centre (NFAC) |
|
4. |
Assignment of Appeal |
Jurisdictional CIT (Appeals) |
The NFAC assigns the Appeal to any Appeal Unit located in any one Regional Faceless Appeal Centre through an automated random allocation system. |
|
5. |
Inquiries/Adjudication during the course of appellate proceedings |
Jurisdictional CIT (Appeals) issues Notices under section 250 for want of further information/documents/records from the appellant or for the remand report from the AO. |
The NFAC may issue appropriate notice or requisition u/s 250, to the appellant for obtaining any further information, documents or evidence or the Remand Report from NeAC/AO, as required by the Appeal Unit in the Regional Faceless Appeal Centre, to which the appeal has been assigned by the NFAC. |
|
6. |
Provision of Draft Appeal Order |
No provision of passing a Draft Appeal Order |
Draft Appeal Order is to be passed by the Appeal unit in the Regional Faceless Appeal, to which the appeal has been assigned by NFAC. This Draft Appeal Order shall be examined by NFAC based on Risk Management Parameters and this draft appeal order may be sent by NFAC to another Appeal Unit in any other RFAC for Review. |
|
7. |
Action on Draft Appeal Order |
Not Applicable |
The National Faceless Appeal Centre shall upon receipt of the draft order
|
|
8. |
Final Appeal Order |
Passed by the Jurisdictional CIT (Appeals) after considering the written and verbal submissions of the appellant. |
Where NFAC has sent the draft appeal order for review to another Appeal Unit: Such another Appeal Unit shall review the draft order, referred to it by the National Faceless Appeal Centre, whereupon it may decide to –
The National Faceless Appeal Centre shall, upon receiving concurrence of the appeal unit, finalise the appeal as per the draft order; 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 —
The National Faceless Appeal Centre shall after finalising the appeal or upon receipt of revised draft order, pass the final appeal order and-
|
|
9. |
Mode of Interface between the Appellant and the Appellate Authority |
The filing of appeals before Commissioner (Appeals) in the prescribed Form 35, had already been enabled in an electronic mode, since long. A taxpayer can file appeal through his registered account on the e-filing portal. However, the appellate proceedings that followed after filing of appeal were neither electronic nor faceless and the appellant or his/her authorised counsel used to file the appeal submissions by personally visiting and representing before the jurisdictional CIT (Appeals). |
All the communication between the appellant and the appellate authority NFAC exclusively through Electronic Mode via the ‘e-Proceedings’ functionality in the ITBA Module. The appellant 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 appeal unit under this Scheme. The Chief Commissioner or the Director General, in charge of the Regional Faceless Appeal Centre, under which the concerned appeal unit is set up, may approve the request for personal hearing, if he is of the opinion that the request is covered by the circumstances as may be notified by CBDT. Where the request for personal hearing has been approved by the Chief Commissioner or the Director General, in charge of the Regional Faceless Appeal Centre, such 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 Board. Any examination or recording of the statement of the appellant or any other person shall be conducted by Commissioner (Appeals) in any appeal unit under this Scheme, 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 Board.
|
|
10. |
Opportunity of Filing Rebuttal against the Objections of AO in relation to the Admission of Additional Ground of Appeal or Additional Evidence as per Rule 46A of Income Tax Rules |
The Opportunity of Filing Rebuttal against the Objections of AO in relation to the Admission of Additional Ground of Appeal or Additional Evidence as per Rule 46A of Income Tax Rules is available to the Appellant. |
In the present structure of the Faceless Appeal Scheme, 2020, the Opportunity of Filing Rebuttal against the Objections of NeAC/AO in relation to the Admission of Additional Ground of Appeal or Additional Evidence as per Rule 46A of Income Tax Rules is not available. However, the concerned Law-Making Authorities are considering to provide the said opportunity to the appellant. |
5. The New Faceless Appeals Hierarchy
For the purpose of conducting of the faceless appeals, the CBDT is setting up:
(i) National Faceless Appeal Centre (NFAC) to 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;
(ii) Regional Faceless Appeal Centres (RFAC) to facilitate the conduct of e-appeal proceedings, which shall be vested with the jurisdiction to dispose appeal in accordance with the provisions of this Scheme;
(iii) Appeal units, to facilitate the conduct of e-appeal proceedings, to perform the function of disposing appeal, which includes admitting additional grounds of appeal, making such further inquiry as thinks fit, directing the National e-Assessment Centre or the Assessing Officer, as the case may be, for making further inquiry, seeking information or clarification on admitted grounds of appeal, providing opportunity of being heard to the appellant, analysis of the material furnished by the appellant, review of draft order, and such other functions as may be required for the purposes of the Faceless Appeal Scheme, 2020. The Appeal Units shall have one or more Commissioner (Appeals) and such other Income Tax Authorities, ministerial staff, executive or consultant to assist the CIT (Appeals), as considered necessary by CBDT.
