INCOME TAX: October 2021

With the objectives to promote digitalization, achieve greater degree of efficiency and transparency at the Income Tax department level while dealing with taxpayers enabling provisions are inserted in the Income Tax Act for conduct of penalty proceedings in a faceless manner. Accordingly, sub-section (2A) to section 274 of the Income Tax Act was inserted by the Finance Act, 2020, with effect from 01.04.2020 and the Central Government has been empowered to issue directions under the above scheme as well on or before 31.03.2022.

Faceless Penalty Scheme 2021 is on same lines as Faceless Assessment Scheme, 2020 and Faceless Appeal Scheme, 2020 and in line with these, the penalty proceedings shall also be decided by a team of income-tax authority with dynamic jurisdiction.

Legal Framework of Faceless Penalty

Text of Section 274(2A), (2B) and (2C)

(2A) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of imposing penalty under this Chapter so as to impart greater efficiency, transparency and accountability by—

(a) eliminating the interface between the income-tax authority and the assessee or any other person] to the extent technologically feasible;

(b) optimising utilisation of the resources through economies of scale and functional specialisation;

(c) introducing a mechanism for imposing of penalty with dynamic jurisdiction in which penalty shall be imposed by one or more income-tax authorities.

(2B) The Central Government may, for the purposes of giving effect to the scheme made under sub-section (2A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to jurisdiction and procedure for imposing penalty shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:

PROVIDED that no direction shall be issued after the 31st day of March, 2022.

(2C) Every notification issued under sub-section (2A) and sub-section (2B) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.

(3) An income-tax authority on making an order under this Chapter imposing a penalty, unless he is himself the Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer.

Hierarchy of National Faceless Penalty Proceedings

In order to execute penalty proceedings in a faceless way, the CBDT establishes:

(i) National Faceless Penalty Centre

A National Faceless Penalty Centre will be set up by the Board to facilitate the conduct of faceless penalty proceedings in a centralized manner and vest it with the jurisdiction to impose penalty in accordance with the provisions of this Scheme.

(ii) Regional Faceless Penalty Centres

Regional Faceless Penalty Centres, as it may deem necessary, are to facilitate the conduct of faceless penalty proceedings, which shall be vested with the jurisdiction to impose penalty in accordance with the provisions of this Scheme.

(iii) Penalty Units (PU)

To facilitate the conduct of faceless penalty proceedings and to draft penalty orders, which includes:

· Identifying points or issues for the imposition of penalties under the ITA and seeking information on or clarification of any points or issues identified;

· Providing the taxpayer with the opportunity of being heard and analyzing material provided by the taxpayer or any other person; and

· Any other functions that may be required to impose a penalty.

(iv) Penalty Review Units

To facilitate the conduct of faceless penalty proceedings and review draft penalty orders, which includes:

• Checking whether the relevant material evidence has been brought on record;

• Checking that the draft order incorporates the relevant points of fact and law, discusses the issues in respect of which the penalty is to be imposed, and considers and addresses the applicable judicial decisions;

• Verifying the arithmetical correctness of any penalty calculation; and

• Performing any other functions required for the purposes of review.

Authorities

The penalty unit and the penalty review unit shall have the following authorities

• Additional Commissioner or Additional Director or Joint Commissioner or Joint Director, as the case may be;

• Deputy Commissioner or Deputy Director or Assistant Commissioner or Assistant Director, or Income-tax Officer, as the case may be;

• such other income-tax authority, ministerial staff, executive or consultant, as may be considered necessary by the Board.

Procedure for handling of assessment by JAO in respect of assessments & penalties transferred out of Faceless Assessment [CBDT F. No.225/97/2021 /ITA-II, dated: 06.09.2021]

CBDT prescribes broad contours for handling of cases by the Jurisdictional Assessing Officers for assessment/penalty cases transferred out of Faceless Assessment regime under section 144B(8) or Clause 5(2) of Faceless Penalty Scheme, 2021; The Procedure covers cases where Assessees do not have access to technology, provides that personal hearing be generally granted through VC with Range Head's approval after Assessee furnishes written submission; Directs for mandatory involvement of Range Head in the transferred cases; Requires adherence to the monetary limits prescribed under section 274(2) for the Range Heads in penalty cases

CBDT F. No. 225/97/2021 /ITA-II, dated: 06.09.2021.

Subject:- Procedure for handling of assessment by Jurisdictional Assessing Officers in respect

of assessments/penalties transferred out of Faceless Assessment under section 144B(8)

of the Income-tax Act,1961/Faceless Penalty Scheme, 2021 respectively- regarding

1. The Central Board of Direct Taxes (CBDT) has accorded approval for transfer of assessments/penalties to Jurisdictional Assessing Officers (PAN based), as found necessary, on case-to-case basis in terms of Section 144B(8) of the Income-tax Act,1961 (Act)/ clause 5(2) of Faceless Penalty Scheme, 2021.

2. The Jurisdictional Assessing Officer (JAO) shall complete the assessments/penalties in such cases as per the following broad contours to the extent technically feasible:-

A. All processes in cases transferred under section 144B(8) of the Act/ clause 5(2) of Faceless Penalty Scheme, 2021 may be conducted electronically to the extent technically feasible, except in those cases where the assessee does not have e-filing account/registered e-mail to communicate electronically with JAO. For cases without digital foot print, the JAO shall endeavor to get the e-filing account of the assessee registered and then conduct the proceedings in an electronic manner.

B. The request for personal hearings shall generally be allowed to the assessee with the approval of Range Head, mainly after the assessee has filed written submission to the show cause notice. Personal hearing may be allowed to the assessee preferably through Video Conference. If Video Conference is not technically feasible, personal hearings may be conducted in a designated area in Income Tax Offices. The hearing proceedings may be recorded.

C. Use of Faceless processes such as VU for online verification, TU for Technical inputs etc. may also be considered for non-faceless regime to the extent technically feasible.

D. In order to have consistency with the unit concept in faceless regime, the Range Head may compulsorily be involved in the finalization of assessment of such cases transferred to JAO, for which the provisions of Section 144A of the Act may suitably be invoked. In penalties, the approval of Range Head is already embedded in Section 274(2) of the Act, over a specific monetary ceiling of `penalty imposable’. Same may be adhered to.

3. It is also clarified that in respect of such cases transferred, the JAO shall take into account the proceedings conducted so far under the faceless regime and proceed further as per the provisions of the Act and broad contours of modalities as indicated above.

4. This issues with the approval of Chairman, CBDT.

Standard Operating Procedures (SOPs) for Penalties under Faceless Penalty Scheme, 2021 [CBDT Circular No. 1/2021-22/439, dated 09.08.2021]

National Faceless Assessment Centre, Delhi, has issued Standard Operating Procedures (SOPs) with the approval of CBDT for completing the penalties under the Faceless Penalty Scheme, 2021.

SOP For Penalties Under Faceless Penalty Scheme, 2021

Letter F. No. AA (NAFAC)-1/2021-22/439, Dated 09.08.2021

I am directed to convey that the following Standard Operating Procedure (SOP) is prescribed with the approval of CBDT for completing the penalties under the FPS-2021:-

Introduction

Faceless Penalty Scheme, 2021 has been notified vide CBDT Notification No. 2/2021 (S.0.117(E)) dated 12th January, 2021 on the strength of Section 274(2A) of the Income-tax Act. The Scheme mandates setting up of National Faceless Penalty Centre/Regional Faceless Penalty Centres (NFPC/RFPC) to conduct Faceless Penalty Proceedings and impose penalty in cases falling into its scope in a centralised manner similar to those of Faceless Assessment. National Faceless Assessment Centre (NaFAC)/Regional Faceless Assessment Centre (ReFAC) are to act as NFPC/RFPC respectively as per para 4(4) of the Scheme read with CBDT's order dated 20.01.2021. Therefore, hereinafter, National Faceless Penalty Centre (NFPC) may be read as National Faceless Assessment Centre (NaFAC); Faceless Penalty Unit or Penalty Unit may be read as Assessment Unit (AU) and Faceless Penalty Officer (FPO) may be read as Faceless Assessing Officer (FAO), wherever referred in this document.

Further Notification No. 3/2021(S.O.118(E) dated 12th January,2021) notified on the strength of section 274(2B) of the Income-tax Act, 1961 issues directions for the purposes of giving effect to the Faceless Penalty Scheme, 2021.

CBDT’s order under para 3 of the Faceless Penalty Scheme, 2021 issued in F. No. 187/4/2021-1TA-I dated 20.01.2021 and dated 26.02.2021 defines the scope of FPS. Penalties leviable by officers above the rank of Addl. CIT or by designated Authorities are not within the scope of FPS. Further Penalties pertaining to Central Charge/International Taxation/TDS are also outside the scope of FAS.

Standard Operating Procedure

The SOP for completing penalties covered under the scope of FPS-2021 is laid down as under:—

A. Reference to NFPC :-

1. All penalties initiated by the NaFAC shall be captured by ITBA for reference to NFPC. Upload of Notice initiating penalty proceedings has been deemed to be requisite reference required under the NPFS-2021. Penalties recommended by NaFAC, (Non-compliance penalties leviable by Addl./Jt. CIT) shall be submitted by Range Head in prescribed form available on ITBA for making reference to NFPC .

2. Upload of Notice initiating Penalties by IT Authorities (JAO) on ITBA is also deemed to be a reference to NFPC. However, penalties recommended by Income-tax Authorities shall be captured through a Form available to them on ITBA. Updated recommended penalties in prescribed Form as received from JAO shall be taken as reference to NFPC and added to worklist of pending penalties.

3. As the quantum appeal matter is handled by JAO, all action relating to section 275(1A) which may result in impositions/enhancement/reduction of penalty shall be taken by JAO. Facility for implementation of provisions of section 275(1A) by JAO is already in place in ITBA.

