How the Scrutiny Process Works in the Faceless Income Tax System and Who Will Review It

The Indian Income Tax Act has been amended to facilitate a modern and efficient scrutiny process under the faceless system. This novel approach aims to enhance transparency, reduce paperwork, and improve the efficiency of tax scrutiny. The process leverages advanced technology via the Computer-Aided Selection System (CASS) and the National E-Assessment Centre (NEAC) to streamline the selection and review of cases.

Selection of the Case

Under the faceless income tax system, cases are selected based on certain parameters. These include a mismatch in reported income and expenses, discrepancies between the information provided and what is recorded in the Income Tax Department's databases, and other inconsistencies in the tax returns. The NEAC, using the CASS system, identifies cases for scrutiny, and the cases are then distributed to assessment units across India.

Serving of the Notice

Once a case is selected for scrutiny, the NEAC sends a notice to the assessees. The notice is sent both via physical mail and through email registered with the Income Tax Department. This ensures that all assessees receive the notice promptly and accurately. The notice contains detailed information about the specific queries that need to be addressed.

The assessees are given the option to participate in the faceless scrutiny process. They can either provide all the required documents and supporting proofs through the e-filing portal, or they can choose to appear physically before the assessing officer. The choice of procedure lies with the assessees.

Review Process and Finalization

Upon receiving the information and supporting documents, the assessment unit forms an opinion and drafts an assessment order. This initial draft is then sent back to the NEAC, which may assign it to another unit for verification. This ensures that the final assessment order is accurate and well-informed. The second unit would review the information provided by the assessees, as well as the information collected by the department. If necessary, they would peruse the draft assessment order and finalize it.

The final assessment order is communicated to the assessees via email and updated in the e-proceedings tab of the Income Tax Portal. Any assessees who are aggrieved by the assessment order have the option to file an appeal before the Commissioner of Income Tax Appeals using Form 35 through the e-appeals portal.

What If the Assessing Officer Is Not Satisfied?

In cases where the assessing officer is not satisfied with the assessees' responses, they may request permission from the Commissioner of Income Tax to expand the scope of scrutiny. Alternatively, they may request the assessees to appear physically for further clarification. However, the officer must record their reasons in writing before taking these actions.

The faceless income tax system and the CASS system together form a robust and transparent mechanism for tax scrutiny, ensuring that taxpayers receive fair treatment and that the tax department can efficiently address any discrepancies in tax returns.

Keywords: faceless income tax, scrutiny process, CASS system