6. No Personal Appearance by the Appellant or Authorised Counsel
(a) The appellant shall not be required to appear either personally or through authorised representative in connection with any proceedings under this Scheme before the income-tax authority at the National Faceless Appeal Centre or Regional Faceless Appeal Centre or appeal unit set up under this Scheme.
(b) The appellant 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 appeal unit under this Scheme.
(d) Where the request for personal hearing has been approved by the Chief Commissioner or the Director General, in charge of the Regional Faceless Appeal Centre, such 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 Board.
(e) Any examination or recording of the statement of the appellant or any other person shall be conducted by Commissioner (Appeals) in any appeal unit under this Scheme, 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 Board.
7. Procedure of Appellate Proceedings under Faceless Appeal Scheme, 2020
8. Handy Practical Considerations in Faceless Appeals Regime
a. Currently there is one common response window both for the faceless assessments and faceless appeals. In future, separate windows may be provided.
b. In the faceless appeals, the taxpayers can e-file the Appeal Form 35, without there being any need to choose the jurisdictional CIT (Appeals). In the appeal form 35, the mentioning of the Document Identification Number (DIN) of the Assessment Order, will result in auto populating of most of the basic details of the appeal.
c. Only the scanned files in pdf format are to be uploaded as attachments. The resolution of the pdf file should be kept at 300dpi. The multiple pages in one submission should be uploaded as one pdf file only.
d. Currently the Video Conferencing (VC) functionalities are in the process of being built and soon the VC links will be available in the e-proceedings window of the e-filing portal.
e. UDINs are not required for e-filing of assessments and appeal submissions in the faceless regime.
f. The formats of State-wise Vakalatnamas with applicable stamp duty, will also be available shortly in the e-filing portal.
g. The taxpayers should upload their current and accurate e-mail ids and mobile numbers in the e-filing portal so as to receive all the intimations and scrutiny & appeal notices from the department, in the e-filing portal and the e-mails.
h. The new platform i.e. CPC 2.0, with enhanced processing speed, is going to be rolled out in November, which will result in faster ITR & Refund processing, faster resolution of the taxpayer’s grievances. Pre-filled ITRs, Mobile App, Real-Time Chat functionality with the Virtual Tax Assistant are some of the key features of the new CPC 2.0 platform.
9. Few Critical Suggestions to Make Faceless Appeals Flawless
Faceless Appeals are indeed a revolutionary and path-breaking initiative of the Government, aimed at reforming and overhauling the tax administration system and curbing the undesirable practices prevailing in the system, by eliminating the personal interface between the assessee and the appellate authority.
However, it is not uncommon for any new reform-oriented initiative to face some teething problems during the initial stages of its implementation and practice.
Accordingly, such critical areas where there is still scope of some improvement are discussed as under:
a. A By- Default Right of Personal Hearing via Video Telephony to the Appellants should be provided in the Faceless Appeals Scheme, 2020.
In the new Faceless Appeal Scheme, 2020, the appellant is not having any ‘by-default’ right of personal hearing and the appellant may only request for a personal hearing by way of video conferencing/telephony, so as to make his oral submissions or present his case before the appeal unit under this Scheme.