B. CLEANING OF STACK

(Identification of Penalties Kept in abeyance/Already completed/Outside the scope of Faceless)

1. FPU may go through the penalty work item to ascertain whether the penalties referred are within the scope of FPS as per CBDT's orders referred to above. Penalties which are outside the scope of FPS but found allocated, the details thereof may be forwarded immediately to designated e-mail of NaFAC for their transfer to appropriate jurisdiction.

2. FPU at initial stage may try to identify the cases which are' kept in abeyance'. The available tools for identification could be:-

(i) Access to data relating to appeals pending before CIT (Appeal Unit) including Form 35.

(ii) NJRS.(for cases pending before ITAT/HC and kept in abeyance earlier)

(iii) To verify the response of the assessee to SCN claiming pendency of appellate proceedings through Judicial Portals.

(iv) Requesting the JAO to provide the information.

(v) Any other process as deemed fit within the provisions of the Scheme.

If the case is identified as to be kept in abeyance, the data thereof should be entered on ITBA. The same may be mentioned in case noting history with relevant document attached for reference.

3. FPU shall also take into account the decision of appellate authorities in quantum appeal. If any pending appeal is decided in favour of the assessee, it is most likely that the assessee shall bring the fact on record in penalty proceedings. FPU may also look into the available resources to see the fate of quantum appeal before finalising the penalty.

4. FPU may also identify the cases which are not found kept in abeyance but limitation for imposition of penalties has expired. Among these cases, it is a distinct possibility that penalties are either dropped or levied off-line without marking them on ITBA. The suggested course of action is:—

(i) To write to the JAO to check the Penalty register/ADCR and revert.

(ii) If reply is received or not received in reasonable time then a suitable remark may be made in case noting history with the approval of Range Head leaving the work item pending. When ITBA provides the functionality to close the proceedings, the same may be utilised.

5. FPU may look into VsVS data available on e-filing to ascertain whether penalty proceedings are required to be closed in view of the VsVS declaration. A suitable noting in case history may be made and requisite documents be attached. If ITBA provides the functionality to close the proceedings by marking the case as VsVS, the same may be utilised.

C. Immunity and Waiver of Penalties

1. Section 270AA allows immunity to the assessee from levy of penalties if application in form 68 is submitted within time and the prescribed conditions are fulfilled. These actions are outside the purview of Faceless Penalty Scheme-2021. At present the functionality to handle the applications u/s 270AA are already in place in ITBA for Jurisdictional Assessing Officer. Once immunity u/s 270AA is granted, the JAO may inform the FPU handling the penalty work item through document upload facility.

Waiver of Penalties under section 273A

2. Waiver of Penalty levied/leviable is to be considered by Pr. CIT (Jurisdictional) as the same is outside the scope of Faceless Penalty Scheme-2021. Hence suitable action for dropping of penalty proceedings in case where leviable penalty has been waived may be taken after receipt of the order of the Pr. CIT (Jurisdictional). The Pr. CIT (Jurisdictional) may ensure that the order is communicated to the FPU through upload document functionality available with JAO.

D. Penalties without base documents :

1. FPU shall have access to the case records/documents initiated by NaFAC and Income-tax Authorities (JAO) if base orders are passed on ITBA. Notice initiating penalty and response of the assessee thereto, if any, are available to the FPU. However, in cases where the base orders in respect of penalties initiated by JAO are not available, the FPU should write to the JAO immediately to provide the base orders. NaFAC/ITBA at their end would also monitor cases to ensure that base orders and the requisite information in response to the request of the FPO is provided by the JAO.

2. At present ITBA has provided access to base orders in a large number of cases (approximately 77% of pendency) through 360 degree facility.

E. Access to records and data available on e-filing/Insight

Facilities and Access level similar to those of Units of NaFAC shall be made available to FPUs also. Status monitor to the hierarchy has been made available on similar lines.

F. Show Cause Notice(SCN)

1. First SCN issued by FPU is automated and format based, where reference is made to penalty section and earlier notice initiating penalty issued to the assessee. The assessee is given opportunity to file written reply and if required seek personal hearing after filing of written reply through VC. Looking to the timelines, 5 to 7 days’ time (flexible) should be given to the assessee to respond from the date of issue of notice. The FPO should preview the date of notice at the time of final generation and amend the date of compliance if required to ensure providing adequate time.

2. Para 5(xx) (a) of the FPS-2021 envisages issue of another show cause notice by new FPU in case where the modifications suggested by the penalty review unit are prejudicial to the interest of assessee or any other person. The FPU can use the same SCN format with comments in free text area provided in its Annexure.

3. Communication with assessee and third person: -

FPU may use 'issue letter' functionality to communicate with the assessee or third person, if any further information/clarification is required. Notice u/s 133(6) or summons u/s 131 may also be used, if required, for the purposes of penalty proceedings. The communications shall go to assessee under digital signature of NaFAC to maintain facelessness.

G. Reference to Verification Unit (VU):

1. Reference to VU can be made as per the Scheme, wherever the FPU considers reference is necessary for the purpose of the proceedings. VU may submit its report as soon as possible and ideally within 7 days of receipt of reference.

2. Unlike in Faceless Assessment Proceedings, use of Designated Verification Unit (DVU) in handling non-response cases is being revisited. Non-responsive case is proposed to be handled through service of notices through speed post by bulk letter generation facility. Pending creation of the facility, non-responsive case may be allocated to VU/DVU for service of notice, who would take print out and send the notice(s) through speed post. Image of letter issued along with speed post sticker containing number may be uploaded as VU report.

3. Only in exceptional/high value cases, physical service of notice should be considered through DVU under existing facility in INSIGHT.

4. In responsive cases, where it is considered necessary to conduct physical verification the same should be resorted to. As in Faceless Assessment, FPU shall have to take the approval of PCIT/CCIT for referring to DVU for physical enquiry following the same procedure.

H. Reference to Technical Unit (TU):

FPU can refer to TU as per the provisions of the Scheme. The existing formats for making reference in Faceless Assessment may be utilised for the said purpose. TU may ideally send its report within 5 working days of receipt of the reference, unless the matter needs to be referred to agencies/authorities outside TU.

I. Draft Penalty Order:

1. Draft penalty order may be well reasoned and speaking. The replies of the assessee should be duly considered and rebutted. Quality Penalty order is intended outcome of the entire penalty proceedings, hence should be given utmost importance.

2. Where the FPU opts not to impose penalty, the order should be well reasoned and speaking so that if the same is selected for review, the Review Unit (RU) should be able to clearly ascertain the reasons for non-imposition of the penalty through an "office note" or through the body of the order.

J. Review Unit (RU):

Cases selected for review by Risk Management Strategy (RMS) shall be reviewed by the allocated RU. RU may consider all the aspects of the case and submit its review report within 5 working days of receipt of the case. RU may concur or make suggestions for corrections in draft while concurring with the decision of the FPU. RU may also suggest modification if decision of FPU is not concurred with or any major issue in draft order is noticed. In case of modification suggested by the RU, the case would go to new FPU for further processing.

K. Handling of non-responsive cases:

1. In non-responsive cases, the FPU may have a look at the base order as to whether that was passed ex-parte or not. If the base order is an ex-parte order, the FPU may issue another show cause notice through 'issue letter functionality' providing the assessee opportunity as to why penalty may not be decided ex-parte. FPU should check if e-mail is delivered or not. A copy of the letter should also be sent through Speed Post through bulk mailing facility through DVU as referred to in para 2 under section G. The FPO may check delivery of speed post through Speed Post number on the India Post Website. If it is delivered, FPU should wait for a reasonable time for the reply of the assessee. If it is not delivered, then FPU may go ahead with passing ex-parte order.

2. Till such time, bulk mail facility is functional, non-responsive cases may be allocated to VU/DVU for taking printouts of notice and issuing them through speed post. Only in exceptional cases, DVU may be used for physical service of notice only after approval of PCIT.

3. In non-responsive cases, where base order was not passed ex-parte, FPU should use all the addresses of the assessee and its authorised representative to communicate and elicit response. If response is still not received, SCN for ex-parte penalty may be sent through e-mail and speed post as per the above process. After waiting for a maximum of 5 working days after communication date, the FPU may go ahead with passing of the order on the basis of material available on record.

Standard Operating Procedure (SOP) for handling writ petitions where assessment is made under the faceless assessment scheme 2019/Section 144B of the Income-tax Act, 1961 and or penalty is passed under Faceless Penalty Scheme (FPS), 2021 where NAFAC/CBDT is one of respondents [Letter F. No. AA (NAFAC)-1/58/2021-22/333, Dated 26.07.2021]

Letter F. No. AA (NAFAC)-1/58/2021-22/333, Dated 26.07.2021

The Central Board of Direct Taxes (CBDT) has issued detailed guidelines for the implementation of FAS 2019 dated 14.08.2020 vide F. No. 173/165/2020-ITA-I which inter alia mandate that the Field formations of jurisdictional charges outside the National Faceless Assessment Centre (NAFAC)/Regional Faceless Assessment Centers (REFACs) hierarchy shall perform the judicial functions including defending writ petitions.

2. The FAS 2019 has been incorporated into the Act vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 as section 144B of the Act with effect from 01.04.2021. In pursuance to the said amendment, the CBDT had passed order under section 119 of the Act dated 31.03.2021 enabling all orders, circulars, instructions, guidelines and communications issued in order to implement the Scheme henceforth mutatis mutandis be applicable to the Faceless Assessment under section 144B of the Act. Hence, in pursuance of the above two administrative directions, all judicial functions including defending writ petitions shall be performed by the jurisdictional Income-tax Authorities, considering the original Jurisdiction lies with the jurisdictional Assessing Officer (JAO) with concurrent jurisdiction being vested in the NaFAC under sub-section (5) of section 120 of the Act for the limited purpose of assessment.

