A major Direct Tax reform was introduced in 2020 with the launch of ‘Faceless Assessments’ and ‘Faceless Appeals’ processes on a technology platform, a first such attempt in tax administration worldwide. While the existing tax processes were manual and based on territorial jurisdiction, the new faceless processes were path-breaking reforms. These reforms in tax administration utilised concomitant technology systems, namely, digitised taxpayer services, data analytics, artificial intelligence and digital departmental workflows.

A pilot scheme was launched after the Finance Minister’s Budget speech of 2019, wherein the Faceless Assessment Scheme was announced. Around 58,000 cases were taken up for scrutiny assessment in the first cycle to test the new system. The new system comprises unbundled but collaborative decision-making by specialised units of tax officers and officials undertaking assessment, verification, technical and review. Pooling in of departmental knowledge was done in a collaborative exercise for achieving shared objectives.

The National e-Assessment Centre was set up as the single point of interface between the taxpayer and the tax officer, through electronic channels and with assessment processes, identity blind and anonymised. To this end, AI/Machine Learning and video-conferencing were deployed. Under the pilot scheme, in just four months after the first ‘faceless’ notice was issued in September, 2019, the first faceless (identity-blind) assessment order was passed in January 2020.

After requisite testing and building in the learnings, the Faceless Assessment Scheme was implemented across the country in August 2020. Faceless Appeals Scheme followed in October 2020, and Faceless Penalty Scheme was launched in January 2021.

The sheer speed with which the scheme went from implantation to replication, from ground zero to full operationalisation, demanded gruelling and sustained effort, and cross-functional collaboration. It involved analysing and upgrading the IT systems, addressing legal provisions, baselining processes, finalising rules of assignment and defining templates, formats, workflows, etc.

The faceless platform incorporated actual users’ suggestions in designing and testing the formats and processes, to make them as user-friendly as possible. Sustained outreach to inform and enable taxpayers and quick capacity-building of tax officers was a critical part of the mammoth exercise. A committee based approach was deployed to identify goalposts, set timelines and ensure best-in-class services in each area.

Legal issues and challenges were addressed by amending statutes, and making processes more transparent. Clear SOPs (Standard Operating Procedures) were issued to rationalise assessment and penalty processes, institute a system of adequate checks and balances, to provide prescriptions for adherence to principles of natural justice, and stipulate a framework for passing a reasoned assessment order.

Improving processes

The attempt to unbundle, automate and re-engineer large scale legal and compliance processes through technology platforms have produced seminal learnings. The real challenge, now, is handling the difficulties faced by improving processes and resolving grievances. Faceless tax processes are constantly endeavouring to address this vital area, which will go a long way in deepening faith in digital systems.

The legacy multiple grievance redressal mechanisms were dovetailed into the e-Samadhan platform introduced for faceless processes in August 2021, with a dedicated mail ID each for faceless assessment, appeal and penalty. Here, grievances are addressed and resolved by a committed team and reviewed by the officers in the hierarchy. Proactive response to incidents, regular FAQs, sustained outreach programmes using multi-media, e-mails, alerts and digital guides for educating taxpayers on their rights and responsibilities have also been undertaken.

So far, about 4.5 lakh faceless assessments, 4.1 lakh faceless penalty cases as well as about 2 lakh faceless appeals have been successfully handled. The learning loop from these cycles has led to refinement in the process of selection of cases, rationalisation of processes, expanding access of officers to multiple data sources, and reducing the turnaround time. Capacity building through identification of gaps and crowdsourcing of good investigation practices is a constant process in the faceless ecosystem.

The way ahead will involve constant upgradation of technological, human as well as other resources by continuous analysis of gaps, grievances and collaborative suggestions. CBDT is endeavouring take the initiative to new heights of innovation and establish new service standards.

The writer is Principal Commissioner of Income Tax, Patiala