Faceless Assessment & Appeals Under the Income-tax Act, 2025

Last Updated: 15 April 2026  |  Applicable From: Tax Year 2026-27 (1 April 2026 onwards)  |  Reference: Income-tax Act, 2025 (30 of 2025), as amended by Finance Act, 2026; Chapter XVI (Assessment), Chapter XVIII (Appeals)

Faceless assessment is arguably the biggest procedural change in Indian direct tax administration in this generation. Before 2019, a scrutiny notice meant physical visits to the Assessing Officer’s chamber, stacks of photocopies, and face-to-face interactions that were sometimes cordial, sometimes adversarial, and occasionally tainted. Under the Income-tax Act, 2025, the faceless regime is not an optional add-on — it is the statutory default. This guide explains how the regime works, who is excluded, how to respond, and how to get the best outcome when you receive a faceless notice.

Table of Contents

1. NaFAC architecture and unit hierarchy
2. Step-by-step faceless assessment procedure
3. Draft order and review mechanism
4. Personal hearing via video conferencing
5. Excluded categories
6. Faceless appeals under Chapter XVIII
7. e-Dispute Resolution Committee for small taxpayers
8. Best practices for responding to faceless notices
9. Taxpayer rights in the faceless regime
10. Common mistakes to avoid
11. Expert Insight
12. Key Takeaways
13. Frequently Asked Questions

1. NaFAC architecture and unit hierarchy

The National Faceless Assessment Centre operates through a layered structure of specialised units:

• Assessment Unit (AU): Conducts the substantive examination — raises queries, examines responses, prepares the draft order
• Verification Unit (VU): Handles specific verification tasks such as cross-checking third-party information, bank records, or vendor confirmations
• Review Unit (RU): Reviews the draft order prepared by the AU for legal correctness and procedural compliance
• Technical Unit (TU): Provides technical assistance on complex issues — e.g. valuation, transfer pricing methodology, international tax

These units operate out of different regional centres and are assigned cases algorithmically. A taxpayer in Chennai may have his case assessed by a unit in Delhi, reviewed by a unit in Mumbai, and have verification handled by a unit in Bengaluru. This geographic distribution is intended to eliminate local influence and reduce corruption risk.

2. Step-by-step faceless assessment procedure

1. Case selection: The CPC and risk management system identify returns for scrutiny based on predefined risk parameters
2. Case assignment: NaFAC assigns the case to an Assessment Unit in a region different from the taxpayer’s jurisdiction
3. Initial notice: A notice under the Sec 143(2) equivalent is issued via the e-filing portal, specifying whether the scrutiny is limited or complete
4. Information gathering: Follow-up notices under the Sec 142(1) equivalent seek specific information and documents
5. Taxpayer response: The taxpayer uploads responses and supporting documents via the e-filing portal
6. Verification: The Verification Unit may independently verify specific facts — e.g. confirm details with a bank or vendor
7. Technical input: For complex issues, the Technical Unit provides expert opinion
8. Draft order: The Assessment Unit prepares a draft order showing proposed additions/disallowances and reasoning
9. Review: The Review Unit examines the draft for legal correctness and procedural compliance
10. Personal hearing (on request): If the taxpayer requested a video hearing, it is scheduled and conducted before finalisation
11. Final order: The assessment order is finalised, signed digitally, and served on the taxpayer via the e-filing portal
12. Demand or refund: Any tax demand is raised, or refund is issued, based on the final order

3. Draft order and review mechanism

One of the most important safeguards in the faceless regime is the four-eye principle — no order is finalised by a single unit. Every draft order passes through the following review:

• The Assessment Unit prepares the draft, stating the issues, taxpayer’s submissions, and the AU’s proposed conclusions
• The draft is transmitted to a Review Unit in a different region
• The Review Unit examines the draft for: legal correctness of additions/disallowances; procedural compliance with the time limits, notice requirements, and hearing rights; factual accuracy; and reasonableness of the estimation
• If approved, the draft becomes the final order (after any personal hearing)
• If modifications are needed, the Review Unit sends the draft back to the Assessment Unit or to a different AU for fresh examination

This mechanism has materially improved order quality. Many frivolous or hyperbolic additions that would have survived under a single-AO regime are filtered out at the review stage.