3. It is being observed that NaFAC is one of the respondents in most of the writs, because all orders under FAS 2019 or under section 144B of the Act are issued from NaFAC. As such NaFAC has no primary role in defending the writ except in case where the scheme itself is challenged or a wider policy issue is involved. Hence, for this purpose, in each such case, the NaFAC shall authorize the Pr. CIT (Jurisdictional) as the authority to defend the case before the Hon'ble High Courts.

4. Further, the CBDT lays down the following SOP on the above subject for clarity and step-by-step guide on the matter:—

(A) SOP for PCIT Jurisdictional Charge being Nodal Coordinating Authority for defending writ petitions arising from the assessment/penalty proceedings pending before NaFAC:

PCIT (jurisdictional) has to handle the writ petition matters with assistance from office of the Pr. CCIT, CIT (Judicial) of the Region and PCJT (ReFAC) (AU) concerned. In such situation, inputs and parawise comments shall be provided by PCIT (ReFAC) (AU) as the case records during the pendency of proceedings before NaFAC will not be visible to the PCIT (Jurisdictional). In such cases:—

1. Information about filing of a WP before the jurisdictional High Court shall be forwarded by CIT (Judicial) or PCIT (Jurisdictional) to CIT (NaFAC)-3, New Delhi as soon as possible and without any delay and on identification, the writ petition will be referred to the PCIT (ReFAC) (AU) concerned.

2. On receipt of the information from concerned Pr. CCIT (Jurisdictional)/High Court Cell/Website of the High Court/any other source, the CIT (NaFAC)-3, New Delhi would request ITBA for identification of the PCIT (ReFAC) (AU) involved immediately without any delay and on identification, the writ petition will be referred to PCIT (ReFAC) (AU) concerned.

3. The PCIT (ReFAC) (AU) shall examine the Writ Petition in the context of facts of the case and applicable law. The PCIT (ReFAC) (AU) can view all the case records including case history noting through the status monitor.

4. The PCIT (ReFAC) (AU) shall examine the petition of the petitioner and record parawise comments with reference to the issues involved in the writ petition and cross verify it with the information available on record for the case on ITBA. On any technical issue/process, if required, the PCIT (ReFAC) (AU) may seek clarification/information from CIT ITBA.

5. Parawise comments so received from PCIT (ReFAC) (AU) shall be forwarded to the PCIT (jurisdictional) and office of Pr. CCIT with the request to take necessary measures to defend the case before the Hon'ble High Court.

6. The PCIT (ReFAC) (AU) would make a reference for seeking specific comments to the NaFAC in the following circumstances:

(i) Any provision related to FAS 2019 or section 144B of the Act is challenged in the writ or during the course of arguments.

(ii) Specific inputs are required on any policy issue.

Such reference to NaFAC for comments shall be in the prescribed format as per Annexure-A and should include parawise comments of the PCIT (Jurisdictional)/PCIT (ReFAC) (AU) on the writ petition supported with necessary documents such as writ petition, assessment order, case history noting etc.

7. Reference to NaFAC on specific policy issues and on specific provisions of FAS, 2019/section 144B of the Act challenged, shall be made in exceptional circumstances requiring specific advice on policy matters and not on the issues related to facts of the case. This should ideally be done within 5 days of receipt of the Writ petition in the O/o PCIT (Jurisdictional) or immediately if the writ is coming up earlier.

The practice of seeking general comments/directions from NaFAC must be avoided.

8. The PCIT (Jurisdictional) shall be authorized by NaFAC to defend the case, give directions regarding the arguments and decide on the stand to be taken before the Hon'ble higher courts. The parawise comments/inputs/instructions to counsel (if required) shall be provided by PCIT (ReFAC) (AU) to PCIT (Jurisdictional) in such cases.

9. Till the utility for communication between PCIT (Jurisdictional) and PCIT (ReFAC) (AU) is made functional, the coordination between both the officers shall be done through office of CIT (NaFAC)-3, New Delhi. E-mail ids of the officers of CIT (3), NaFAC are given at the end of this SOP.

(B) SOP for PCIT (Jurisdictional) Charge being Nodal Coordinating Authority for defending writ petitions arising from the assessment/penalty orders completed by NaFAC:

1. On receipt of the Writ Petition, the PCIT (Jurisdictional) shall examine the Writ Petition in the context of facts of the case and applicable law. The JAO can view all the case records including 'case history notings' through the status monitor and furnish its comments considering all the facts and legal issues involved.

2. The PCIT (Jurisdictional) shall examine the petition of the taxpayer and record parawise comments with reference to the issue involved in the writ petition and cross verify it with the information for the case available on record in ITBA. On any technical issue/process, if required, the PCIT (Jurisdictional) may seek clarification/information from CIT ITBA.

3. IF the facts so warrant, the PCIT (jurisdictional) may seek the comments of the PCIT (ReFAC) (AU) under whose jurisdiction the assessment order had been passed. The PCIT (Jurisdictional) shall record reasons in writing and make reference for unmasking of the AU concerned to the NaFAC (on email <delhi.cit3neac@incometax.gov.in>) with a copy marked to Addl.CIT-3(1) NaFAC<delhi.addlcit3.1neac@incometax.gov.in>) & DCIT 3(2)(2) NaFAC<delhi.dcit3.2.2neac@incometax.gov.in>) After unmasking, the PCIT (Jurisdictional) and PCIT (ReFAC) (AU) may coordinate amongst themselves through email/faceless communication facility in ITBA as and when available.

4. The PCIT (Jurisdictional) will make reference for seeking specific comments to the NaFAC in the following circumstance:

(i) Any provision related to FAS 2019 or section 144B of the Act or FPS, 2021 is challenged in the writ or during the course of arguments.

(ii) Specific inputs are required on any policy issue.

Such references to NaFAC are to be handled in the same manner as mentioned in para (A)(6). These references to NaFAC on specific policy issues and on specific provisions of FAS, 2019 or section 144B of the Act or FPS 2021, challenged shall be in exceptional circumstances requiring specific advice on policy matters and not on the issues related to facts of the case. This action should ideally be done within 5 days of receipt of the writ in the O/o PCIT (Jurisdictional) or immediately if the writ is coming up earlier.

Again, the practice of seeking general comments/directions from NaFAC is to be avoided.

5. A number of writs have been filed because of apparent violation of principles of natural justice. In many such cases, the High Courts have set aside the cases back to the file of the Assessing Officer for giving a fresh opportunity and for taking into consideration the submissions of the assessee. When such an order is received in any case, the PCIT (Jurisdictional) will direct the JAO to immediately create a set aside proceedings in ITBA. After creating of the proceedings, the ITBA may be requested to reallocate the case to FAO.

6. In case of unfavourable order of Hon'ble High Court, the decision on filing of appeal or stay application before division bench if the order is of single bench or filing of SLP or otherwise shall be taken by the Pr. CIT (Jurisdictional) in accordance with existing guidelines issued by Pr. DGIT (L&R) and CBDT from time to time.

7. If unfavourable order of Hon'ble High Court received in a case where proceedings are pending before NaFAC, inputs and comments of Pr. CIT (ReFAC)(AU) shall be Obtained by PCIT (Jurisdictional) for taking a decision on acceptability or otherwise of the order.

(C) SOP for Standing Counsels and CIT (Judicial) of the relevant jurisdiction:

1. The standing counsels or the O/o CIT (Judicial) shall seek comments/directions from the concerned PCIT (Jurisdictional) only. They shall not refer the writ petition directly to NaFAC.

2. During the course of defending a writ petition, if certain directions/comments are required from the NaFAC, the request for the same shall be made by the concerned PCIT (Jurisdictional) as per SOP Para B.4 and not directly by the standing counsel. The standing counsel shall make a request to the concerned PCIT (Jurisdictional) for the same.

(D) SOP for PCIT (ReFAC) (AU) concerned:

1. On receipt of request for giving comments on the writ, the PCIT (ReFAC) (AU) shall ensure that the AU concerned examines the petition of the taxpayer with reference to the issue involved in the writ. The AU shall cross verify and record parawise comments with the information available with the office concerned, within a time limit specified for this purpose.

2. The Pr. CIT (ReFAC) (AU) will supervise and monitor the process of framing parawise comments in accordance with FAC, 2019/section 144B of the Act or FPS, 2021 and the orders, circulars and notifications issued thereunder. The parawise comments will be approved by Pr. CIT (ReFAC)(AU) and CCIT (ReFAC) and before they are sent to PCIT (Jurisdictional).

3. PCIT (ReFAC) (AU) concerned may coordinate with PCIT (Jurisdictional) themselves email/faceless communication facility in ITBA as and when available. This action should ideally be completed within 5 days of receipt of the writ in the O/o PCIT (ReFAC) (AU).

(E) SOP for NaFAC:

1. On receipt of a writ petition directly from the petitioner or the Standing Counsel or the High Court or the CIT (Judicial) concerned, a copy shall be forwarded to the PCIT (Jurisdictional), in case, proceedings are completed and to PCIT (ReFAC) (AU) where proceedings are pending [with copy to PCIT (Jurisdictional)], within 5 days of receipt for necessary action as per Para A.

In view of CBDTs communication vide F. No. 173/165/2020-ITA-I dated 14.08.2020 the NaFAC shall authorize the PCIT (Jurisdictional) as the authority to defend the case before the Hon'ble High Courts.

2. On receipt of request from the PCIT (Jurisdictional) for unmasking of AU, the NaFAC shall forward the request to the Directorate of Systems for unmasking of the AU concerned and provide such details of the PCIT (ReFAC) (AU) concerned to the PCIT (Jurisdictional).

