Analysis of Faceless Appeals Scheme – Personal Finance


In recent years, the tax department has introduced e-proceedings, faceless assessment, and faceless appeal to prevent incidences of harassment or other misconduct by the tax authorities. The Central government has been working for some time to improve the transparency, efficiency, and accountability of Income Tax Assessment and to reduce corruption. While there may be initial hiccups in the faceless assessment regime, it is indeed a fundamental change in the tax assessment process which should help the taxpayers and the tax authorities in the long run. The paper discusses the process, advantages and the difference in the 2020 & 2021 faceless appeals scheme. The author also offers proposals designed to enhance the smooth operation of the faceless system, so that both the Income-tax Department and tax payers benefit.


A taxpayer or assessee is not obliged to attend an I-T department office or meet a department representative for income tax-related activities under the faceless assessment system. The scheme gives taxpayers and specialists who represent them before tax authorities’ additional options. It has led to significant time savings in terms of travel to the tax office, time spent waiting there, etc. Additionally, it reduces bribes and harassment within the system. Trust and transparency are bolstered through faceless evaluations, leading to increased administrative effectiveness and delivery. This change will aid in the reduction of unwarranted litigation and strengthen our position as a global player with an effective and sustainable tax administration system within the ecosystem of economic growth.

E-Government measures were implemented to ensure the precise and secure filing of tax returns and the Central Processing Centre’s rapid processing of these returns. However, the Government of India deemed it necessary to transform the interface between taxpayers and the Income tax Department in relation to proceedings for assessment and appeals, while simultaneously enabling the department to improve the quality of its audits and establishing countrywide consistency in its approach and position.

In 2015, as a result, the Central Board of Direct Taxes (CBDT), the Apex Tax Authority, piloted a paperless environment for tax assessment proceedings by communicating with taxpayers via email.[1] The CBDT launched this optional service so that some taxpayers in specific cities might answer to notices and surveys by email. The Central Board of Direct Taxes (CBDT) developed an e-Proceeding facility to facilitate electronic tax assessments in April 2017, allowing a tax officer or assessing officer to communicate with a taxpayer via the Income-tax e-Filing site.[2] Using this feature, a tax officer might submit a notice to the Income-tax e-Filing portal, and the taxpayer would have the ability to react to the notice on the same portal. This marked the expansion of electronic assessment proceedings and abolished the requirement for taxpayers to provide hardcopies or email responses. Despite the fact that the e-Proceedings facility included all components of electronic tax assessments, taxpayers had the option to opt out of the e-Proceedings facility. In August 2018, the CBDT made it necessary for all assessments to be done using the e-Proceeding facility during the 2018-19 fiscal year, with a few exceptions.[3]

In his 2018 Budget Speech, the Honorable Minister of Finance launched the faceless assessment system (which was initially known as the e-Assessment scheme). The objectives of the programme, as outlined by the finance minister in his Budget speech and the accompanying memorandum to the Finance Bill of 2018 are strikingly similar to those of the faceless assessment programme.

In order to meet the goals of the Central Government, the Finance Act of 2018 changed the Income-tax law to give the Government of India the authority to prescribe a new scheme for electronic and faceless tax assessments, so enhancing its efficiency, transparency, and accountability.

Consequently, on September 12, 2019, the e-Assessment system was notified to automate the different assessment procedures stipulated by the Act. The scheme specifies the technique for conducting an anonymous evaluation via electronic means. The 2019 e-assessment scheme will be rebranded as the Faceless Assessment scheme as of 13 August 2020.[4]


Since the Faceless Assessment Scheme has its own set of advantages and disadvantages, the impact of this electronic mode of tax payment is neutral in the business world.

1. Since the human interface is excluded in the selection of cases which need to be scrutinized, it will extinct corruption, biased decisions and will give rise to fair judgment, creating a positive impact on business owners as well as their business.

2. Taxpayers and assessing officer’s identity tend to remain a secret due to territorial distribution thus creating a positive business environment.

3. Taxpayers who do not have the resources or properly equipped system to carry out the task may face a problem. Submission of documents on a technology-based platform, may create hardships for them since loads of documents need to be uploaded on the portal.

4. The transition from physical to digital may trigger anxiety in the initial stage. Tax professionals also worry about the complications that the large enterprises need to face, by uploading loads of documents. Since the upload count is limited, the situation becomes more complex.