4. Personal hearing via video conferencing

Every taxpayer has a statutory right to request a personal hearing in a faceless assessment. The hearing is conducted via video conferencing through the Income Tax portal. Key points:

• The request must be made within the time specified in the notice or the draft order
• The request is generally granted, especially where the matter is complex or the proposed additions are material
• The hearing is scheduled at a mutually convenient time
• The taxpayer or his representative can present oral arguments, clarify written submissions, and respond to the AU’s concerns
• The hearing is recorded and forms part of the case file
• Even during the faceless hearing, the identities of the unit members may remain anonymous

5. Excluded categories

Not every case is conducted faceless. The following categories continue under the jurisdictional Assessing Officer:

• Search and seizure cases under the Sec 132 equivalent
• International taxation — cases involving non-residents, DTAA disputes, cross-border transactions
• Transfer pricing — cases involving Form 3CEB and ALP adjustments under the Sec 92C/CC equivalents
• Black money cases under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
• Benami Transactions Prohibition Act proceedings
• Prosecution cases and cases involving complex fraud
• High-value or sensitive cases specifically notified by the CBDT for jurisdictional handling

6. Faceless appeals under Chapter XVIII

The first appeal against an assessment order also goes through a faceless mechanism — the National Faceless Appeal Centre. The procedure:

1. Appeal is filed electronically in Form 35 within 30 days of the assessment order
2. The grounds of appeal and statement of facts are uploaded along with supporting documents
3. The appeal is assigned to a CIT(A) or JCIT(A) in a different region
4. Additional documents can be sought by the appellate authority
5. Video conference hearing is available on request
6. Draft appellate order is reviewed before finalisation
7. The order is served via the e-filing portal

For details on the full appellate hierarchy — CIT(A), ITAT, High Court, Supreme Court — see our income tax appeals procedure guide.

7. e-Dispute Resolution Committee for small taxpayers

The Income-tax Act, 2025 preserves the e-Dispute Resolution Committee (e-DRC) mechanism for small taxpayers. Eligible taxpayers can approach the e-DRC with disputes up to a specified monetary limit (typically where the aggregate additions are below ₹10 lakh and the return is below ₹50 lakh). The e-DRC:

• Offers a quicker, non-adversarial resolution path
• Can modify additions, grant immunity from penalty in appropriate cases, and provide immunity from prosecution
• Its orders are binding on the Department once accepted by the taxpayer
• Operates entirely electronically

8. Best practices for responding to faceless notices

• Respond on time. Never wait for the last day. Start work as soon as the notice is received.
• Organise the response like a legal brief. Use headings, numbered paragraphs, a clear narrative, and numbered annexures. The faceless unit reads your submission cold — help them follow the logic.
• Address every query. Leaving queries unanswered or partially answered is the most common reason for adverse orders. If you cannot answer, explain why and provide alternative evidence.
• Reconcile with AIS/26AS. The faceless unit has both. Any unreconciled difference will be flagged. Proactively reconcile and explain differences.
• Provide specific document references. “Please see Annexure 3 page 5, row 12” beats “see attached documents”.
• Request a video hearing when the matter is complex or the stakes are material.
• Keep backups. Save every notice, response, and annexure locally. The portal is reliable but not infallible.
• Seek extensions before missing the deadline, not after.
• Engage a professional for material matters — the cost is almost always recovered through better outcomes.

9. Taxpayer rights in the faceless regime

• Right to know the reasons for any adverse action
• Right to respond with adequate time (extensions available on request)
• Right to a personal hearing via video conferencing
• Right to engage a representative (CA, advocate, or authorised person)
• Right to confidentiality of personal and financial information
• Right to appeal against any adverse order
• Right to seek rectification of mistakes apparent from record
• Right to stay of demand pending appeal
• Right to non-discrimination and equal treatment across units

10. Common mistakes to avoid

• Last-minute responses without adequate preparation
• Disorganised document uploads without an index or narrative
• Leaving queries unanswered
• Failing to reconcile with AIS/26AS
• Not requesting a video hearing when the matter is complex
• Contradictory statements across different responses
• Relying on the portal without keeping local backups
• Ignoring the review stage — taxpayers should push back on unreasonable draft orders
• Submitting handwritten documents or low-quality scans
• Not engaging a professional for material disputes

Expert Insight

Key Takeaways

• Faceless is the default mode for most assessments under the Income-tax Act, 2025 (commenced 1 April 2026)
• NaFAC coordinates all faceless assessments through regional Assessment, Verification, Review, and Technical Units
• Cases are geographically distributed — your assessment happens in a different region than your jurisdiction
• Draft orders go through review by a second unit before finalisation (four-eye principle)
• Personal hearing via video conferencing is available on request
• Excluded categories: search, international taxation, transfer pricing, black money, Benami, prosecution, notified high-value cases
• Faceless appeals — first appeal to CIT(A)/JCIT(A) also operates faceless
• e-DRC provides alternate dispute resolution for small taxpayers
• Taxpayer rights (hearing, representation, appeal, rectification) are preserved
• Best practice: organise responses like legal briefs, reconcile with AIS/26AS, and request hearings for material matters

Frequently Asked Questions

Related guides: Income-tax Act, 2025 — Complete Guide · Assessment Types · Appeals Procedure · Penalties & Interest · Updated Return · ITR Filing