Overview of the Faceless Appeal Scheme, 2020

1. Introduction

E-filing of appeals before CIT(Appeals) has already been enabled through e-Filing portal.
However, the process that follows after filing of such appeal is neither electronic nor
faceless. In order to further harness the power of technology and to achieve the motto of
faceless assessment at CIT(A) level, an appellate system, with dynamic jurisdiction in
which appeal shall be disposed of by one or more Commissioner (Appeals), has been
introduced by the Finance Act, 2020.

A new sub section (6A) has been inserted in Section 250 of the Income-tax Act to
authorize the Central Government to notify an e-appeal scheme for disposal of appeal so
as to impart greater efficiency, transparency and accountability by:

(a)   eliminating the interface between the CIT(A) and the appellant in the course of
appellate proceedings to the extent technologically feasible;
(b)   optimising the utilisation of the resources through economies of scale and
functional specialisation;
(c)   Introducing an appellate system with dynamic jurisdiction in which appeal shall
be disposed of by one or more CIT (Appeals).
The Prime Minister of India, Shri Narendra Modi, on 13-08-2020, had launched
platform for 'Transparent Taxation – Honoring the Honest' to carry forward the journey
of direct tax reforms. The PM unveiled Faceless assessments, Faceless appeals &
Taxpayers Charter.

Faceless assessment and taxpayer's charter implemented from same day, i.e., 13-08-
2020 2020, whereas faceless appeal was made applicable from September 25, 2020.
Now, the Central Board of Direct Taxes (CBDT) has notified the Faceless Appeal Scheme,
2020 vide Notification No. 76/2020 which is effective from 25-09-2020.

2. Scope of Scheme

The appeal under this Scheme shall be disposed of in respect of such territorial area or
persons or class of persons or incomes or class of incomes or cases or class of cases, as
may be specified by the Board.

3. Faceless Appeal Centres

For the purpose of this scheme, the board may 1 set-up the following centres & units and
specify their respective jurisdiction:

(a)   National Faceless Appeal Centre;

(b)   Regional Faceless Appeal Centres; and
(c)   Appeal units.
3.1. National Faceless Appeal Centre (NFAC)
The purpose of the National Faceless Appeal Centre is to facilitate the conduct of e-
appeal proceedings in a centralised manner, which shall be vested with the jurisdiction
to dispose appeal in faceless manner.

3.2. Regional Faceless Appeal Centres (RFACs)

Its major function is to facilitate the conduct of e-appeal proceedings. They shall be
vested with the jurisdiction to dispose appeal in faceless manner.

3.3. Appeal Units

It shall perform the function of disposing faceless appeal which includes:

(a)   Admitting additional grounds of appeal,

(b)   Making such further inquiry as thinks fit,
(c)   Directing the National e-Assessment Centre (now called as National Faceless
Assessment Centre) or the Assessing Officer for making further inquiry, seeking
information or clarification on admitted grounds of appeal,
(d)   Providing opportunity of being heard to the appellant,
(e)   Analysis of the material furnished by the appellant,
(f)   Review of draft order, and
(g)   Such other functions as may be required for the purposes of this Scheme.
All communication with respect to information, document, evidence or any other details
between the Appeal Unit and the appellant or any other person or the National e-
Assessment Centre (NeAC) or the Assessing Officer (AO) shall be done through the
NFAC.

The Appeal Unit shall have the following authorities:

(a)   One or more Commissioner (Appeal);

(b)   Income-tax authority, ministerial staff, executive or consultant to assist the
Commissioner (Appeals) as considered necessary by the Board.
4. Procedure under Faceless Appeal Scheme:

The procedure to be followed under the faceless appeal have been discussed in the below
paragraphs:

4.1. Assignment of appeal

The NFAC shall assign the appeal to a specific appeal unit in any one RFAC through an
automated allocation system

Automated allocation system means an algorithm for randomised allocation of cases, by

using suitable technological tools, including artificial intelligence and machine learning,
to optimise the use of resources.

4.2. Admission or rejection of appeal

3.2-1. Appeal filed after expiry of time limit

Where an assessee has filed an appeal after the expiration of time specified in section
249(2) of the Income-tax Act, the Appeal Unit may admit such appeal if it is satisfied
that the appellant had sufficient cause for not filing the appeal within the said time. In
any other case, it may reject the appeal. The Appeal Unit is required to intimate about
such acceptance or rejection to the NFAC.