The entire assessment process is handled through the National e-Examination Centre (NeAC), which uses an automatic allocation method to distribute cases selected for anonymous assessment under the scheme to regional e-assessment centres. Subsequently, all assessment-related communication, mostly written electronic exchanges, is channelled through the National e-assessment centre. Assessment is performed by a quasi-judicial authority. Consequently, the laws of natural justice cannot be disregarded. The courts have often emphasised that the principles of natural justice must be adhered to during the evaluation and that no superior authority may interfere with the assessment. It does not appear that there is any statutory right to a personal hearing under this scheme, and the National e-Assessment Centres directly interfere with the autonomy of the evaluating officer.

National Faceless Appeal Centre (NFAC)

The NFAC shall serve as the nodal agency and interaction between the National e-Assessment Centre (NeAC) or the Assessing Officer (AO), the appellant, or any other person, and the Appeal Units (AU). The NFAC will serve as the central authority and will be granted the jurisdiction to facilitate e-appeal proceedings and decide the appeal. Accordingly, any contacts between the appellant or the NeAC/Assessing Officer and the AU shall be conducted only through the NFAC.

Regional Faceless Appeal Centre (RFAC)

The RFAC will enable the conduct of e-appeal proceedings and will have the authority to rule on the appeal in accordance with the scheme’s regulations. New Delhi, Mumbai, Chennai, and Kolkata make up the four regional centres.

Exception to the procedure established: According to a press press release issued by the CBDT on September 25, 2020, the Scheme will not apply in the following instances:

• Search and seizure, serious tax frauds/evasions

• International Tax Division cases and

• Black Money Act cases.


The “Faceless Appeal Scheme 2020” was introduced by the Central Board of Direct Taxes on September 25, 2020, with the intention of introducing greater openness to the appeals process and “honouring the honest.” The Old Scheme was implemented with the intention of eliminating human intervention between the taxpayer and the First appellate authority (Commissioner Appeals), so guaranteeing that appeals are decided in a fair way and are not influenced by any human bias or personal relationship.

The CDBT has implemented a new appeal named “Faceless Appeal Scheme 2021” on December 28, 2021, in order to correct the problems and include the adjustments sought by taxpayers. The Old Scheme will be replaced by the New Scheme.

1. Compulsory to allow a personal hearing if requested

Regarding granting requests for a personal hearing, the word “may” has been substituted by “must” in the new policy. Thus, it would be obligatory for the Commissioner (Appeals) to grant a personal hearing if a taxpayer requested one during an e-proceeding.

2. Role of Regional Faceless Appeal Centre is removed

Under the old scheme, the Regional Faceless Appeal Centres (RFACs) facilitated the conduct of e-appeal proceedings. When an appeal was filed, it was assigned by the National Faceless Appeal Centre to a specific appeal unit in any RFAC. Such appeal unit had one or more Commissioner (Appeals) who performed the actual e-proceedings.

In the new scheme, the board has removed Regional Faceless Appeal Centres. Now, an appeal is directly assigned to the Commissioner (Appeals) of a specific Appeal Unit.

3. Cases will be assigned to the Commissioner (Appeals)

In the old scheme, the appeals were assigned to a specific appeal unit, and the Commissioner (Appeals) appointed under such appeal unit performed the e-proceeding functions. Now, the National Faceless Appeal Centre (NFAC) shall assign the appeal directly to a Commissioner (Appeals) of the appeal unit.

4. No need to send a recommendation to NFAC to initiate penalty proceedings

Under the erstwhile scheme, for any non-compliance with any notice, direction or order, the Appeal Unit was required to send a recommendation to the NFAC to initiate penalty proceedings.

The new scheme has removed the requirement to send such a recommendation. The Commissioner (Appeals) has been authorized to send a notice to the appellant through the NFAC to initiate any penalty proceedings.

5. Penalty proceedings to be initiated by same Commissioner (Appeals)

In the erstwhile appeal scheme, NFAC assigns the initiation of penalty proceedings to a specific Appeal Unit in any one RFAC through an automated allocation system. This Appeal Unit may or may not be the same unit that completed the appeal proceedings. However, in the new appeal scheme, the same Commissioner (Appeals) who has completed the appeal proceedings is authorized to conduct penalty proceedings.

6. Orders passed by Commissioner (Appeals) to be digitally signed

Under the new Faceless Appeal Scheme, all orders (appeal order, penalty order, and rectification order) must be digitally signed by the Commissioner (Appeals) prior to being transmitted to the National Faceless Appeal Centre. In the old model, Appeal were not permitted to sign orders electronically.

