Faceless Appeal Scheme 2021
1.0 Background
1.1 In order to provide efficiency, transparency and accountability by eliminating the interface between taxpayers, Income-tax authorities and Commissioner of Income-tax (Appeals) [‘CIT(A)’], Central Board of Direct Taxes (‘CBDT’ or ‘the Board’) had notified Faceless Appeal Scheme, 2020 (hereinafter referred to as ‘old scheme’) vide Notification nos. 76 and 77 dated 25 September 2020 for conducting appellate proceedings in a faceless manner. The old scheme provided discretionary power to the appellate authorities for granting personal hearing and same was challenged in court of law.
1.2 CBDT vide Notification No. 139/2021/F. No. 370142/66/2021-TPL notified the Faceless Appeal Scheme, 2021 (hereinafter referred to as ‘new scheme’) applicable w.e.f. 28 December 2021 which is in supersession of the old scheme. The Board has brought several changes in the new scheme for instance, mandatory requirement to grant personal hearing through video conferencing, removal of draft order and its review by another appeal unit, etc. 1.3 Further vide Notification no F.No. 279/ Misc/66/2014-SO-ITJ (Pt.1), CBDT also specified that w.e.f. 29 December 2021, all appeals under section 246A/ 248 of the Income-tax Act, 1961 (‘the Act’) pending or instituted on or after 29 December 2021 shall be completed under the new scheme.
1.4 For early disposal of pending appeals, CBDT vide Notification F.No 279/Misc./ M-102/ 2021-ITJ has issued guidelines prescribing certain category of cases wherein the Principal Chief Commissioner of Income Tax (Pr. CCIT) of NFAC and Chief Commissioner of Income Tax (‘CCIT’) of Central Charges and International Taxation on the basis of recommendation of the jurisdictional Principal Commissioner of Income-tax (‘Pr. CIT’) can prioritize or provide out-of-turn disposal.
2.0 Salient Features of revised scheme
2.1 NFAC shall assign appeal to CIT(A) instead of RFAC. The erstwhile concept wherein the assignment appeal cases to the RFAC, has now been revised under the new scheme, wherein the appeal shall directly be assigned for disposal by the National Faceless Appeal Centre (‘NFAC’) to a CIT(A) of a specific appeal unit through an automated allocation system. Under the old scheme, RFAC was responsible for assigning the appeals to a specific appeal unit and not identified CIT(A).
2.2 CIT(A) bound to allow request for personal hearing for oral submission Under the new scheme, the word ‘may’ has been replaced with ‘shall’ in regards to acceptability of requests for a personal hearing for oral submissions. This implies that the CIT(A) is now mandatorily required to adhere to the requests for granting personal hearing, if any, requested by the Appellant, during the course of appellate proceedings. Such personal hearing shall be conducted through video conferencing or video telephony.
2.3 Concept of draft appeal order and review process removed. In the old scheme, the appeal unit was required to prepare a draft order. The said draft order was then sent to another appeal unit for review and if review appeal unit intended to vary draft appellate order, it was required to refer to third appeal unit for finalisation and third appeal unit was required to pass such order. This used to be done in cases where the aggregate amount of tax, penalty, interest or fee, including surcharge and cess, payable in respect of disputed issues, exceeded a specified amount. Under the new scheme, there is no concept of draft order and CIT(A) would prepare the final appeal order and send to NFAC after signing the same digitally. In effect, only one CIT(A) will adjudicate the entire appeal proceedings and pass the final order as in the physical hearing cases and thereafter, the NFAC would communicate such order to the Appellant.
CIT(A) would be entirely responsible for conducting appeal and sign the appellate order digitally.
2.4 Condonation of delay Under the old scheme. In case the appeal was filed after expiration of prescribed time limit, appeal unit / RFAC was required to record the reason for admission or rejection of appeal and intimate to Appellant through NFAC. This process has been eliminated and CIT(A), who has been assigned the appeal for disposal, is required to record the reasons for condonation or otherwise in final order.
2.5 Admission of additional grounds and / or additional evidence Under the old scheme. In case any additional ground and / or additional evidences were filed by Appellant, the appeal unit / RFAC was required to record the reason for admission or rejection of such additional ground / evidence and intimate to Appellant through NFAC. This process has been eliminated and CIT(A), who has been assigned the appeal for disposal, is required to record the admission / rejection of additional ground / evidence in final order.
2.6 Rectification Proceedings. Under the old scheme, rectification application may be filed by Appellant / appeal unit / AO / NeAC and such application received by NFAC shall be assigned to a specific appeal unit in any RFAC through automated allocation system. The scheme has been amended to provide rectification rights to CIT(A) for the order passed by it.
2.7 Amendment in Penalty proceedings. Under the old scheme, appeal unit was required to send a recommendation to the NFAC to initiate penalty proceedings. Further, penalty proceedings / order might not be conducted by same appeal unit who had passed the final appellate order. However under the new scheme, CIT(A) has been authorized to send notice to the Appellant through the NFAC and no recommendation is required to be made to NFAC separately. Also, the same CIT(A) who has completed the appeal proceedings is authorized to conduct penalty proceedings under the new scheme.
2.8 Notification F.No.279/Misc/66/2014-SO-ITJ (Pt.1) issued by CBDT specifies that w.e.f. 29 December 2021, all the appeals under section 246A/ 248 of the Act pending or instituted on 29 December 2021 shall be completed under the new scheme. The cases of Central Charges and International Taxation are not covered within the scope of the faceless scheme.
3.0 Guidelines issued by CBDT for out-of-turn hearing:
3.1 CBDT has issued guidelines (F.No 279/Misc./ M-102/ 2021-ITJ) to prioritize or provide out-of-turn hearing by CIT(A) / CIT (Appeal unit) in below cases:
i. Cases with demand of more than Rs.1 Cr.,
ii. Cases with original refund claim in excess of Rs.1 Lac,
iii. Cases where direction for out-of-turn or priority hearing is passed by the Courts, iv. Cases where request is made by Senior / Super Senior Citizen, and v. Any other genuine hardship.
3.2 The request covering genuine and exceptional cases may be considered by Principal Chief Commissioner of Income Tax (Pr. CCIT) of NFAC and Chief Commissioner of Income Tax (‘CCIT’) of Central Charges and International Taxation on the basis of recommendation of the jurisdictional Pr. CIT / Pr. CIT(Central) / CIT(IT). Accordingly, Appellant falling in aforementioned cases can make an application before aforesaid jurisdictional authorities for early hearing.
The revised scheme addresses the main legal debate around principle of natural justice (i.e. personal hearings) which was discretionary and power was vested on appellate authorities under old scheme. CBDT also abided by the timelines sought from Apex court to modify the faceless appeal scheme.
The guidelines issued by CBDT also provide relief to the Appellants who were looking for early hearings and disposal of appeals for which no guidance was available in the old scheme. Now, application for early hearing and disposal of appeals falling under certain category of cases as per guidelines can be filed before authorized jurisdictional authorities.