Section 249 deals with form for filing appeal and its limitation period in case an appeal is
filed before the Commissioner (Appeal). Section 249(2) prescribes following limitation
period for filing an appeal:

(a)   If appeal is related to assessee who is denying liability to deduct tax

  Where an assessee is filing an appeal under Section 248 to declare that tax is not
required to be deducted under Section 195, appeal shall be filed within 30 days
from the date of payment of the tax.
(b)   If appeal is relating to assessment or penalty
  Where an appeal is being filed against an order of assessment or penalty, it is
required to be filed within 30 days from the date on which the notice of demand
relating to such assessment or penalty is served.
(c)   If appeal relating to any other matter
  Where the appeal is being filed in any other case, it is required to be filed within
30 days from the date on which the intimation of the order, against which appeal
is sought, is served.
3.2-2. Appeal filed without filing return of Income and advance tax is payable

Where an assessee has not filed the return of income, the CIT(A) shall not admit appeal
unless an amount equal to amount of advance tax payable by him has been paid.
However, CIT(A) may for good and sufficient reasons, to be recorded in writing, exempt
the assessee from the requirement of payment of such tax.

Where an assessee has applied for such exemption, Appeal Unit may admit an appeal
and exempt the appellant from payment of tax for any good and sufficient reason to be
recorded in writing. In any other case, it may reject the appeal. The Appeal unit shall
intimate about such acceptance and rejection to the NFAC.

Thereafter, the NFAC shall intimate the admission or rejection of appeal by the Appeal
Unit, as the case may be, to the appellant.

4.3. Calling upon information by the Appeal Unit

If an appeal is admitted by the Appeal Unit, it may request the NFAC to obtain such
further information, document or evidence from the appellant or any other person, as it
may specify.

The Appeal Unit may also request to NFAC to obtain a report of the NeAC or the AO on
grounds of appeal or information, document or evidence filed by the appellant.

Further, Appeal Unit may request NFAC to direct the NeAC or the AO for making further
inquiry under Section 250(4) and submit a report thereof.
Section 250(4) says that, before disposing of any appeal, Commissioner (Appeals) may
conduct such enquiry as he thinks fit. He may also direct the assessing officer to make
further enquiry and report the results of such enquiry to the Commissioner (Appeals).

4.4. Notice by NFAC

The NFAC shall serve a notice, specifying date and time, to seek such information,
document or evidence or report as may be specified by the Appeal Unit or as may be
relevant to the appellate proceedings. The notice can be served on any of the following
person:

(a)   Appellant;
(b)   NeAC;
(c)   AO; or
(d)   Any other person.
4.5. Filing of response or submit report to notice issued by NFAC

The Appellant, the NeAC, the AO or any other person, as the case may be, shall file a
response or submit a report in response to notice issued to them. The response shall be
filed within the date and time specified in the notice, or such extended date and time as
may be allowed on the basis of an application made in this behalf with the NFAC.

The response or report furnished pursuant to notice issued by NFAC shall be sent to
Appeal Unit. In case no response or report is filed, same shall be informed to Appeal
Unit.

4.6. Filing of Additional Ground

The appellant may file additional ground of appeal in such form, as may be specified by
the NFAC, specifying therein the reason for omission of such ground in the appeal filed
by him.

In case such additional ground of appeal is filed:

(a)   NFAC shall send the additional ground of appeal to the NeAC or the AO for
providing comments. It shall also send the additional ground of appeal to the
Appeal Unit as well.
(b)   Upon receiving such additional grounds, the NeAC or the AO shall furnish their
comments within the time specified or such extended time as may be allowed on
the basis of an application made in this behalf.
(c)   NFAC shall send such comments to the Appeal Unit. If no such comments are
filed, same shall be informed to the Appeal Unit.
The Appeal Unit, after taking into consideration of comments, may admit such
additional ground if it is satisfied that the omission of additional ground from the form
of appeal was not wilful or unreasonable. In any other case, it may reject such additional
ground.
Appeal Unit is required to record reasons in writing on its admission or rejection of
additional ground and intimate same to the NFAC. The NFAC further intimate the
admission or rejection of the additional ground to the appellant.