3. On receipt of request from the PCIT (Jurisdictional) for specific inputs on policy matters or provisions related to FAS 2019/section 144B of the Act or FPS, 2021 being challenged, the NaFAC shall:—

· Examine whether the request is accompanied by terms of reference for seeking comments of NaFAC as per prescribed template. Prescribed template is enclosed as Annexure - A.

· Analyse the writ petition and respond on broad policy issues. If required, NaFAC may refer the petition to the CBDT and Directorate of Legal and Research and obtain comments from the relevant division before sending a response to the PCIT (Jurisdictional).

(F) SOP for CIT (ITBA), Directorate of Systems:

1. On receipt of request for unmasking of the AU from NaFAC, the ITBA team shall give the details of PCIT (ReFAC) (AU) concerned.

If the modification to returned income is done by the new AU after modification suggestions reported by the Review Unit, details of both the AUs (original and new) shall be provided.

2. A number of writs have been filed because of apparent violation of principles of natural justice. In many such cases, the High Courts have set aside the cases back to the file of the Assessing Officer for giving a fresh opportunity and taking into consideration the submissions of the assessee. On receipt of such set aside request as per para B.5 from the PCIT (Jurisdictional), the ITBA shall ensure that:

The work item shall be transferred automatically to the same ReFAC inwhich the case was originally assessed for the completion of the same.

If the modification to returned income is done by the new AU after modification suggestions reported by the Review Unit, the work item shall be transferred automatically to the original ReFAC AU in which the case was originally allocated at the first instance for the completion of the same. The work item is to be completed by the ReFAC AU concerned.

5. This SOP may be brought to the notice of all Pr. CsIT and other field offices for necessary action.

This issues with the approval of Central Board of Direct Taxes (CBDT).

Encl.: Template and E-mail ids as discussed in the order.

CBDT Order designating web portal www.incometax.gov.in as the ‘designated portal’ for the purpose of Faceless Penalty Scheme [Order No. F. No. CIT (NaFAC)-1/2021-22/204, dated 29.06.2021]

Section 274 of the Income-tax Act, 1961, read with para 2(xi) of National Faceless Penalty Scheme, 2021 - penalty - Procedure for - Designated portal for Faceless Penalty

Order No. F. No. CIT (NaFAC)-1/2021-22/204, dated 29.06.2021

I am directed to hereby designate the web portal www.incometax.gov.in as the “designated portal” for the purpose of FacelessPenalty in terms of sub-para (xi) of Para 2 of National Faceless Penalty Scheme, 2021 (Notification No. 2 of 2021).

This issues with the approval of the Principal Chief Commissioner of Income-tax (National Faceless Assessment Centre), New Delhi.

Amendment to the Orders under Para 3 and Para 4 of the Faceless Penalty Scheme, 2021, (the Scheme) [Order F. No. 187/4/2021-ITA-I, Dated 01.04.2021]

Section 144B of the Income-Tax Act, 1961 - Faceless Assessment - Amendment to Orders under Para 3 and Para 4 of the Faceless Penalty Scheme, 2021

Order F. No. 187/4/2021-ITA-I, Dated 01.04.2021

The Central Board of Direct Taxes in exercise of powers conferred under section 119 of the Act, hereby directs that in the orders issued under Para-3 of the Schemevide F.No. 187/4/2021-ITA-I, dated 20th January 2021 and dated 26th February 2021, and under Para 4 of the SchemevideF.No. 187/4/2021-ITA-I, dated 20th January 2021, the words National Faceless Assessment Centre (NeAC) and Regional Faceless Assessment Centre (ReAC) shall henceforth be read as National Faceless Assessment Centre (NaFAC) and Regional Faceless Assessment Centre (ReFAC) respectively.

2. This order shall come into force from the 1st day of April, 2021.

Scope of Penalties to be assigned to Faceless Penalty Scheme, 2021 [Order F. No. 187/4/2021-ITA-1, Dated 26.02.2021]

Order under Para 3 of the Faceless Penalty Scheme, 2021, For Defining Scope of “Penalties” to be assigned to the Faceless Penalty Scheme, 2021

Order F. No. 187/4/2021-ITA-1, Dated 26.02.2021

1. The Central Board of Direct Taxes, in exercise of powers conferred under Para 3 of the FacelessPenaltyScheme, 2021 (the Scheme) and in continuation of the Order F.No. 187/4/2021-ITA-l dated 20.01.2021, hereby clarifies that:

(i) Penalty proceedings arising/pending in the Investigation Wing, the Directorate of I&CI, erstwhile

DG (Risk-Assessment) or by any prescribed authority for the purpose of specified penalties shall remain outside the purview of the Scheme, in addition to the exclusions provided in the order

(supra) under Para 3 of the Scheme vide F.No. 187/4/2021-ITA-1 dated 20.01.2021;

(ii) Penalty proceedings arising out of any statute other than the Income-tax Act, 1961 shall remain

outside the purview of the Scheme; and,

(iii) All the penalties imposable by the officers of the level of Commissioner/Director/Commissioner

(Appeals/Appeal Unit) and above shall remain outside the purview of the Scheme and be

disposed by the respective officer.

2. Further, it is also clarified that all the penalties imposable under the Income-tax Act, 1961, except for the exclusions provided in Para 1 above, by the officers of the rank of Addl.CIT/JCIT and below, shall remain with the National Faceless Assessment Centre (read as NeAC) as per the order under Para 4 of the Scheme vide F.No. 187/4/2021-ITA-l dated 20.01.2021.

3. This order shall come into force with immediate effect.

CBDT vide its Order F No. 187/4/2021-ITA-I, dated 20.01.2021, dated 20.01.2021 has directed that under the Faceless Penalty Scheme, 2021, the National Faceless Assessment Centre/Regional Faceless Assessment Centre/Assessment Unit/Review Unit to act as the National Faceless Penalty Centre/Regional Faceless Penalty Centre/Penalty Unit/Penalty Review Unit until they are set-up by the Board. This Order is issued under Para 4 of the Faceless Penalty Scheme, 2021 notified by the CBDT on 12.01.2021 vide Notification No. 02/2021/F.No.370142/51/2020-TPL.

F No. 187/4/2021-ITA-I, dated 20.01.2021

ORDER

Subject: Order under Para 4 of the Faceless Penalty Scheme, 2021 for directing the National Faceless Assessment Centre/Regional Faceless Assessment Centre/Assessment Unit/Review Unit to act as the National Faceless Penalty Centre/Regional Faceless Penalty Centre/Penalty Unit/Penalty Review Unit under the Scheme—Regarding

In pursuance to sub-para (4) of Para 4 of the Faceless Penalty Scheme, 2021 (the Scheme), the Central Board of Direct Taxes (hereinafter referred to as Board) hereby directs that, until the date on which National Faceless Penalty Centre/Regional Faceless Penalty Centres/Penalty Units/Penalty Review Units under the Scheme are set up, the National Faceless Assessment Centre/Regional Faceless Assessment Centres/Assessment Units/Review Units (read as NeAC/ReACs/AUs/RUs), set up under the Faceless Assessment Scheme, 2019 will also act as the National Faceless Penalty Centre/Regional Faceless Penalty Centre/Penalty Unit/Penalty Review Unit respectively.

2. The Income-tax Authorities of the NeAC/ReAC/AUs/RUs i.e. Pr.CCIT/CCIT/Pr.CIT/CIT/Addl.CIT/Jt.CIT/DCIT/ACIT/ITO shall act as and perform the functions of the corresponding Income-tax authorities of the National Faceless Penalty Centre/Regional Faceless Penalty Centers/Penalty Units/Penalty Review Units respectively.

3. This order shall come into force with immediate effect.

Penalty cases not covered under Faceless Penalty Scheme, 2021 – Proceedings related to Central Charges, International Tax Charges & TDS – [Order under Para 3 of the Faceless Penalty Scheme, 2021 – [F No. 187/4/2021-ITA-I, dated 20.01.2021]

ORDER

Subject : Order under Para 3 of the Faceless Penalty Scheme, 2021, for assignment and disposal of penalty cases under the scheme—Regarding

The Central Board of Direct Taxes in exercise of powers conferred under Para 3 of theFaceless Penalty Scheme, 2021hereby directs that all the penalty cases initiated under the Income-tax Act, 1961, pending as well initiated subsequently, is assigned to the National Faceless Penalty Centre to be disposed by the National Faceless Assessment Centre (read as NeAC) in accordance with order under para 4 of the Scheme, dated 20.01.2021 (F. No. 187/3/2020-ITA-I), except provided as hereunder:—

(i) Penalty proceedings in cases assigned to Central Charges;

(ii) Penalty proceedings in cases assigned to International Tax Charges; and

(iii) Penalty proceedings arising inTDS charges.

