The future of income tax: How faceless assessments are changing the game

Faceless assessment is an automated process streamlining tax procedures, reducing taxpayer-officer interaction, curbing corruption, enhancing assessment efficiency, and promoting objectivity in the assessment process.

In a revolutionary move, the Central Board of Direct Taxes (CBDT) introduced the faceless income tax assessment in October 2019. The process aims to conduct ITR filing in a more automated and objective manner to minimise direct interference between income tax officers and taxpayers. The primary objective behind this move is to mitigate corruption, reduce subjectivity, and improve the efficiency of the assessment process.

Let's delve into what is faceless income tax assessment and how it works.

Highlights:

• Faceless income tax assessments were introduced by the CBDT in 2019.

• These assessments minimise corruption, reduce subjectivity, and enhance objectivity in the tax assessment process.

• From notice issuance to final assessment, this assessment ensures fair treatment for taxpayers.

What is faceless income tax assessment?

Data analytics and artificial intelligence are at the forefront of this process, aiming to eliminate the direct contact between income tax officers and taxpayers. The centre has laid out procedures wherein ITR filing can be done online.

A central computer will scrutinise tax returns based on predetermined risk parameters.

How do faceless assessments work?

The National Faceless Assessment Centre will give notice to taxpayers as to why their case is taken up. Upon receiving the income tax notice, the individual has to reply within 15 days.

A taxpayer's case is eligible for e-assessment if they:

• Provides income tax returns voluntarily under section 130

• Provides income tax returns in response to the income tax notice as per section 142 (1), 143 (2), or 148 (1)

• Fails to provide an income tax return under sections 148 (1) and 142 (1)

Also Read: Maximise tax savings in 2023

What happens after the income tax notice is served?

1. An automated allocation system assigns the e-assessment cases to a random assessment unit within the regional e-assessment centre.

2. Once the case is assigned, the unit can request the National e-Assessment Centre to:

• Procure documents, evidence, or information from the taxpayer or related individuals. 

• Conduct an inquiry or verification to ensure legitimacy.

• Ask for the technical unit's assistance. 

3. Under section 144, the centre will issue a notice based on the best judgment assessment if the taxpayer fails to respond to the income tax notice.

4. After collecting all the relevant information and cross-verification, the assessment unit will pass a draft assessment, either accepting the income tax return or suggesting modification.

Also Read: Ignored your income tax notice? Here's what you should know

Parting thoughts

As of July 2023, 4.5 lakh faceless assessments and 2 lakh faceless appeals have been carried out successfully. An automated system randomly picks out units, making the process more objective and efficient. This innovative approach has reshaped income tax assessment for a fairer and smoother experience for taxpayers and income tax officers.

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