Legal Framework of Faceless Assessments & Appeals

Click Here To Know Introduction on Faceless Assessments & Appeals

Section 144B of Income Tax Act, 1961

Applicability

Covers:

• Assessments under Sec 143(3) (scrutiny)
• Best-judgment assessments under Sec 144
• Re-assessments under Sec 147 (subject to CBDT notification)

Structural Framework

Faceless assessment is managed entirely through the National Faceless Assessment Centre (NFAC) and 4 types of functionally specialized units:

National Faceless Assessment Centre (NFAC)

• Acts as the central coordinating hub
• Handles all communication with the assessee and among units
• Uses automated allocation systems for random assignment of cases

Functional Units 

Assessment Unit(AU):

• Issues notices under section 142(2) & 143(2)
• Examine Returns & replies 
• Prepare draft Assessment orders 

Verification Unit (VU): Conducts verification, enquiry, cross-verification of books and witnesses

Technical Unit (TU): Provides expert input (valuation, transfer pricing, forensic audit, legal)

Review Unit (UV):

• Reviews draft orders before finalization
• Checks for accuracy, completeness and legal/factual correctness

Step By Step Procedure 

Step 1: Case Assignment

• NFAC assigns the case to an Assessment Unit using automated systems
• Intimation is sent to the assessee that the case is under faceless assessment

Step 2: Notice to Assessee

• AU issues notices under Sec. 143(2) or Sec. 142(1)
• Served through NFAC
• Assessee replies online (via designated portal)

Step 3: Requisition for Assistance (if required)

AU may request NFAC to:

• Obtain further information/documents
• Involve Verification Unit (for field checks or third-party confirmations)
• Involve Technical Unit (for complex legal/accounting issues)

NFAC forwards the requisition to the respective unit, and sends back the report to AU.

Step 4: Drafting the Order

Based on all records and reports, AU:

• Drafts a "no-change" income determination proposal, OR
• If adverse variation is proposed, issues a Show Cause Notice (SCN) through NFAC

Step 5: Opportunity of Being Heard

• Assessee replies to SCN through the portal
• May request video conference hearing
• If no reply, NFAC informs AU and assessment may proceed ex parte

Step 6: Review Process

• Draft order can be sent to Review Unit by NFAC
• RU may suggest modifications
• AU accepts/rejects changes with reasons
• Final Draft Assessment Order (DAO) is sent to NFAC

Step 7: Draft Order for Eligible Assessee (Sec. 144C)

If Assessee qualifies as eligible assessee:

• NFAC serves DAO to assessee
• Assessee may:

1. Accept the draft
2. File objections with Dispute Resolution Panel (DRP) and NFAC

NFAC forwards objections to AU and DRP directions later

Step 8: Final Assessment

AU finalizes assessment:

As per draft (if accepted)
As per DRP directions (if objections raised)

Final order with demand notice/penalty is issued via NFAC to assessee.

Step 9: Records Transfer

• After assessment, NFAC transfers all case records to the jurisdictional AO for further proceedings (recovery, appeal, etc.)

Communication & Technology rules

All communication among units, Between NFAC & Assessee happens exclusively via electronic mode.

Notices and orders are delivered via:

• Registered account on portal
• Registered email
• Income-tax Mobile App with real-time alerts (SMS/email)

Authentication:

• Officers sign using digital signature
• Assessee files replies with DSC/EVC or login

Video Hearing:

• Allowed on request for oral submissions
• Conducted only via VC/telephony, to the extent technologically feasible

Section 250- Faceless Appeals (Cit(A)) Under Income Tax Act

Applicability

Section 250 governs appeals before the Commissioner of Income Tax (Appeals) – CIT(A).

Applicable to:

Any Assessee aggrieved by an order passed by an Assessing Officer under:

1. Sec 143(3), 144 (assessment orders)
2. Sec 147 (reassessments)
3. Sec 143(1) (intimations)
4. Sec 271 (penalties), Sec 154 (rectifications), etc.
5. Other appealable orders listed in Section 246A
6. Faceless Appeal Scheme applies to:

• All appeals filed with CIT(A), except those specifically excluded by CBDT.

Section 250 now operates along with the Faceless Appeal Scheme, 2020, notified under the powers conferred by Section 250(6B) & 250(6C).

Step-by-Step Procedure For Appeal

Step 1: Filing of Appeal

• Assessee files Form 35 appeal online to NFAC
• Appeal is allocated to an Appeal Unit (AU) via an automated system

Step 2: Notice to Assessing Officer (AO)

• NFAC informs the AO about the appeal
• AO files a report (statement of facts and counter-arguments) within the prescribed time

Step 3: Further Inquiry (if needed)

AU may:

• Ask NFAC to get additional documents from the assessee
• Refer to the Verification Unit for fact-checking
• Refer to the Technical Unit for complex issues (valuation, TP, legal)

Step 4: Opportunity of Hearing

• NFAC serves show-cause notice to the assessee if any adverse view is proposed
• Assessee may:

1. File a reply in writing
2. Request video conference hearing (allowed based on approval)

Step 5: Draft Order

• AU finalizes the Draft Appeal Order
• Sent to NFAC for processing

Step 6: Review of Order (if required)

• A Review Unit may be assigned to examine the draft order
• If changes suggested, it is returned to AU for modification

Step 7: Final Order

• Final appeal order is issued by NFAC
• Copy is served electronically to:

1. The assessee
2. Jurisdictional AO

• Demand/refund effect is given by AO based on the outcome
• Click Here To Know Key Features Of Faceless Assessments Scheme