2. This order shall come into force with immediate effect.

CBDT Notification No. 03/2021, dated 12.01.2021 - Directions to give effect to the Faceless Penalty Scheme, 2021

Notification No. 03/2021-Income Tax, dated 12.01.2021

S.O. 118(E) : In exercise of the powers conferred by sub-section (2B) of section 274 of the Income-tax Act, 1961 (43 of 1961), for the purposes of giving effect to the Faceless Penalty Scheme, 2021 made under sub-section (2A) of section 274 of the said Act, the Central Government hereby makes the following directions, namely:—

1. The provisions of section 2, section 120, section 127, section 129, section 131, section 133, section 133C, section 136 and Chapter XXI of the said Act shall apply to the procedure for imposing penalty in accordance with the said Scheme subject to the following exceptions, modifications and adaptations, namely:—

“(A). (1) The penalty shall be levied under the said Scheme as per the following procedure, namely:––

(i) where any income-tax authority or the National Faceless Assessment Centre has, in a case,—

(a) initiated penalty proceedings and issued a show-cause notice for imposition of penalty; or

(b) recommended initiation of penalty proceedings, it shall refer such case, in the form specified in clause (viii) of sub-paragraph (B) of paragraph 4, to the National Faceless Penalty Centre;

(ii) the National Faceless Penalty Centre shall in a case, where reference has been received as per clause (i), assign such case to a specific penalty unit in any one of the Regional Faceless Penalty Centres through an automated allocation system;

(iii) where in a case assigned to a penalty unit, initiation of penalty proceedings has been recommended, such unit, after examination of the material available on record, may decide to,—

(a) agree with the recommendation and prepare a draft notice calling upon the assessee or any other person, as the case may be, to show cause as to why penalty should not be levied under the relevant provisions of the Act; or

(b) disagree with the recommendation, for reasons to be recorded in writing, and send such draft notice or the reasons, as the case may be, to the National Faceless Penalty Centre;

(iv) the National Faceless Penalty Centre shall upon receipt of the draft notice or reasons referred to in clause (iii) from the penalty unit,—

(a) serve the show-cause notice, as per the draft referred to in sub-clause (a) of clause (iii), upon the assessee or any other person, as the case may be, specifying the date and time for filing a response; or

(b) not initiate penalty in cases referred to in sub-clause (b) of clause (iii);

(v) where in the case assigned to a penalty unit, penalty proceedings are already initiated, such unit shall prepare a draft notice calling upon the assessee or any other person, as the case may be, to show cause as to why penalty should not be levied under the relevant provisions of the Act and send such notice to the National Faceless Penalty Centre;

(vi) the National Faceless Penalty Centre shall serve the show-cause notice, as per draft referred to in clause (v), upon the assessee or any other person, as the case may be, specifying the date and time for filing a response;

(vii) the assessee or any other person, as the case may be, shall file a response to the show-cause notice, referred to in sub-clause (a) of clause (iv) or in clause (vi), 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, with the National Faceless Penalty Centre;

(viii) where response is filed by the assessee or any other person, as the case may be, the National Faceless Penalty Centre shall send such response to the penalty unit, and where no such response is filed, inform the penalty unit;

(ix) the penalty unit may make a request to the National Faceless Penalty Centre for—

(a) obtaining further information, documents or evidence from any income-tax authority or the National Faceless Assessment Centre; or

(b) obtaining further information, documents or evidence from the assessee or any other person; or

(x) the National Faceless Penalty Centre shall, upon receipt of request, referred to in sub-clause (a) or (b) of clause (ix), issue appropriate notice or requisition to the income-tax authority or the National Faceless Assessment Centre or the assessee or any other person, as the case may be, to submit such information, documents or evidence, as may be specified by the penalty unit, specifying the date and time for furnishing a response;

(xi) the income-tax authority or the National Faceless Assessment Centre or the assessee or any other person, as the case may be, shall furnish a response to the notice or requisition, as referred to in clause (x), 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, to the National Faceless Penalty Centre;

(xii) where a request for conducting of certain enquiry or verification or seeking technical assistance has been made by the penalty unit, the National Faceless Penalty Unit shall send such request to the National Faceless Assessment Centre specifying a date and time for submitting a report;

(xiii) where response to notice referred to in clause (x) is filed by the income-tax authority or the National Faceless Assessment Centre or the assessee or any other person, as the case may be, the National Faceless Penalty Centre shall send such response to the penalty unit, and where no such response is filed, inform the penalty unit;

(xiv) where a report in response to request referred to in clause (xii) is received by the National Faceless Penalty Centre, it shall send such report to the penalty unit, and where no such report is received, inform the penalty unit;

(xv) the penalty unit shall, after considering the material on record including response furnished, if any, as referred to in clauses (viii) and (xiii) or report, if any, as referred to in clause (xiv), propose for,––

(a) imposition of the penalty and prepare a draft order for imposition of penalty; or

(b) non-imposition of the penalty;

for reasons to be recorded in writing and send the proposal along with such draft order or reasons, as the case may be, to the National Faceless Penalty Centre;

(xvi) the National Faceless Penalty Centre shall examine the proposal, as referred to in clause (xv), in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide, ––

(a) in a case where imposition of penalty has been proposed, to pass the penalty order as per draft order referred to in sub-clause (a) of clause (xv), and serve a copy thereof upon the assessee or any other person, as the case may be; or

(b) in a case where non-imposition of penalty has been proposed, not to impose penalty under intimation to the assessee or any other person, as the case may be; or

(c) assign the case to a penalty review unit in any one of the Regional Faceless Penalty Centres through an automated allocation system, for conducting review of such proposal;

(xvii) the penalty review unit shall review the proposal of penalty unit, as referred to in clause (xv), whereupon it may concur with, or suggest modification to, such proposal, for reasons to be recorded in writing, and intimate the National Faceless Penalty Centre;

(xviii) where the penalty review unit concurs with the proposal of penalty unit, the National Faceless Penalty Centre shall follow the procedure laid down in sub-clause (a) or sub-clause (b) of clause (xvi);

(xix) where the penalty review unit suggests modification to the proposal in sub-clause (a) or sub-clause (b) of clause (xv), the National Faceless Penalty Centre shall assign the case to a specific penalty unit, other than the penalty unit referred to in clause (xv), in any one of the Regional Faceless Penalty Centres through an automated allocation system;

(xx) where the case is assigned to a penalty unit, as referred to in clause (xix), such penalty unit after considering the material on record including suggestions for modification and reasons recorded by the penalty review unit,—

(a) in a case where the modifications suggested by the penalty review unit are prejudicial to the interest of assessee or any other person, as the case may be, as compared to the proposal of the penalty unit under clause (xv), shall follow the procedure laid down in clauses (v) to (xiv) and prepare a revised draft order for imposition of penalty; or

(b) in a case where the modifications are not prejudicial to the interest of assessee or any other person, as the case may be, shall prepare a revised draft order for imposition of penalty; or

(c) may propose non-imposition of penalty, for reasons to be recorded in writing, and send such order or reasons to the National Faceless Penalty Centre;

(xxi) upon receipt of revised draft order from the penalty unit, as referred to in clause (xx), the National Faceless Penalty Centre shall pass the penalty order as per such draft and serve a copy thereof upon the assessee or any other person or not impose penalty under intimation to the assessee or any other person, as the case may be;

(xxii) where in a case, as referred to in sub-clause (a) or (b) of clause (i), the National Faceless Penalty Centre has passed a penalty order, or not initiated or imposed penalty, as the case may be, it shall send a copy of such order or reasons for not initiating or imposing penalty to the income-tax authority, referred to in clause (i) or the National Faceless Assessment Centre, as the case may be, for such action as may be required under the Act.

(2) Notwithstanding anything contained in sub-paragraph (1), the Principal Chief Commissioner or the Principal Director General, in charge of National Faceless Penalty Centre, may at any stage of the penalty proceedings, if considered necessary, transfer such proceedings to the income-tax authority or National Faceless Assessment Centre having jurisdiction over the assessee or any other person, in whose case the penalty proceedings are initiated, with the prior approval of the Board.

(B). (1) A person shall not be required to appear either personally or through authorised representative in connection with any proceedings under the said Scheme before the income-tax authority at the National Faceless Penalty Centre or Regional Faceless Penalty Centre or penalty unit or penalty review unit set up under the said Scheme.

(2) The assessee or any other person, as the case may be, or his authorised representative, may request for personal hearing so as to make his oral submissions or present his case before the penalty unit under the said Scheme.

(3) The Chief Commissioner or the Director General, in charge of the Regional Faceless Penalty Centre, under which the concerned penalty unit is set up, may approve the request for personal hearing, as referred to in sub-paragraph (2), if he is of the opinion that the request is covered by the circumstances laid down under clause (ix) of sub-paragraph (B) of paragraph 4.

(4) Where the request for personal hearing has been approved by the Chief Commissioner or the Director General, in charge of the Regional Faceless Penalty Centre, such hearing shall be conducted exclusively through video conferencing, including use of any telecommunication application software which supports video telephony, in accordance with the procedure laid down by the Board;

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

(C). The provision of section 246A of the said Act shall apply to appealable orders arising out of penalty imposed in accordance with the said Scheme subject to the following exceptions, modifications and adaptations, namely:—

“An appeal against a penalty order made by the National Faceless Penalty Centre under the said Scheme shall lie before the Commissioner (Appeals) having jurisdiction over the jurisdictional income-tax authority or before the National Faceless Appeal Centre, as the case may be; and any reference to the Commissioner (Appeals) in any communication from the National Faceless Penalty Centre shall mean such jurisdictional Commissioner (Appeals) or the National Faceless Appeal Centre, as the case may be.”

2. The provisions of section 140 and section 282A of the said Act shall apply to the penalty proceedings in accordance with the said Scheme subject to the following exceptions, modifications and adaptations, namely:—

“an electronic record shall be authenticated by the,––

(i) National Faceless Penalty Centre by affixing its digital signature;

(ii) the assessee or any other person, by affixing his digital signature if he is required under the Rules to furnish his return of income under digital signature, and in any other case by affixing his digital signature or under electronic verification code.

Explanation : For the purposes of this paragraph, “electronic verification code” shall have the same meaning as referred to in rule 12 of the Rules.”.

3. The provisions of section 154 and section 155 of the said Act shall apply to the order passed in accordance with the said Scheme subject to the following exceptions, modifications and adaptations, namely:—

“(1) With a view to rectifying any mistake apparent on the record, the National Faceless Penalty Centre may, by an order to be passed in writing, amend any order passed by it under the said Scheme.

