Faceless Assessment & Appeal: How the New System Works
Quick Answer
The Faceless Assessment Scheme under Section 144B of the Income Tax Act eliminates physical interface between the taxpayer and the Assessing Officer. All scrutiny proceedings — notices, questionnaires, document submissions, hearings, and orders — are conducted electronically through the e-filing portal. The assessment is handled by an Assessment Unit that is geographically distant from the taxpayer, and the taxpayer never knows the identity of the assessing officer. At Virtual Auditor, we have represented clients in hundreds of faceless assessments since the scheme’s inception. The system has changed how assessments are conducted, but the substantive law and the taxpayer’s rights remain the same — including the right to a personal hearing via video conferencing under Section 144B(7)(viii).
Definition — Section 144B (Faceless Assessment): Inserted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, Section 144B provides the legislative framework for conducting assessments in an electronic and faceless manner. It establishes the National Faceless Assessment Centre (NaFAC) as the nodal centre, with Assessment Units (AU), Verification Units (VU), Technical Units (TU), and Review Units (RU) operating in a team-based, jurisdiction-free manner.
Definition — Faceless Assessment Scheme 2019: Originally notified on 12 September 2019 as the e-Assessment Scheme 2019 (subsequently renamed), this was the administrative framework preceding Section 144B. The scheme was operationalised in phases — first for cases selected for limited scrutiny, then expanded to all scrutiny cases. Section 144B now provides the statutory backing that the 2019 scheme lacked.
Definition — Faceless Appeal Scheme: Notified under Section 250 of the Income Tax Act, the Faceless Appeal Scheme applies to appeals before CIT(A). Appeals are allocated through an automated system to CIT(A) officers across the country, ensuring jurisdictional separation between the AO who passed the order and the CIT(A) who hears the appeal.
How the Faceless Assessment System Works — The NaFAC Architecture
National Faceless Assessment Centre (NaFAC)
NaFAC, headquartered in Delhi, is the central hub that manages the entire faceless assessment process. It receives cases allocated for scrutiny through CASS (Computer Aided Scrutiny Selection), assigns them to Assessment Units located across the country through an automated random allocation system, coordinates between different units, and serves all notices and orders to the assessee through the e-filing portal.
Assessment Unit (AU)
The AU is the functional equivalent of the Assessing Officer. It examines the return, prepares questionnaires, analyses the assessee’s submissions, and drafts the assessment order. The AU is always located in a different city from the assessee. The assessee does not know which AU is handling their case, and the AU does not have any physical contact with the assessee.
Verification Unit (VU)
If the AU requires any verification — such as site inspection, examination of books at the assessee’s premises, or physical verification of assets — it requests NaFAC to assign the task to a Verification Unit. The VU conducts the verification and reports findings to NaFAC, which forwards the report to the AU. The VU does not conduct any assessment function — it only verifies facts.
Technical Unit (TU) and Review Unit (RU)
For technically complex issues (transfer pricing, international taxation, valuation), the AU can request technical assistance from a TU. The Review Unit reviews the draft assessment order prepared by the AU to check for errors, omissions, or inconsistencies before finalisation. This multi-unit structure is designed to reduce individual officer discretion and improve assessment quality.
The Faceless Assessment Process — Step by Step
Step 1 — CASS Selection and Notice. The case is selected for scrutiny through CASS based on risk parameters. NaFAC serves the Section 143(2) notice to the assessee through the e-filing portal. The notice is generic and does not identify the AU or the officer handling the case.
Step 2 — Initial Questionnaire. The AU prepares an initial questionnaire identifying the issues to be examined and the documents required. This is served through NaFAC on the e-filing portal. The assessee must respond within the specified time (typically 15 days, extendable on written request).
Step 3 — Submission and Follow-up. The assessee uploads documents and explanations on the e-filing portal. The AU examines submissions and may issue follow-up questionnaires. Multiple rounds of query and response are common. All communications are documented on the portal.
Step 4 — Show Cause Notice (if variation proposed). Under Section 144B(1)(xvi), if the AU proposes any variation prejudicial to the assessee, a show cause notice must be issued specifying the proposed variation and the reasons. The assessee must be given an opportunity to respond, and can request a personal hearing via video conferencing under Section 144B(7)(viii).
Step 5 — Draft Assessment Order. The AU prepares a draft assessment order and submits it through NaFAC. The draft is examined by a Review Unit. If the RU finds errors or issues, it is sent back to the AU for modification.
Step 6 — Final Assessment Order. Once the draft is finalised, NaFAC issues the final assessment order to the assessee through the e-filing portal, along with the demand notice under Section 156 (if any tax demand arises) and the penalty notice under Section 270A/271(1)(c) (if penalty proceedings are initiated).
Right to Personal Hearing — Section 144B(7)(viii)
One of the most significant rights under the faceless scheme is the right to request a personal hearing through video conferencing. Section 144B(7)(viii) provides that the assessee may request a personal hearing, and if such request is made, the NaFAC shall allow personal hearing through video conferencing.
This is particularly important where: (a) the issues are technically complex and cannot be adequately addressed through written submissions alone; (b) the assessee wants to present oral arguments alongside documentary evidence; (c) the show cause notice proposes a significant variation and the assessee wants to make detailed representations. We always request a video conferencing hearing when a variation prejudicial to the assessee is proposed.