4.7. Filing of Additional Evidence

The appellant may file additional evidence, other than the evidence produced by him
during the course of proceedings before the NeAC or the AO. The additional evidence to
be filed by the appellant in form specified by the NFAC specifying therein as to how his
case is covered by the exceptional circumstances specified Rule 46A(1) 2 of the Income-
tax Rules, 1962.

In case such additional evidence is filed:

(a)   NFAC shall send the additional evidence to the NeAC or the AO for furnishing a
report within the specified date and time on the admissibility of additional
evidence.
(b)   NeAC or the AO shall furnish such report within specified date or such extended
date and time as may be allowed on the basis of an application made in this
behalf.
(d)   Upon receiving such report, NFAC shall send it to the Appeal Unit. If no such
report is furnished, same shall be informed to Appeal Unit.
(e)   After considering the additional evidence and report furnished by NeAC or the
AO, the Appeal Unit may admit or reject the additional evidence. Reasons for
same shall be recorded in writing and intimation to be send to NFAC.
(f)   Thereafter, NFAC shall intimate same to the Appellant and the NeAC or the AO.
4.7.1. Admission of Additional Evidence

If the additional evidence filed by the appellant is admitted by the Appeal Unit then the
following procedure shall be followed:

(a)   Before taking such additional evidence into account, Appeal Unit shall prepare a
notice to provide an opportunity to the NeAC or the AO, within the date and
time specified therein:
i.   To examine such evidence or to cross-examine such witness, as may be
produced by the appellant; or
ii.   To produce any evidence or document or any witness in rebuttal of the
additional evidence or witness produced by the appellant and furnish a
report thereof.
(b)   Notice prepared by the Appeal Unit shall be sent to NFAC and thereafter NFAC
will serve such notice to the NeAC or the AO.
(c)   The NeAC or AO shall furnish the report to the NFAC within the date and time
specified, or such extended date and time as may be allowed on the basis of an
application made in this behalf.
(d)   NFAC shall send the report furnished by the NeAC or the AO to the appeal unit.
If no such report is furnished, same shall be informed to the appeal unit.
4.8. Production of documents relevant for appellate proceedings
NeAC or AO may request the NFAC to direct the appellant to produce any document or
evidence or to examine any witness relevant to the appellate proceedings. If such request
is received, NFAC shall send such request to the Appeal Unit.

The Appeal Unit, after considering such request, may prepare a notice directing the
appellant to produce such document or evidence or for examination of any other person
being a witness. Such notice shall be send to the NFAC.

NFAC shall serve the notice received from Appeal Unit to appellant or any other person
being a witness. Person to whom such notice is served shall file his response within the
date and time specified in the notice or such extended date and time as may be allowed
on the basis of application made in this behalf.

Response received from person shall be send to Appeal Unit. In case no response is
received, NFAC shall inform the appeal unit.

4.9. Enhancement of assessment or penalty or reduction of refund

If the appeal unit intends to enhance an assessment or a penalty or reduce the amount of
refund available to assessee, it shall prepare a show-cause notice containing the reasons
for such enhancement or reduction and send such notice to the NFAC.

NFAC shall service such notice to appellant. The appellant shall file his response within
the date and time specified in the notice or such extended date and time as may be
allowed on the basis of application made in this behalf. NFAC shall send the response
received from appellant to Appeal Unit. In case no response is received, NFAC shall
inform the appeal unit.

4.10. Draft Order related to enhancement of assessment/penalty/reduction

of refund

The Appeal Unit shall prepare draft order in accordance with the provisions of section
251 after considering:

(a)   All the relevant material available on the record;

(b)   Response filed by the appellant or any other person;
(c)   Report furnished by the NeAC or AO; and
(d)   Any matter arising out of the proceedings in which the order appealed against
was passed, notwithstanding that such matter was not raised in the appeal.
The draft order prepared by the Appeal Unit shall be sent to NFAC along with details of
the penalty proceedings, if any, to be initiated therein.

4.11. Review of Draft Order

Upon receiving the draft order from Appeal Unit, it shall be sent to another Appeal Unit
for review in case where the aggregate amount of tax, penalty, interest or fee, including
surcharge and cess, payable in respect of disputed issues, exceed specified amount 3.