(2) Subject to the other provisions of the said scheme, an application for rectification of mistake, as referred to in sub-paragraph (1), may be filed with the National Faceless Penalty Centre by the,—

(a) assessee or any other person, as the case may be; or

(b) penalty unit, which prepared the order; or

(d) income-tax authority; or

(e) National Faceless Assessment Centre.

(3) Where an application, as referred to in sub-paragraph (2), is received by the National Faceless Penalty Centre, it shall assign such application to a specific penalty unit in any one of the Regional Faceless Penalty Centres through an automated allocation system.

(4) The penalty unit shall examine the application and prepare a notice for granting an opportunity—

(a) to the assessee or any other person, as the case may be, where the application has been filed by the authorities referred to in clause (b) or (c) or (d) or (e) of sub-paragraph (2); or

(b) to the authorities referred to in clause (b) or (c) or (d) or (e) of sub-paragraph (2), where the application has been filed by the assessee or any other person, as the case may be, and send the notice to the National Faceless Penalty Centre.

(5) The National Faceless Penalty Centre shall serve the notice, as per draft referred to in sub-paragraph (4), upon the assessee or any other person, as the case may be, or authorities referred to in clause (b) or (c) or (d) or (e) of sub-paragraph (2) to show cause as to why rectification of mistake should not be carried out under the relevant provisions of the Act, specifying the date and time for filing a response.

(6) The response to the show-cause notice referred to in sub-paragraph (5) shall be furnished within the specified date and time or such extended time as may be allowed on the basis of application made in this behalf, to the National Faceless Penalty Centre.

(7) Where a response, as referred to in sub-paragraph (6), is filed, the National Faceless Penalty Centre shall send such response to the penalty unit, or where no such response is filed, inform the penalty unit.

(8) The penalty unit shall, after taking into consideration the response, if any, referred to in sub-paragraph (7), prepare a draft order,––

(a) for rectification of the mistake; or

(b) for rejection of application for rectification, citing reasons thereof, and send the order to the National Faceless Penalty Centre.

(9) The National Faceless Penalty Centre shall upon receipt of draft order, as referred to in sub-paragraph (8), pass an order as per such draft and communicate such order to, –

(a) the assessee or any other person, as the case may be; and

(b) the National Faceless Assessment Centre or the income-tax authority having jurisdiction over the case for such action as may be required under the Act;”.

4. The provisions of section 282, section 283 and section 284 of the said Act shall apply to the said Scheme subject to the following exceptions, modifications and adaptations, namely:—

“(A). (1) Every notice or order or any other electronic communication under the said Scheme shall be delivered to the addressee, being the assessee or any other person, by way of,––

(a) placing an authenticated copy thereof in the assessee’s or any other person’s registered account, as the case may be; or

(b) sending an authenticated copy thereof to the registered e-mail address of the assessee or any other person, as the case may be, or his authorised representative; or

(c) uploading an authenticated copy on the assessee’s or any other person’s Mobile App, as the case may be, and followed by a real time alert.

(2) Every notice or order or any other electronic communication under the said Scheme shall be delivered to the addressee, being any other person, by sending an authenticated copy thereof to the registered e-mail address of such person, followed by a real time alert.

(3) The assessee or any other person, as the case may be, shall file his response to any notice or order or any other electronic communication, under the said Scheme, through his registered account, and once an acknowledgement is sent by the National Faceless Penalty Centre containing the hash result generated upon successful submission of response, the response shall be deemed to be authenticated.

(4) 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 (21 of 2000).

(B). The Principal Chief Commissioner or the Principal Director General, in charge of the National Faceless Penalty Centre shall, with the approval of Board, lay down the standards, procedures and processes for effective functioning of the National Faceless Penalty Centre, the Regional Faceless Penalty Centre, the penalty unit and the penalty review unit set-up under the said Scheme, in an automated and mechanised environment, including format, mode, procedure and processes in respect of the following, namely:—

(i) service of the notice, order or any other communication;

(ii) receipt of any information or documents from the person in response to the notice, order or any other communication;

(iii) issue of acknowledgment of the response furnished by the person;

(iv) provision of “e-proceedings” facility including log-in account facility, tracking status of penalty proceedings, display of relevant details, and facility of download;

(v) accessing, verification and authentication of information and response including documents submitted during the penalty proceedings;

(vi) receipt, storage and retrieval of information or documents in a centralised manner;

(vii) general administration and grievance redressal mechanism in the respective Centres and units;

(viii) form for referring a case, in which penalty has been initiated or initiation of penalty has been recommended, as referred to in clause (i) of sub-paragraph (1) of paragraph 5 of the said Scheme, and

(ix) circumstances in which personal hearing may be approved as per sub-paragraph (3) of paragraph 11 of the said Scheme.”

5. This notification shall come into force on the date of its publication in the Official Gazette.

[Notification No. 03/2021][F. No. 370142/51/2020-TPL]

CBDT Notification No. 03/2021, dated 12.01.2021 - Faceless Penalty Scheme, 2021

Notification No. 02/2021-(Income-Tax)

S.O. 117(E) : In exercise of the powers conferred by sub-section (2A) of section 274 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following Scheme, namely:—

1. Short title and commencement

(1) This Scheme may be called the Faceless Penalty Scheme, 2021.

(2) It shall come into force on the date of its publication in the Official Gazette.

2. Definitions

(1) In this Scheme, unless the context otherwise requires,––

(i) “Act” means the Income-tax Act, 1961 (43 of 1961);

(ii) “addressee” shall have the same meaning as assigned to it in clause (b) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);

(iii) “assessment unit” means the assessment unit set up under the scheme notified under sub-section (3A) of section 143 of the Act or referred to in section 144B of the Act, as the case may be;

(iv) “authorised representative” shall have the same meaning as assigned to it in sub-section (2) of section 288 of the Act;

(v) “automated allocation system” means an algorithm for randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning, with a view to optimise the use of resources;

(vi) “Board” means the Central Board of Direct Taxes constituted under the Central Board of Revenues Act, 1963 (54 of 1963);

(vii) “computer resource” shall have the same meaning as assigned to it in clause (k) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);

(viii) “computer system” shall have the same meaning as assigned to it in clause (l) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);

(ix) “computer resource of assessee” shall include assessee’s registered account in designated portal of the Income-tax Department, the Mobile App linked to the registered mobile number of the assessee, or the registered e-mail address of the assessee with his email service provider;

(x) “digital signature” shall have the same meaning as assigned to it in clause (p) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);

(xi) “designated portal” means the web portal designated as such by the Principal Chief Commissioner or Principal Director General, in charge of the National Faceless Penalty Centre;

(xii) “faceless penalty” means the penalty proceedings conducted electronically in ‘e-proceeding’ facility through assessee’s registered account in designated portal;

(xiii) “electronic record” shall have the same meaning as assigned to it in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);

(xiv) “e-mail” or “electronic mail” and “electronic mail message” means a message or information created or transmitted or received on a computer, computer system, computer resource or communication device including attachments in text, image, audio, video and any other electronic record, which may be transmitted with the message.;

(xv) “hash function” and “hash result” shall have the same meaning as assigned to them in the Explanation to sub-section (2) of section 3 of the Information Technology Act, 2000 (21 of 2000);

(xvi) “Mobile app” shall mean the application software of the Income-tax Department developed for mobile devices which is downloaded and installed on the registered mobile number of the assessee;

(xvii) “National Faceless Assessment Centre” shall mean the National e-Assessment Centre set up under the scheme notified under sub-section (3A) of section 143 of the Act or the National Faceless Assessment Centre referred to in section 144B of the Act, as the case may be;

(xviii) “originator” shall have the same meaning as assigned to it in clause (za) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);

(xix) “penalty” means the penalty imposable under the Act;

(xx) “real time alert” means any communication sent to the assessee, 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 e-mail at his registered e-mail address, so as to alert him regarding delivery of an electronic communication;

(xxi) “Regional Faceless Assessment Centre” shall mean the Regional e-Assessment Centre set up under the scheme notified under sub-section (3A) of section 143 of the Act or the Regional Faceless Assessment Centre referred to in section 144B of the Act, as the case may be;

(xxii) “registered account” of the assessee means the electronic filing account registered by the assessee in the designated portal;

(xxiii) “registered e-mail address” means the e-mail address at which an electronic communication may be delivered or transmitted to the addressee, including—

(a) the e-mail address available in the electronic filing account of the addressee registered in the designated portal; or

(b) the e-mail address available in the last income-tax return furnished by the addressee; or

(d) in the case of addressee being an individual who possesses the Aadhaar number, the e-mail address of addressee available in the database of Unique Identification Authority of India; or

(e) in the case of addressee being a company, the e-mail address of the company as available on the official website of Ministry of Corporate Affairs; or

(f) any e-mail address made available by the addressee to the income-tax authority or any person authorised by such authority;

(xxiv) “registered mobile number” of the assessee means the mobile number of the assessee, or his authorised representative, appearing in the user profile of the electronic filing account registered by the assessee in the designated portal;

(xxv) “review unit” means the review unit set up under the scheme notified under sub-section (3A) of section 143 of the Act or referred to in section 144B of the Act, as the case may be;

(xxvi) “Rules” means the Income-tax Rules, 1962;

(xxvii) “technical unit” means the technical unit set up under the scheme notified under sub-section (3A) of section 143 of the Act or referred to in section 144B of the Act, as the case may be;

(xxviii) “verification unit” means the verification unit set up under the scheme notified under sub-section (3A) of section 143 of the Act or referred to in section 144B of the Act, as the case may be;

(xxix) “video conferencing or video telephony” means the technological solutions for the reception and transmission of audio-video signals by users at different locations, for communication between people in real-time.

(2) Words and expressions used herein and not defined but defined in the Act shall have the meaning respectively assigned to them in the Act.