The Chief Commissioner or the Director General, in charge of the Regional Faceless Appeal Centre (RFAC), under which the concerned appeal unit is set up, may approve the request for personal hearing, if he is of the opinion that the request is covered by the circumstances as may be notified by CBDT.
The circumstances where the request of the appellant for personal hearing via video conferencing may be approved are yet to be notified by CBDT.
Thus, a suitable clarification concerning the specified circumstances wherein the request of personal hearing of the assessee may be approved by the CCIT RFAC is desirable.
This burning and litigative issue of lack of suitable opportunity of being heard in the new faceless assessment/appeal scheme resulting in violation of Principle of Natural Justice & Article 14 of the Constitution of India, has become more critical in view of the admission of the writ petition of the taxpayer by the Hon’ble Delhi High Court in the case of Lakshya Buddhiraja on 16.10.2020, on this very issue.
Thus, in order to reduce litigations and tussles, the CBDT may reconsider and review the provision of conditional grant of opportunity of personal hearing via video telephony to the appellant, only in certain specified circumstances, and may consider the grant of such opportunity of personal hearing via video telephony to the appellant, in all cases, wherein the appellant asks for it in writing.
b. Provision of Alternative Mode of Uploading Files as Attachments along with e-Submissions, other than the Scanned Files.
In the existing ‘schema’ and ‘semantics’ of the ‘e-Proceedings’ functionality, the maximum number of attachments or files which can be attached along with a single ‘response’ to any appeal notice is ‘TEN’ (10) and the maximum ‘size’ of one attachment which can be attached along with a single ‘e-response’ is ‘10 MB’ of data. Earlier the maximum size of one attachment which can be attached along with a single ‘e-response’ was 5 MB only. So, in the new scheme of ‘E-assessment 2019’ the issue of space constraint has been resolved to some extent.
However, the appellant can attach scanned documents only in .pdf, .xls, .xlsx, .csv format. At times, the process of scanning of files or their conversion into pdf files for the purpose of uploading is very cumbersome and tedious process and involves a lot of time. So, this file conversion becomes an irritant and hinders the smooth and uninterrupted uploading of supporting attachments to be attached `along with the response to any query to a notice.
The requirement of scanning of files or the conversion of files into pdf version to make them up-loadable should be done away with and instead a standard file format like ‘XML’ in line with the International Best Practice of ‘Standard Audit File for Tax’ (SAF-T), should be adopted and implemented for uploading files and attachments, by aligning and integrating the ‘e-proceedings’ functionality of the ITBA module with that of the natural accounting systems of assessees.
c. Right of Filing Rebuttal to the objections of NeAC/AO against the admission of additional ground of appeal & additional evidence by the appellant should be provided in faceless appeals scheme.
10. Concluding Remarks
The concerned Legislative Authorities should immediately address the above stated grey areas and litigative issues concerning this path-breaking and revolutionary initiative of faceless appeals so as to ensure their timely redressal and avoidance of opening up of the unnecessary pandora box of litigations.
This path breaking reform of faceless appeals is indeed a game changer for overhauling the entire tax administration system. Though for the taxpayers and tax practitioners, this will result in missing out on that odd cup of Tea with the CIT(Appeals), but as long as that odd cup of Tea is being substituted by a far more rewarding and satisfying TEA i.e. Transparency, Efficiency & Accountability, no one is complaining.
‘When solving problems, dig at the roots instead of just hacking at the leaves.’ -Anthony J.D’Angelo.
Useful Reference: For more details and complete understanding of the nitty-gritties and nuances of the New Scheme of Faceless Assessment & Faceless Appeal, the Readers may pre-book the upcoming Taxmann Book titled “Faceless Assessment & Appeals Ready Reckoner with Real-time Case Studies”, authored by Sh. Mayank Mohanka, FCA, the author of this article and published by Taxmann Publications.
This Book is a Ready Reckoner for Faceless Assessments & Appeals and incorporates each and everything which a tax practitioner should know and do in his tax practice in the new faceless regime.