In any other case, the NFAC may:

 (a)   Finalise the order after examine it in accordance with the risk management
strategy specified by the Board, including by way of an automated examination
tool; or
(b)   Send the draft order for conducting review to an appeal unit, other than the unit
which prepared it, through an automated allocation system.
The Appeal Unit which received the draft order shall review it and may decide to:

(a)   Concur with the draft order and intimate the NFAC about such concurrence; or
(b)   Suggest such variation, as it may deem fit, to the draft order and send its
suggestions to the NFAC.
4.12. Assignment of appeal to another Appeal Unit

NFAC shall finalise the appeal as per the draft order if it has received concurrence of the
Appeal Unit. However, if it has received any suggestion for variation then it shall again
assign the appeal to another Appeal Unit in any one RFAC through an automated
allocation system. This Appeal Unit shall be the unit other than the unit which has
prepared or reviewed the draft order.

In case where the suggestion for variation intend to enhance an assessment or a penalty
or reduce the amount of refund, the Appeal Unit to whom the appeal is assigned shall
prepare a revised draft order as per the procedure laid down in Para 4.9., The Appeal
Unit shall also require to follow the procedure laid down Para 4.10.

In any other case, the appeal unit shall prepare a revised draft order as per the procedure
laid down in para 4.10.

The Appeal Unit shall send its order to NFAC along with details of the penalty
proceedings, if any, to be initiated therein.

4.13. Passing of Final Appeal Order

The NFAC shall finalise the appeal, pass the appeal order and communicate such order
to:

(a)   Appellant;
(b)   Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner as per section 250(7); and
(c)   NeAC or AO for such action as may be required under the Act;
In case where initiation of penalty has been recommended in the order, NFAC shall serve
a notice on the appellant calling upon him to show cause as to why penalty should not be
imposed upon him under the relevant provisions of the Act.

4.14. Transfer of case to Commissioner (Appeals)

If it is consider necessary, the Principal Chief Commissioner or the Principal Director

General, in charge of NFAC, may transfer the appeal with the prior approval of the Board
to such Commissioner (Appeals) as may be specified in its order. The appeal can be
transferred at any stage of the appellate proceedings.

5. Penalty Proceedings
In case of any non-compliance of any notice, direction or order issued under this Scheme
by the appellant or any other person, the Appeal Unit may send recommendation for
initiation of any penalty proceedings to the NFAC. The followings are the steps to be
followed under the penalty proceedings:

(i)   NFAC shall serve a notice on the appellant or any other person calling upon him
to show cause as to why penalty should not be imposed upon him under the
relevant provisions of the Act.
(ii)   Appellant or any other person shall file a response to the show-cause notice,
within the date and time specified in such notice, or such extended date and
time as may be allowed on the basis of an application made in this behalf.
(iii)   NFAC shall assign the recommendation for initiation of penalty proceedings
along with the response filed to a specific Appeal Unit in any one RFAC through
an automated allocation system.
(iv)   After taking into account all the relevant material available on the record, the
Appeal Unit shall:
a.   Prepare a draft order and send a copy of such order to the NFAC; or
b.   Drop the penalty after recording reasons and send intimation to the
NFAC.
(v)   If the Appeal Unit has sent a draft order, the NFAC shall pass the order for
imposition of penalty as per such draft and communicate such order to:
a.   Appellant or any other person; and
b.   NeAC or the AO for such action as may be required under the Act.
(vi)   If the Appeal Unit has dropped the penalty, the NFAC shall also intimate same
to
a.   Appellant or any other person; and
b.   NeAC or the AO for such action as may be required under the Act.
6. Rectification Proceedings

The NFAC may amend any order passed by it if there is any mistake apparent from the
record. An application for rectification of mistake may be filed with the NFAC by:

(a)   The Appellant or any other person;

(b)   The Appeal Unit preparing or reviewing or revising the draft order; or
(c)   The NeAC or the AO.
Upon receiving such application, the NFAC shall assign it to a specific Appeal Unit in any
one RFAC through an automated allocation system.