3. Scope of the Scheme

The penalty under this Scheme shall be imposed in respect of such territorial area, or persons or class of persons, or income or class of income or cases or class of cases, or penalties or class of penalties as may be specified by the Board.

4. Faceless Penalty Centres

(1) For the purposes of this Scheme, the Board may set up—

(i) a National Faceless Penalty Centre to facilitate the conduct of faceless penalty proceedings in a centralised manner and vest it with the jurisdiction to impose penalty in accordance with the provisions of this Scheme;

(ii) Regional Faceless Penalty Centres, as it may deem necessary, to facilitate the conduct of faceless penalty proceedings, which shall be vested with the jurisdiction to impose penalty in accordance with the provisions of this Scheme;

(iii) penalty units, as it may deem necessary, to facilitate the conduct of faceless penalty proceedings, to perform the function of drafting penalty orders, which includes identification of points or issues for imposition of penalty under the Act, seeking information or clarification on points or issues so identified, providing opportunity of being heard to the assessee or any other person, analysis of the material furnished by the assessee or any other person, and such other functions as may be required for the purposes of imposing penalty;

(iv) penalty review units, as it may deem necessary, to facilitate the conduct of faceless penalty proceedings, to perform the functions of review of draft penalty order, which includes checking whether the relevant material evidence has been brought on record, whether the relevant points of fact and law have been duly incorporated in the draft order, whether the issues on which penalty is to be imposed have been discussed in the draft order, whether the applicable judicial decisions have been considered and dealt with in the draft order, checking arithmetical correctness of computation of penalty, if any, and such other functions as may be required for the purposes of review,

and specify their respective jurisdiction.

(2) All communications among the penalty unit and penalty review unit or with the assessee or any other person, as the case may be, or any income-tax authority or the National Faceless Assessment Centre, with respect to the information or documents or evidence or any other details as may be necessary for the purposes of imposing penalty under this Scheme, shall be through the National Faceless Penalty Centre.

(3) The penalty unit and the penalty review unit shall have the following authorities, namely:—

(a) Additional Commissioner or Additional Director or Joint Commissioner or Joint Director, as the case may be;

(b) Deputy Commissioner or Deputy Director or Assistant Commissioner or Assistant Director, or Income-tax Officer, as the case may be;

(c) such other income-tax authority, ministerial staff, executive or consultant, as may be considered necessary by the Board.

(4) The Board for the purposes of this Scheme shall, until the date on which the National Faceless Penalty Centre or the Regional Faceless Penalty Centres, the penalty units or the penalty review units are set up, direct the National Faceless Assessment Centre, Regional Faceless Assessment Centre, assessment unit and review unit to also act as the National Faceless Penalty Centre, Regional Faceless Penalty Centre, the penalty unit and the penalty review unit, respectively.

5. Procedure in penalty

(1) The penalty in a case referred to in paragraph 3 shall be levied under this Scheme as per the following procedure, namely:—

(i) where any income-tax authority or the National Faceless Assessment Centre has, in a case,—

(a) initiated penalty proceedings and issued a show-cause notice for imposition of penalty; or

(b) recommended initiation of penalty proceedings,

it shall refer such case, in the form specified in clause (viii) of paragraph 12, to the National Faceless Penalty Centre;

(iii) where in a case assigned to a penalty unit, initiation of penalty proceedings has been recommended, such unit, after examination of the material available on record, may decide to,—

(b) disagree with the recommendation, for reasons to be recorded in writing, and send such draft notice or the reasons, as the case may be, to the National Faceless Penalty Centre;

(iv) the National Faceless Penalty Centre shall upon receipt of the draft notice or reasons referred to in clause (iii) from the penalty unit,—

(b) not initiate penalty in cases referred to in sub-clause (b) of clause (iii);

(ix) the penalty unit may make a request to the National Faceless Penalty Centre for,—

(a) obtaining further information, documents or evidence from any income-tax authority or the National Faceless Assessment Centre; or

(b) obtaining further information, documents or evidence from the assessee or any other person; or

(a) imposition of the penalty and prepare a draft order for such imposition of penalty; or

(b) non-imposition of the penalty,

for reasons to be recorded in writing and send the proposal along with such draft order or reasons, as the case may be, to the National Faceless Penalty Centre;

(b) in a case where non-imposition of penalty has been proposed, not to impose penalty under intimation to the assessee or any other person, as the case may be; or

(c) assign the case to a penalty review unit in any one of the Regional Faceless Penalty Centres through an automated allocation system, for conducting review of such proposal;

(xx) where the case is assigned to a penalty unit, as referred to in clause (xix), such penalty unit, after considering the material on record including suggestions for modification and reasons recorded by the penalty review unit,—

(b) in a case where the modifications are not prejudicial to the interest of assessee or any other person, as the case may be, shall prepare a revised draft order for imposition of penalty; or

(c) may propose non-imposition of penalty, for reasons to be recorded in writing, and send such order or reasons to the National Faceless Penalty Centre;

(2) Notwithstanding anything contained in sub-paragraph (1), the Principal Chief Commissioner or the Principal Director General, in charge of the National Faceless Penalty Centre, may at any stage of the penalty proceedings, if considered necessary, transfer such proceedings to the income-tax authority or the National Faceless Assessment Centre having jurisdiction over the assessee or any other person, in whose case the penalty proceedings are initiated, with the prior approval of the Board.

6. Rectification Proceedings

(1) With a view to rectifying any mistake apparent from the record the National Faceless Penalty Centre may, by an order to be passed in writing, amend any order passed by it under this Scheme.

(2) Subject to the other provisions of this Scheme, an application for rectification of mistake, as referred to in sub-paragraph (1), may be filed with the National Faceless Penalty Centre by the,—

(a) assessee or any other person, as the case may be; or

(b) penalty unit, which prepared the order; or

(d) income-tax authority; or

(e) National Faceless Assessment Centre.

(4) The penalty unit shall examine the application and prepare a notice for granting an opportunity,—

(a) to the assessee or any other person, as the case may be, where the application has been filed by the authorities referred to in clause (b) or (c) or (d) or (e) of sub-paragraph (2); or

(b) to the authorities referred to in clause (b) or (c) or (d) or (e) of sub-paragraph (2), where the application has been filed by the assessee or any other person, as the case may be, and

send the notice to the National Faceless Penalty Centre.

(8) The penalty unit shall, after taking into consideration the response, if any, referred to in sub-paragraph (7), prepare a draft order,––

(a) for rectification of the mistake; or

(b) for rejection of application for rectification, citing reasons thereof,

and send the order to the National Faceless Penalty Centre.

(9) The National Faceless Penalty Centre shall upon receipt of draft order, as referred to in sub-paragraph (8), pass an order as per such draft and communicate such order to,—

(a) the assessee or any other person, as the case may be; and

(b) the National Faceless Assessment Centre or the income-tax authority having jurisdiction over the case, for such action as may be required under the Act.

7. Appellate Proceedings

An appeal against a penalty order made by the National Faceless Penalty Centre under this Scheme shall lie before the Commissioner (Appeals) having jurisdiction over the jurisdictional income-tax authority or before the National Faceless Appeal Centre, as the case may be; and any reference to the Commissioner (Appeals) in any communication from the National Faceless Penalty Centre shall mean such jurisdictional Commissioner (Appeals) or the National Faceless Appeal Centre, as the case may be.

8. Exchange of communication exclusively by electronic mode

(1) For the purposes of this Scheme,––

(a) all communications between the National Faceless Penalty Centre and the assessee or any other person, as the case may be, or his authorised representative, shall be exchanged exclusively by electronic mode; and

(b) all internal communications between the National Faceless Penalty Centre, National Faceless Assessment Centre, Regional Faceless Penalty Centres, any income-tax authority, the penalty unit or the penalty review unit shall be exchanged exclusively by electronic mode.

9. Authentication of electronic record

For the purposes of this Scheme, an electronic record shall be authenticated by the,––

(i) National Faceless Penalty Centre by affixing its digital signature;

(ii) assessee or any other person, by affixing his digital signature if he is required under the Rules to furnish his return of income under digital signature, and in any other case by affixing his digital signature or under electronic verification code.

Explanation : For the purpose of this paragraph, “electronic verification code” shall have the same meaning as referred to in rule 12 of the Rules.

10. Delivery of electronic record

(1) Every notice or order or any other electronic communication under this Scheme shall be delivered to the addressee, being the assessee or any other person, by way of,––

(a) placing an authenticated copy thereof in the assessee’s or any other person’s registered account, as the case may be; or

(b) sending an authenticated copy thereof to the registered e-mail address of the assessee or any other person, as the case may be, or his authorised representative; or

followed by a real time alert.

(2) Every notice or order or any other electronic communication under this Scheme shall be delivered to the addressee, being any other person, by sending an authenticated copy thereof to the registered e-mail address of such person, followed by a real time alert.

(3) The assessee or any other person, as the case may be, shall file his response to any notice or order or any other electronic communication, under this Scheme, through his registered account, and once an acknowledgement is sent by the National Faceless Penalty Centre containing the hash result generated upon successful submission of response, the response shall be deemed to be authenticated.

(4) 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 (21 of 2000).

11. No personal appearance in the Centres or Units

(1) A person shall not be required to appear either personally or through authorised representative in connection with any proceedings under this Scheme before the income-tax authority at the National Faceless Penalty Centre or Regional Faceless Penalty Centre or penalty unit or penalty review unit set up under this Scheme.

