| Mar-19-2021

Overview of the Faceless Appeal Scheme, 2020

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:

• eliminating the interface between the CIT(A) and the appellant in the course of appellate proceedings to the extent technologically feasible;
• optimising the utilisation of the resources  through  economies of scale and functional specialisation;
• 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 may1 set-up the following centres & units and specify their respective jurisdiction:

• National Faceless Appeal Centre;
• Regional Faceless Appeal Centres; and
• Appeal

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:

• Admitting additional grounds of appeal,
• Making such further inquiry as thinks fit,
• 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,
• Providing opportunity of being heard to the appellant,
• Analysis of the material furnished by the appellant,
• Review of draft order, and
• Such other functions as may be required for the purposes of this

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:

• One or more Commissioner (Appeal);
• Income-tax authority, ministerial staff, executive or consultant to assist the Commissioner (Appeals)  as  considered necessary by the

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:

• If appeal is related to assessee who is denying liability to deduct taxWhere 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.
  
  
• If appeal is relating to assessment or penaltyWhere 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.
  
  
• If appeal relating to any other matterWhere 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:

• Appellant;
• NeAC;
• AO; or
• 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:

• 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.
  
  
• 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.
  
  
• 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:

• 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.
  
  
• 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.
  
  
• 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.
  
  
• 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.
  
  
• 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:

• 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:
  
  • To examine such evidence or to cross-examine such witness, as may be produced by the appellant; or
    
    
  • 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.
    
    
• Notice prepared by the Appeal Unit shall be sent to NFAC and thereafter NFAC will serve such notice to the NeAC or the AO.
  
  
• 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.
  
  
• 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:

• All the relevant material available on the record;
• Response filed by the appellant or any other person;
• Report furnished by the NeAC or AO; and
• Any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised in the

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 amount3.

In any other case, the NFAC may:

• 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
• Send the draft order for conducting review to an appeal unit, other than the unit which prepared it, through an automated allocation

The Appeal Unit which received the draft order shall review it and may decide to:

• Concur with the draft order and intimate the NFAC about such concurrence; or
• Suggest such variation, as it may deem fit, to the draft order and send its suggestions to the

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:

• Appellant;
• Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as per section 250(7); and
• 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:

• 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
• 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
• 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
• After taking into account all the relevant material available on the record, the Appeal Unit shall:
  1. Prepare a draft order and send a copy of such order to the NFAC; or
  2. Drop the penalty after recording reasons and send intimation to the
• 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:
  1. Appellant or any other person; and
  2. NeAC or the AO for such action as may be required under the
• If the Appeal Unit has dropped the penalty, the NFAC shall also intimate same to

1. Appellant or any other person; and
2. NeAC or the AO for such action as may be required under the

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:

• The Appellant or any other person;
• The Appeal Unit preparing or reviewing or revising the draft order; or
• The NeAC or the

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:

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:

• To the appellant or any other person and
• 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 circumstances4.

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;

• Placing an authenticated copy thereof in his registered account; or
• Sending an authenticated copy thereof to his registered email address or to his authorised representative; or
• 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:

• Service of the notice, order or any other communication;
• Receipt of any information or documents from the person in response to the notice, order or any other communication;
• Issue of acknowledgment of the response furnished by the person;
• Provision of “e-appeal” facility including login account facility, tracking status of appeal, display of relevant details, and facility of download;
• Accessing, verification and authentication  of  information and response including documents submitted during the appellate proceedings’;
• Receipt, storage and retrieval of information  or  documents in a centralised manner;
• General administration and grievance redressal mechanism in the respective Centres and units;
• Filing of additional ground of appeal;
• Filing of additional evidence;
• Specified amount referred to in Para 11.
• Circumstances in which personal hearing referred to in Para

9. Conclusion

The  rules  &  procedures  laid  down  by  the  Faceless  Appeal  Scheme, 2020  are  on  the  similar  lines  with  the  Faceless  Assessment  Scheme, 20195. 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:

• 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]
• 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]
• 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.