The Appeal Unit shall examine the application and prepare a notice for granting an
opportunity to:

(a)   The appellant or any other person if the application has been filed by the NeAC
or the AO;
(b)   The NeAC or the AO if the application has been filed by the appellant or any
other person; or
(c)   The appellant or any other person and the NeAC or the AO if the application has
been filed by an Appeal Unit preparing or reviewing or revising the draft order.
The notice so prepared by the Appeal Unit shall be sent to NFAC. The NFAC shall serve
such notice upon the appellant or any other person or NeAC or AO, as the case may be,
calling upon him to show cause as to why rectification of mistake should not be carried
out under the relevant provisions of the Act.

The person receiving the above notice shall file a response to the NFAC within the date
and time specified therein, or such extended date and time as may be allowed on the
basis of an application made in this behalf. The response received by NFAC shall be
forwarded to the Appeal Unit. In case no response is filed, the NFAC shall inform the
same to the appeal unit.

The Appeal Unit, after taking into consideration the application and response, shall
prepare a draft order for rectification of mistake or rejection of application for
rectification (citing reasons thereof) and send the order to the NFAC.

NFAC shall, upon receipt of draft order, pass an order as per such draft and
communicate it:

(a)   To the appellant or any other person and

(b)   To the NeAC or the AO for such action as may be required under the Act
7. Personal appearance during faceless proceedings

A person is not required to appear either personally or through authorised

representative before the income-tax authority at the NFAC or RFAC or Appeal Unit set
up under this Scheme in connection with any proceedings. However, he may request for
personal hearing so as to make his oral submissions or present his case before the
Appeal Unit.

The Chief Commissioner or the Director General, in charge of the RFAC under which the
concerned appeal unit is set up, may approve the request for personal hearing if he is of
the opinion that the request is covered under specified circumstances 4.

If the request is approved, personal hearing shall be conducted exclusively through video
conferencing or video telephony, including use of any telecommunication application
software which supports video conferencing or video telephony, in accordance with the
procedure laid down by the Board.

Further, any examination or recording of the statement of the appellant or any other
person shall be conducted by CIT(Appeals) in any appeal unit, exclusively through video
conferencing or video telephony, including use of any telecommunication application
software which supports video conferencing or video telephony in accordance with the
procedure laid down by the Board.

The Board shall establish suitable facilities for video conferencing or video telephony
including telecommunication application software which supports video conferencing or
video telephony at such locations as may be necessary, so as to ensure that a person is
not denied the benefit of this Scheme merely on the ground that such person does not
have access to video conferencing or video telephony at his end.

8. Other procedural aspects under Faceless Appeal

8.1. Appeal against order passed by NFAC

An appeal against an order passed by the NFAC shall lie before the Income Tax Appellate
Tribunal (ITAT) having jurisdiction over the jurisdictional AO.

8.2. Proceedings in remand cases

The NFAC shall pass the order in accordance with the provisions of this Scheme if any
order passed by the NFAC/CIT(Appeals) is set-aside and remanded back to it by the
ITAT or High Court or Supreme Court.

8.3. Delivery of electronic record

In case of appellant, every notice or order or any other electronic communication shall
be delivered to by way of;

(a)   Placing an authenticated copy thereof in his registered account; or

(b)   Sending an authenticated copy thereof to his registered email address or to his
authorised representative; or
(c)   Uploading an authenticated copy on his Mobile App; and followed by real time
alert
"real time alert" means any communication sent to the appellant, by way of Short
Messaging Service on his registered mobile number or by way of update on his Mobile
App or by way of an email at his registered email address, so as to alert him regarding
delivery of an electronic communication.

In case of any other person, every notice or order or any other electronic communication
shall be delivered by sending an authenticated copy thereof to the registered email
address of such person, followed by a real time alert.

The appellant shall file his response through his registered account. Once an
acknowledgement is sent by the NFAC containing the hash result generated upon
successful submission of response, the response shall be deemed to be authenticated.

The time and place of dispatch and receipt of electronic record shall be determined in
accordance with the provisions of section 13 of the Information Technology Act, 2000.

8.4. Exchange of communication

All communications between the NFAC and the appellant or his authorised
representative shall be exchanged exclusively by electronic mode. Further, all internal
communications between the NFAC, RFACs, NeAC, AO and the Appeal Unit shall be
exchanged exclusively by electronic mode.