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

12. Power to specify format, mode, procedure and processes

The Principal Chief Commissioner or the Principal Director General, in charge of the National Faceless Penalty Centre shall, with the approval of Board, lay down the standards, procedures and processes for effective functioning of the National Faceless Penalty Centre, the Regional Faceless Penalty Centre, the penalty unit and the penalty review unit set-up under this Scheme, in an automated and mechanised environment, including format, mode, procedure and processes in respect of the following, namely:—

(i) service of the notice, order or any other communication;

(ii) receipt of any information or documents from the person in response to the notice, order or any other communication;

(iii) issue of acknowledgment of the response furnished by the person;

(iv) provision of “e-proceedings” facility including log-in account facility, tracking status of penalty proceedings, display of relevant details, and facility of download;

(v) accessing, verification and authentication of information and response including documents submitted during the penalty proceedings;

(vi) receipt, storage and retrieval of information or documents in a centralised manner;

(vii) general administration and grievance redressal mechanism in the respective Centres and units;

(viii) form for referring a case, in which penalty has been initiated or initiation of penalty has been recommended, as referred to in clause (i) of sub-paragraph (1) of paragraph 5; and

(ix) circumstances in which personal hearing may be approved as per sub-paragraph (3) of paragraph 11.

[Notification No. 02/2021] [F.No.370142/51/2020-TPL]

Procedure to be adopted in case of non-compliance of any notice under section 142(1) & passing of best judgement assessment under section 144 of the Act [Para ‘D’ of SOP, dated 19.11.2020]

1. The cases that do not require any verification and where returned income can be accepted on the basis of information available in internal data- bases of the department on record, the returned income may be accepted under Section 144 of the Act without any initiation of penalty for non-compliance.

2. In other cases the following procedure is to be followed:

(i) Issue of centralized reminder from NeAC.

(ii) Where the notice issued in point (i) has not been responded to by the compliance date then the assessee can be issued show cause notice for levy of penalty for non-compliance.

3. The AU shall make request for physical verification to the designated VU after recording reasons in writing and obtaining the approval of Pr.CIT in the following circumstances:

(a) It is a high risk potential case

(b) The impugned PAN is a potential fraud PAN

Whereas, in any other circumstances, the approval of CCIT (ReAC) shall be obtained. The request for obtaining approval for physical verification shall be in prescribed format.

Orders in such cases are to be passed only after receipt of report from designated VU.

4. After receipt of report from designated VU where no modification is proposed to the returned income or to tax payable; and where returned income can be accepted on the basis of information available in internal data- bases of the department or on record, the returned income may be accepted under Section 144 of the Act with no initiation of penalty for non-compliance.

5. After receipt of report from designated VU where tax payable and/or where modification to returned income is proposed then—

(i) Show cause notice to be issued as to why assessment should not be framed ex-parte under section 144 of the Income-tax Act mentioning the points of proposed additions.

(ii) If no reply received then DAO is to be framed with modified income and notices for penalty for non-compliance and/or any other penalty warranted by the facts of the case are to be issued.

6. In case the assessee stops responding after submitting only part reply or after seeking adjournment the AU should proceed with making ex-parte assessmentunder section 144of the Act in accordance with the process and procedure described above.

7. Order under section 144 to be passed by AU should be based on material available on record and estimation of income in accordance with law. High pitched assessments that are not supported by any evidence/document should be avoided.

8. Assessment procedure as laid down in other sections of this SOP for framing regular assessment under section 143(3) of the Act is to be followed if reply of the Assessee is received at any stage.

Issue of penalty notice & levy of penalty under section 272A for non-compliance with 142(1) notice [Para ‘E’ of SOP, dated 19.11.2020]

1. The case would be treated as non-compliant where:

(a) no response has been received from the assessee on or before the date mentioned in the notice.

(b) Immediately thereafter a reminder to all known e-mail IDs of the assessee that gives another 15 days to respond is to be issued by the AU.

(c) An anonymized physical notice has been issued to the assessee through the INSIGHT on reference from NeAC, if no response is forthcoming even after electronic reminders.

(d) SMS reminders have been issued first within 7 days of the issue of the notice; Secondly, on the day prior to the date of compliance with notice and thirdly on the date of compliance mentioned in the notice.

2. Physical verification may be conducted through the designated VU in cases enumerated in the SOP at Para D(3) after approval of the PCIT of the AU.

3. Where the assessee does not respond even after physical notice and/or physical verification and modification is proposed in income, then—

(a) The notice shall be deemed to have been delivered in accordance with paragraph 10 of the CBDT’s SO 3264 (E) which states that every notice or order shall be delivered to the addressee, being the assessee, by way of placing an authenticated copy thereof in the assessee’s registered account; or sending an authenticated copy thereof to the registered e-mail address of the assessee or his authorised representative; or uploading an authenticated copy on the assessee’s Mobile App; and followed by a real time alert.

(b) Show cause notice for levy of penalty for non-complianceunder section 272A(1) along with the Show Cause Notice for passing order under section 144 with modified income shall be issued to the Assessee. Such notice ideally would give a time of 15 days for response.

Penalty proceedings for non-compliance [Notification No. 6/2021, dated 17.02.2021]

(1) Any unit may, in the course of assessment proceedings, for non-compliance with any notice, direction or order issued under this Scheme on the part of the assessee or any other person, send recommendation for initiation of any penalty proceedings under Chapter XXI of the Act, against such assessee or any other person, as the case may be, to the National e-assessment Centre, if it considers necessary or expedient to do so.

(2) The National e-assessment Centre shall, on receipt of such recommendation, serve a notice on the assessee or any other person, as the case may be, calling upon him to show-cause as to why penalty should not be imposed on him under the relevant provisions of the Act.

(3) The response to show - cause notice furnished by the assessee or any other person, if any, shall be sent by the National e-assessment Centre to the concerned unit which has made the recommendation for penalty.

(4) The said unit shall, after taking into consideration the response furnished by the assessee or any other person, as the case may be,—

(a) make a draft order of penalty and send a copy of such draft to National e-assessment Centre; or

(b) drop the penalty after recording reasons, under intimation to the National e-assessment Centre.

(5) The National e-assessment Centre shall levy the penalty as per the said draft order of penalty and serve a copy of the same along with demand notice on the assessee or any other person, as the case may be, and thereafter transfer electronic records of the penalty proceedings to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act.]

Penalties in the course of assessment proceedings, for non-compliance with any notice, direction or order issued under Faceless Assessment Scheme [Notification No. 60/2020, dated 13.08.2020]

(i) Any unit may, in the course of assessment proceedings, for non-compliance with any notice, direction or order issued under this Scheme on the part of the assessee or any other person, send recommendation for initiation of any penalty proceedings under Chapter XXI of the Act, against such assessee or any other person, as the case may be, to the National e-assessment Centre, if it considers necessary or expedient to do so.

(ii) The National e-assessment Centre shall, on receipt of such recommendation, serve a notice on the assessee or any other person, as the case may be, calling upon him to show-cause as to why penalty should not be imposed on him under the relevant provisions of the Act.

(iii) The response to show - cause notice furnished by the assessee or any other person, if any, shall be sent by the National e-assessment Centre to the concerned unit which has made the recommendation for penalty.

(iv) The said unit shall, after taking into consideration the response furnished by the assessee or any other person, as the case may be,—

(a) make a draft order of penalty and send a copy of such draft to National e-assessment Centre; or

(b) drop the penalty after recording reasons, under intimation to the National e-assessment Centre.

(v) The National e-assessment Centre shall levy the penalty as per the said draft order of penalty and serve a copy of the same along with demand notice on the assessee or any other person, as the case may be, and thereafter transfer electronic records of the penalty proceedings to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act.

Specific penalty provisions

An indicative list of penalty provisions is provided in the table below. For complete list of penalties imposable reference can be made to Chapter XXI of the Act.

Section	Nature of default	Minimum penalty	Maximum penalty
271A	Failure to keep or maintain books of account, documents, etc., as required under section 44AA	Rs. 25,000	Rs. 25,000
271AA(2)	Failure to furnish information and document as required under section 92D(4)	Rs. 5,00,000	—
271B	Failure to get accounts audited under section 44AB or furnish such report as is required under section 44AB	1/2% of the total sales, turnover, or gross receipts	Rs. 1,50,000
271BA	Failure to submit report under section 92E	Rs. 1,00,000	—
271D	Taking or accepting any loan or deposit or specified sum in contravention of the provisions of section 269SS	Amount of loan/deposit/specified sum so taken or accepted	—
271DA	Receiving an amount of Rs. 2 lakh or more otherwise than by an account payee cheque/draft/use of electronic clearing system through a bank account in contravention of the provisions of section 269ST	100% of the amount of such receipt	—
271E	Repaying any deposit or loan or specified advance referred to in section 269T otherwise than in accordance with the provisions of section 269T	Amount of deposit so repaid	—
271J	Furnishing incorrect information in reports or certificates by chartered accountant, merchant banker or registered valuer	Rs. 10,000 for each report/certificate	—
272A(1)(a)	Failure to answer any question put to a person (who is legally bound to state the truth of any matter touching the subject to his assessment) by an income-tax authority	Rs. 10,000 for each default	—
272A(1)(b)	Failure to sign any statement made by person in course of income-tax proceeding	Rs. 10,000 for each default	Rs. 10,000 for each default
272A(1)(c)	Failure to comply with summons issued under section 131(1) to attend office to give evidence and produce books of account or other documents	Rs. 10,000 for each default	Rs. 10,000 for each default
272A(1)(d)	Failure to comply with notices issued under section 143(2), 142(1) or 142(2A).	Rs. 10,000 for each such default	Rs. 10,000 for each such default
272A(2)(c)	Failure to comply with a notice issued under section 133	Rs. 100 for every day during which default continues	Rs. 100 for every day during which default continues
272AA	Failure to comply with the provision of section 133B	Any amount up to Rs. 1000	Rs. 1000

INCOME TAX

Wednesday, 27 October 2021

Faceless Penalty Scheme, 2021

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