Last updated: September 13th, 2024 4:27 PM

Faceless Penalty Scheme, 2021

Recently, the Central Board of Direct Taxes, vide notification dated 12^th January 2021, introduced the ‘Faceless Penalty Scheme, 2021’. The same gets into force from the date of the publication i.e. 12^th January 2021. The Scheme is briefly explained in the present article.

Centres working under Faceless Penalty Proceedings

The following Centers will conduct the Faceless Penalty Proceedings-

1. National Faceless Penalty Centre,
2. Regional Faceless Penalty Centre,
3. Penalty Units, and
4. Penalty Review Units.

Procedure for levying penalty under Faceless Penalty Scheme

1. The income-tax authority/ National Faceless Assessment Centre will refer already initiated penalty proceeding case or recommended initiation of the penalty proceeding case to the National Faceless Penalty Centre.
2. National Faceless Penalty Centre will assign the case to a specific penalty unit.
3. Based on the type of the case, the penalty unit will take any of the following action-

Type of the case	Action by the penalty unit
Penalty proceedings already initiated	The penalty unit will issue draft notice and send the same to the National Faceless Penalty Unit.
It is recommended to initiate the penalty proceedings	Penalty unit, based on material on record, will either agree or disagree with the recommendation. If agrees, the penalty unit will draft notice to show cause as to why the penalty should not be levied. Such draft notice will be sent to the National Faceless Penalty unit.

4. National Faceless Penalty Centre will serve the notice to the assesses.
5. The assesses will file the response within the time and date as specified in the notice.
6. National Faceless Penalty Centre will send the response, if received, to the penalty unit or inform non-receipt of the response.
7. Procedure for obtaining additional information/ documents-

• If needed, the penalty unit can request the National Faceless Penalty Centre for obtaining additional information/ documents/ evidence from income-tax authority/ National Faceless Assessment Centre/ assessee.
• Accordingly, the National Faceless Penalty Centre will issue notice/ requisition for submission of the additional information/ documents.
• The income-tax authority/ National Faceless Assessment Centre/ assessee should file a necessary response to the National Faceless Penalty Centre.

8. Procedure for conducting inquiry/ verification/ technical assistance-

• In case there is need for any inquiry/ verification/ technical assistance, the penalty unit will request for the same to the National Faceless Penalty Centre.
• National Faceless Penalty Centre will forward the request to the National Faceless Assessment Centre, wherein, the date and time of submitting the report will be specified.
• The report, if received, will be sent to the penalty unit. However, if no report is received, the same will be informed to the penalty unit by the National Faceless Penalty Centre.

9. Preparation of draft order-

• Based on the material on record and additional information/ documents, if any, the penalty unit will propose to either impose the penalty or drop the penalty proceedings.
• The penalty unit will draft order in case it proposes to impose the penalty. The same will be sent to the National Faceless Penalty Centre.
• Based on the proposal of the penalty unit, the National Faceless Penalty Centre can decide-

Proposal	The action of the National Faceless Penalty Centre
Imposition of penalty	Pass the penalty order
Non-imposition of penalty	Intimate the same to the assessee
Further review of the proposal	Assign the case to a penalty review unit.

Procedure for rectifying the mistake apparent from the record

An application for the rectification of mistake may be filed by any of the following categories of person-

1. An assessee,
2. Penalty unit,
3. Penalty review unit,
4. Income-tax authority, or
5. National Faceless Assessment Centre.

Such an application is to be filed with the National Faceless Penalty Centre. On receiving the application, the National Faceless Penalty Centre will follow the below steps-

• Assign the application to a specific penalty unit via automated allocation system.
• The penalty unit will examine the application. It will prepare a notice for granting appropriate opportunity and send such notice to the National Faceless Penalty Centre.
• The National Faceless Penalty Centre will serve the notice to the assessee or the authorities, as the case may be.
• Penalty unit will prepare a draft order, based on the response, forwarded by the National Faceless Penalty Centre.
• Penalty unit will send the draft order to the National Faceless Penalty Centre.
• On the basis of the draft order, the National Faceless Penalty Centre will pass a final order.

Also read: Section 144B of income tax act: Faceless assessment

Some important points

1. An aggrieved assessee can prefer an appeal, against the penalty order issued by the National Faceless Penalty Centre, before the jurisdictional Commissioner (Appeals) or the National Faceless Appeal Centre.
2. Any type of communication, in the matter, between the following, should be carried out only via electronic mode-
   1. National Faceless Penalty Centre and the assessee; or
   2. Internally between the National Faceless Penalty Centre; penalty unit; penalty review unit; National Faceless Assessment Centre; income-tax authority or the Regional Faceless Penalty Centre.
3. The electronic record will be authenticated as under-

Particulars	Manner of authentication
National Faceless Penalty Centre	Affixing the digital signature
Assessee/ any other person	·   Affixing the digital signature – if an income tax return is to be filed using digital signature; or ·   Electronic verification code or digital signature – in any other case.