7. National e-Assessment Centre renamed to National Faceless Assessment Centre

The CBDT has renamed the National e-Assessment Centre to National Faceless Assessment Centre. However, the board has already changed the name, but that was done in the Faceless Assessment Scheme, 2019. Now, the same has been incorporated in the Faceless Appeal Scheme, 2021.


Reform in Right Direction: As the taxpayer and the tax officer would not know each other’s identities, it will offer greater justice and confidence to the country’s taxation system. It will also provide tremendous ease to taxpayers, assure just and fair assessment and appeal rulings, and reduce additional litigation.

A Game Changer: It promises to streamline the tax administration and improve its openness and accountability. This is a substantial overhaul of the tax administration procedure that reduces tax officer discretion, tax terrorism, and the potential for corruption and litigation.

Hassle- free Approach: The income taxpayer can electronically submit an assessment’s response on the IT portal without having to visit a tax official. On August 13, 2020, the Honourable Prime Minister announced certain tax adjustments within the Transparent Taxation framework.[5]

Aims for Transparency: Aims to promote transparency by erecting a wall of obscurity between taxpayers and the assessor.

Reducing the cost of Compliance: It develops trust between the taxpayer and the authorities, provides a timely resolution, and provides complete and correct information for tax compliance, hence decreasing compliance costs.


Both the Delhi High Court in Sanjay Aggarwal v. National Faceless Assessment Centre[6] (NFAC) and Cuttack Tax Bar Association v. Union of India[7] attempted to clarify the same issue. It was determined that the denial of a personal hearing violates both natural justice principles and the procedure outlined in Section 144B.

In Supereme Court of India in the case of Central Board of Direct Taxes Vs Lakshya Budhiraja & Anr.[8] the Respondent argued that the scheme is violative of article 14 of the constitution of India, as it does not follow the well settled principle of audi alteram partem. In response to this the ASG asked for some time to make new rules in consonance with the principles of natural justice. Within 3 months’ time the Faceless Appeals Scheme, 2021 was introduced. The new scheme clarified the situation. Thus, personal hearings must be granted for the assessee that requests it. To guarantee that the structural concept of the Scheme is not compromised, the Court indicated that personal hearings can be conducted without disclosing the identity of the assessor.

In the case of Centum Finance Ltd. v. National Faceless Assessment Centre[9] it was decided by the court that in the cases where adequate time was not provided to the taxpayer to respond to the show cause notice before passing the assessment order, the assessment order shall be set aside with liberty to the NFAC to continue the assessment proceedings from the stage at which they were positioned at the time of issue of the show cause notice.


Introduction of Faceless Appeal Scheme, 2020 is a step in right direction. If implemented properly, this could be game changer as it could actually reduce the time gap, as about 88 percent of the pending appeals is expected to be taken up in faceless manner. This will be the booster in reducing the overall timeframe for litigation. Further, by providing for review of draft order (based on the pre-set criteria) the quality of orders should improve. Thus, there will be lesser matters where the Revenue Authorities would be filing appeal before higher authorities.

The Faceless Appeal Scheme has the potential to bring in a gigantic reform in the first appeal proceedings. It can act as a significant tool in ensuring effective, transparent, and quick justice delivery to the Taxpayer. Lastly, the onus of successful implementation of the Faceless Scheme lies, not only with the Income Tax Department, but with every person who believes in the significance of judicial reforms.

It would not be out of place to remember the time when the compliance of e-filing of income tax returns was made mandatory for the first time and fingers were raised in view of the repeated extensions given by the Government due to the technical glitches faced by the taxpayers. However, looking back at the progress made on this, it is quite an achievement that today we have a world class IT infrastructure wherein filing of tax returns is an extremely efficient and easy process. Accordingly, the taxpayers would need to be more patient and give time to the Government to iron out the initial glitches being faced in the faceless assessment regime. The scheme is well intentioned and hopefully destined for success.

[1] PTI, CBDT looks to connect with taxpayers online in smaller cases, Business Today,

[2] Akshay Shah, Income Tax E-Proceedings -An Aurora of New Era, Taxguru,

[3] CBDT, Scrutiny Assessment only through ‘E-Proceeding’ facility subject to 7 exceptions, Ministry of Finance,

[4] Dhruva Advisors LLP, E-assessment Scheme, 2019,

[5] ET Online, M Modi launches Transparent Taxation platform to benefit honest taxpayers, The Economic Times,

[6] W.P.(C) 5741/2021

[7] W.P.(C) No. 33457 of 2020

[8] Transfer Petition (Civil) Nos.1445-1446/2021

[9] [2021] 131 39/283 Taxman 232 (Delhi)

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