8.5. Authentication of electronic record

An electronic record shall be authenticated by the NFAC by affixing its digital signature.
The appellant or any other person shall also be required to authenticate electronic record
by affixing his digital signature if he is required to furnish his return of income under
digital signature. In any other case, he shall have option to authenticate records by
affixing his digital signature or under electronic verification code.

8.6. Specifying format, mode, procedure and processes by the NFAC

The Principal Chief Commissioner or the Principal Director General, in charge of the
NFAC shall, with the prior approval of Board, lay down the standards, procedures and
processes for effective functioning of the NFAC, RFACs and the Appeal Unit. It includes
notifying format, mode, procedure and processes in respect of the following:

(a)   Service of the notice, order or any other communication;

(b)   Receipt of any information or documents from the person in response to the
notice, order or any other communication;
(c)   Issue of acknowledgment of the response furnished by the person;
(d)   Provision of "e-appeal" facility including login account facility, tracking status of
appeal, display of relevant details, and facility of download;
(e)   Accessing, verification and authentication of information and response including
documents submitted during the appellate proceedings';
(f)   Receipt, storage and retrieval of information or documents in a centralised
manner;
(g)   General administration and grievance redressal mechanism in the respective
Centres and units;
(h)   Filing of additional ground of appeal;
(i)   Filing of additional evidence;
(j)   Specified amount referred to in Para 4.11.
(k)   Circumstances in which personal hearing referred to in Para 7.
9. Conclusion

The rules & procedures laid down by the Faceless Appeal Scheme, 2020 are on the
similar lines with the Faceless Assessment Scheme, 2019 5. It also appears from certain
provisions that they are exact copy of the Faceless Assessment provisions with minor
modifications. It seems that the Central Government has framed this scheme without
understanding the moot difference between an assessment proceeding and appeal
proceedings.

A few grey areas of the Faceless Appeal Scheme are:

(a)   There is no provision of providing hearing opportunity to appellant if the Appeal

Unit has rejected the additional ground of appeal/additional evidence filed by
appellant on the basis of report furnished by the NeAC or AO. [Para 4.6 & 4.7]
(b)   This Scheme provides for penalty proceedings only in case where there is failure
for non-compliance of any notice, direction or order. No procedure has been
prescribed in case where penalty has been initiated under section 270A. [Para 5]
(c)   This scheme give right to dispose of rectification proceedings by any Appeal Unit
selected by NFAC through an automated allocation system. As a general
practice, the rectification proceedings is to be heard by same Income-tax
authority who has disposed of the appeal. [Para 6]
The Central Government is yet to notify such circumstances & such class of persons
where the appellate proceedings shall be done in faceless manner according to this
scheme. It is likely that Govt. might implement faceless appeal in phase manner like
what we have seen under Faceless Assessment.

The Faceless Assessment was first introduced by the Central Government in the Year
2015 on pilot basis in five cities, inter-alia, Ahmedabad, Bangalore, Chennai, Delhi and
Mumbai. Thereafter its scope and applicability was extended year on year basis.

■■

1. The CBDT vide Order F. No.187 /4/2020-ITA-1 & Notification No. 80 & 81/2020,
dated 25-09-2020 has set up required centres and Appeal Units.
2. Rule 46A(1) of the Income-tax Rules provides the following exceptional
circumstances wherein appellant is entitled to produce additional evidence:
(a)   Where AO has refused to admit evidence which ought to have been admitted; or
(b)   Where the appellant was prevented by sufficient cause from producing the
evidence which he was called upon to produce by AO; or
(c)   Where the appellant was prevented by sufficient cause from producing before
AO any evidence which is relevant to any ground of appeal; or
(d)   Where AO has made the order appealed against without giving sufficient
opportunity to the appellant to adduce evidence relevant to any ground of
appeal.
3. The NFAC, with the prior approval of Board, is empowered to lay down the
standards, procedures and processes to determine specified amount.
4. The NFAC, with the prior approval of Board, is empowered to notify specified
circumstances.
5. The Faceless Assessment Scheme, 2019 has been incorporated into the
Income-tax Act vide the Taxation and Other Laws (Relaxation and Amendment
of Certain Provisions) Act, 2020