Challenging Faceless Assessment Orders — Procedural Grounds
Non-Issuance of Show Cause Notice
If the final assessment order makes additions or disallowances without first issuing a show cause notice under Section 144B(1)(xvi), the order is procedurally defective. Multiple High Courts have quashed orders where the show cause notice was not issued before making a variation prejudicial to the assessee. This is not a mere irregularity — it is a violation of the mandatory procedure prescribed by the statute.
Denial of Personal Hearing
Where the assessee requested a personal hearing through video conferencing under Section 144B(7)(viii) and the request was denied or the hearing was not provided, the order is vulnerable to challenge. The right to personal hearing is statutory, and its denial violates principles of natural justice.
Draft Order Not Sent for Review
The multi-unit review mechanism under Section 144B is mandatory. If the draft order was not reviewed by the Review Unit before finalisation, this constitutes non-compliance with the prescribed procedure.
Expert Insight — CA V. Viswanathan, FCA, IBBI/RV/03/2019/12333
The faceless system has created two distinct challenges for taxpayers. First, the inability to have a face-to-face discussion means every argument must be articulated in writing with complete precision — there is no opportunity for informal clarification or real-time dialogue with the officer. Second, the automated allocation system means your case may be handled by an officer who has no familiarity with your industry or the local regulatory context. At Virtual Auditor, we address both challenges by preparing submissions that are self-contained, thoroughly documented, and written with the assumption that the reader has no prior context. Every submission includes a factual background section, legal analysis with case law references, and a concluding summary of the position. This structured approach has consistently produced better outcomes than ad hoc responses.
Faceless Appeal — How CIT(A) Appeals Work Under the New System
The Faceless Appeal Scheme applies to all appeals before CIT(A) filed under Section 246A. The appeal is filed through the e-filing portal in Form 35. Once filed, the appeal is allocated through an automated system to a CIT(A) in a different jurisdiction from the AO who passed the order.
The CIT(A) examines the appeal, may issue queries to the appellant for additional information or clarification, and provides an opportunity of hearing through video conferencing. The CIT(A) order is served through the e-filing portal. If the CIT(A) upholds the assessment order or grants only partial relief, a further appeal lies before the ITAT. See our Income Tax Appeal Services Guide for the complete appellate procedure.
Cases Excluded from Faceless Assessment
The following categories are excluded from the Faceless Assessment Scheme and continue to be assessed by the jurisdictional AO: (a) cases involving search under Section 132 or requisition under Section 132A; (b) cases involving international taxation and transfer pricing (Sections 92 to 92F); (c) cases under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015; and (d) specific categories notified by CBDT from time to time. For excluded cases, the traditional assessment procedure applies with physical hearings before the jurisdictional AO.
Summary — Faceless Assessment Essentials
Section 144B establishes the faceless assessment framework — all scrutiny proceedings are conducted electronically through the e-filing portal with no physical interface. The NaFAC coordinates between Assessment Units, Verification Units, Technical Units, and Review Units. The assessee has a statutory right to personal hearing via video conferencing under Section 144B(7)(viii). A show cause notice is mandatory before any variation prejudicial to the assessee. Non-compliance with Section 144B procedure is a jurisdictional defect that can result in quashing of the order. At Virtual Auditor, we handle faceless assessments and appeals across all jurisdictions. Contact us at +91 99622 60333 or check our pricing.
Frequently Asked Questions
What is the Faceless Assessment Scheme under Section 144B?
The Faceless Assessment Scheme under Section 144B eliminates physical interface between the taxpayer and the Assessing Officer. All notices, communications, and submissions are handled electronically through the e-filing portal. The assessment is conducted by an Assessment Unit not in the same city as the taxpayer. The scheme applies to all scrutiny assessments except search/seizure cases, international taxation, and Black Money Act proceedings.
Can I request a personal hearing in faceless assessment?
Yes. Under Section 144B(7)(viii), the assessee can request a personal hearing through video conferencing. The request should be made in writing through the e-filing portal. NaFAC is required to provide the hearing if requested. We recommend requesting a hearing whenever a variation prejudicial to the assessee is proposed.
What is the Faceless Appeal Scheme?
The Faceless Appeal Scheme applies to appeals before CIT(A). Appeals are allocated through an automated system to CIT(A) officers across the country, ensuring the appeal is not heard by an officer in the same jurisdiction as the AO. All submissions, hearing requests, and orders are processed through the e-filing portal.
What cases are excluded from the Faceless Assessment Scheme?
Excluded cases include: assessments relating to search and seizure under Section 132/132A; cases involving international taxation and transfer pricing; assessments under the Black Money Act 2015; and specific categories notified by CBDT. These continue to be assessed by the jurisdictional AO with physical hearings.
What happens if the faceless assessment order is passed without following Section 144B procedure?
Non-compliance with Section 144B procedure is a jurisdictional defect. Multiple High Courts have quashed orders passed without issuing a show cause notice before making a variation, without providing the requested personal hearing, or without following the multi-unit review mechanism. The order is liable to be set aside on this ground alone.
How long does a faceless assessment take?
Under Section 153(1), the assessment order must be passed within 9 months from the end of the AY in which the return was filed, or within 12 months from the end of the AY being assessed, whichever is later. For reassessments, the time limit is 12 months from the end of the FY in which the Section 148 notice was served. These statutory time limits apply equally to faceless assessments.
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