An Overview of the New Faceless Appeal Scheme, 2021

The new Faceless Appeal Scheme 2021 was launched by the Central Board of Direct Taxes (CBDT) to overcome certain drawbacks in the Faceless Appeal Scheme, 2020, which was launched last year in September 2020. The highlights of the new Scheme are as under:

  1. A National Faceless Appeal Centre(Centre) is set up to conduct e-appeal in a centralized manner. This Centre will set up Appeal units, as it deems fit, to facilitate the conduct of appeals.
  2. All communication between Commissioner(Appeals), taxpayer, and any other person for details/information, etc., will be through the Faceless Appeal Centre.
  3. The Faceless Appeal Centre will assign the appeal to a Commissioner(Appeals) of a particular appeal unit through an automated allocation system.
  4. On assignment of the appeal, the Commissioner(Appeals) can
    1. Can condone a delay, in case if any, in filing an appeal;
    2. Send notice fixing hearing and calling for details/ information;
    3. Obtain information from any other person through the Centre ;
    4. Call for the report from the Assessing Officer(AO) in connection with the appeal;
    5. Request for further inquiry to the AO;
  5. The information/details/report called for from the appellant/AO/third person needs to be submitted by them electronically through the Centre.
  6. The appellant can also file additional grounds through the Centre.
  7. Where additional grounds are received, the Commissioner(Appeals) will need to decide on the admission or otherwise of the same for which it will need to:
    1. Send the additional grounds to the AO through the Centre;
    2. The response received from the AO/Faceless Assessment Centre will need to be considered
  8. The appellant can also file additional evidence. Where additional evidence is filed, the Commissioner(Appeals) will need to:
    1. Send the same to the AO for comments and verification in accordance with Rule 46A;
    2. The response by the AO will be submitted to the Centre, which will, in turn, be forwarded to the Commissioner(Appeals);
    3. Ongoing through the same, the Commissioner(Appeals) may admit or reject the additional evidence.
  9. In case the Commissioner(Appeals) intends to enhance an assessment or penalty or reduce refund, it will need to prepare a show cause notice containing the reasons for the same.
  10. The same will be served on the appellant through the Centre.
  11. The response received will be passed on to the Commissioner(Appeals) by the Centre.
  12. The Commissioner(Appeals) will then prepare an order in writing and send the same to the Centre after digitally signing it.
  13. The order will then be communicated to the appellant, Pr. Chief Commissioner/Chief Commissioner and AO.
  14. Where initiation of penalty has been recommended, a notice requiring the appellant to show cause why penalty should not be imposed needs to be served by the Commissioner (Appeals).
  15. The Commissioner(Appeals) may, through the Centre, issue notice for initiating penalty for non-compliance.
  16. After considering the response received, the Commissioner(Appeals) may levy the penalty by passing the order or dropping the penalty. The communication of the same needs to be made to the appellant through the Centre.
  17. The Commissioner(Appeals) can pass an order of rectification based on an application made by:
    1. The appellant;
    2. The Commissioner(Appeals) who has passed the order; or
    3. The AO.
  18. The rectification application so received by the Centre will be assigned to a Commissioner(Appeals) through the automated allocation system.
  19. After examining facts, calling for information, etc., the Commissioner(Appeals) will pass an order either rectifying the mistake or rejecting the application.
  20. The will then be communicated to the appellant and AO through the Centre.
  21. The appeal against the order of Commissioner(Appeals) will lie with the Income Tax Appellate Tribunal (ITAT).
  22. In the event the order under appeal before ITAT is set aside or remanded back to Commissioner Appeals, the same will be assigned to a Commissioner(Appeals) by the Centre.
  23. The Scheme does not require a personal appearance by the appellant or their Authorised Representatives. However, the appellant can request a personal hearing conducted through video conferencing or video telephony.
  24. In the erstwhile Faceless Appeal Scheme 2020, providing the opportunity of personal hearing was at the Centre’s discretion. However, in the New Faceless Appeal Scheme Commissioner (Appeals) has to mandatory allow a personal hearing if the taxpayer requests it during e-proceedings.

The new Scheme has done with the duplicity of work with respect to the passing of draft order which was the case in the old Scheme where the appeal unit first passes the draft order and is sent to another unit for review.

As compared to the earlier structure, there is a rationalization of the appeal unit, which consists only of the National Faceless Appeal Centre, which assigns all the appeals to the Commissioner (Appeals) of a specific appeal unit. Under the new Scheme, the Commissioner(Appeals) can directly initiate penalty proceedings in case of any noncompliance with notice or direction, or order which had to be routed through National Faceless Appeal Centre in the old Scheme.

Furthermore, under the new Scheme, the same Commissioner(Appeals) who has completed the appeal proceedings is also authorized to initiate penalty proceedings. However, in the erstwhile Scheme, NFAC assigns the initiation of penalty proceedings to any Regional Faceless Appeal Centres (RFAC) that might be the same or different who conducted the appeal proceedings.

Under the new Faceless Appeal Scheme, all the orders (appeal order, penalty order, or rectification order) shall be signed digitally by the Commissioner(Appeals) before sending to the Centre. There were no such provisions of signing orders digitally by the Appeal Units in the previous Scheme.

Tax Street December 2021