Understanding Faceless Tax Scrutiny Assessment: A Comprehensive Overview

As of recently, the tax department has announced that it will soon start implementing a new faceless tax scrutiny assessment system. This system aims to streamline the process of tax compliance and review by eliminating the need for physical interactions between taxpayers and tax officials. Here’s a detailed look at what this means and how it will operate.

Introduction to Faceless Assessment

On Friday, a tax official announced that intimation letters informing taxpayers about upcoming scrutiny assessments will now be handled under the faceless assessment system. This new process will also be applied to domestic transfer pricing cases. Under this system, a central computer selects tax returns for scrutiny based on risk parameters and mismatches, randomly allocates them to a team of officers, and reviews them at another randomly selected location. Only if the review is concurred, a notice is sent via the centralized computer system.

Key Features of the Faceless Assessment Scheme

The key features of the Faceless Assessment Scheme are as follows:

Systemic Selection: Tax returns are selected using data analytics and AI, ensuring a fair and unbiased process. No Territorial Jurisdiction: Taxpayers do not need to appear in the same city where their tax returns were filed. Cases are randomly allocated to different cities. Automated Allocation: Cases are automatically and randomly allocated to a team of officers. Centralized Notice Issuance: Notices are issued centrally with a Document Identification Number (DNI), ensuring that taxpayers can respond electronically without visiting a tax office. Team-Based Reviews: Assessments and reviews are carried out by teams of officers, with reviews taking place in different cities from the original assessment and finalization happening in a third city.

Benefits and Exceptions to the Faceless Assessment System

The introduction of the faceless assessment system is designed to provide several benefits, including increased efficiency, reduced instances of bias, and enhanced transparency. However, there are certain exceptions to this system:

Major Frauds and Tax Evasions: Cases involving serious frauds or major tax evasions will still require a human interface for due diligence. Sensitive and Search Matters: Sensitive matters or those involving searches may also fall outside the scope of the faceless assessment system. International Taxation and Black Money Act (Benami Property): International taxation and matters related to the Benami Property Act will not be covered under this system.

How Does the Process Work?

Under the faceless assessment system, taxpayers will not need to appear in person for hearings. The entire process, including scrutiny, allocation, and review, will be conducted online via email and the e-filing portal. Taxpayers are required to respond to notices electronically and do not need to visit a tax office or meet any official in person. This ensures a more efficient and convenient process for taxpayers.

Conclusion

Overall, the faceless tax scrutiny assessment system marks a significant step towards modernizing and streamlining the tax administration process. By reducing the need for human interaction, the system aims to enhance transparency, efficiency, and fairness, benefiting both taxpayers and the tax department.