Faceless Assessment Scheme: CBDT 2024 Procedure Walkthrough and Taxpayer Rights

The Scenario

Priya, a 34-year-old product manager from Pune, opens her e-Filing dashboard on a Tuesday evening and finds an unfamiliar message: a notice under Section 143(2) of the Income-tax Act 1961, served by the National Faceless Assessment Centre (NaFAC), Delhi. Her ITR for AY 2024-25 has been picked up for scrutiny. The notice gives her 15 days to respond and warns that all proceedings will be conducted electronically, with no physical visit to any income-tax office. Her gross salary was Rs 22,80,000 and she had claimed Rs 1,50,000 under Section 80C, Rs 50,000 under 80CCD(1B) and Rs 2,00,000 of HRA exemption — all under the old regime. She does not know an Assessing Officer's name. She does not know which charge or city is handling her case.

This is exactly how the Faceless Assessment Scheme is supposed to feel — anonymous, paperless, time-bound. The scheme was inserted as Section 144B of the Income-tax Act 1961 by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020, with the original notification dated 13 August 2020. CBDT has since issued procedural amendments in 2022 and again in 2024 to fold in video conferencing, an additional show-cause window, and a fully faceless penalty arm. Priya's case is one of several lakh routed through the system every year.

Statutory Answer

Section 144B is the spine of the scheme. It overrides the older "physical" Section 143(3) wherever applicable and lays out a strict, step-driven sequence. The legal architecture splits the work across four distinct units, none of which knows the taxpayer's identity:

The case enters the system when the National Faceless Assessment Centre auto-allocates it to a randomly chosen Assessment Unit using the Computer Assisted Scrutiny Selection (CASS) algorithm. The taxpayer never sees this allocation — only NaFAC itself communicates with her through the e-filing portal and registered email.

The chronology of compulsory steps is fixed by Section 144B(1):

1. NaFAC issues the Section 143(2) notice. The statutory window after the Finance Act 2021 amendment is 3 months from the end of the financial year in which the return was furnished.
2. The taxpayer files an electronic response within the period stated in the notice (typically 15 to 30 days).
3. The Assessment Unit may call for further information through NaFAC, and may refer the case to the Verification Unit or Technical Unit.
4. Before any addition is made, NaFAC must serve a Show Cause Notice (SCN) along with the proposed order or proposed variation, giving the taxpayer at least 7 days to respond — Section 144B(6)(viii).
5. The taxpayer can request a personal hearing by video conferencing under Section 144B(6)(viii)(B) — and this request "shall be granted" if it is made before the limitation date.
6. After considering the reply, NaFAC passes the final assessment order, signed digitally, with a Document Identification Number (DIN) embedded as required by CBDT Circular 19/2019 dated 14 August 2019.

The overall limitation for completing the assessment is set by Section 153(1): 12 months from the end of the assessment year for AY 2022-23 onwards. For AY 2024-25, that means the order must ordinarily be issued on or before 31 March 2026, subject to the specific extensions in the second proviso to s. 153.

If the taxpayer is aggrieved by the final order, the appeal lies before the Faceless Commissioner of Income-tax (Appeals) under the Faceless Appeal Scheme 2021. The appeal fee, payable through Challan ITNS-280, ranges from Rs 250 to Rs 1,000 depending on the assessed income (Section 249).

Worked Resolution

Let us run Priya's matter end to end, with specific numbers, to show how a careful response avoids an addition.

The Section 143(2) notice flags two issues for verification:

1. HRA claim of Rs 2,00,000 — rent receipts and PAN of landlord required.
2. 80CCD(1B) deduction of Rs 50,000 — NPS Tier-I transaction proof required.

Priya is on the old regime for AY 2024-25. One important carve-out applies here: 80CCD(1B) is NOT allowed in the new regime under any circumstances, and the additional Rs 50,000 NPS deduction is therefore an old-regime-only benefit. By claiming it, Priya has implicitly opted for the old regime. The numbers her notice references:

If both contested deductions of Rs 2,50,000 are denied, taxable income climbs to Rs 20,80,000, raising tax to Rs 4,49,000 plus cess of Rs 17,960 — a net additional demand of approximately Rs 78,000 plus interest under sections 234B and 234C. A reasonable Section 270A "under-reporting" penalty at 50% of tax on the addition could add another Rs 39,000.

Priya's response strategy:

• HRA: She uploads twelve months of rent receipts (Rs 18,000 per month, total Rs 2,16,000), the registered rent agreement, and her landlord's PAN. PAN is mandatory because annual rent exceeded Rs 1,00,000 (CBDT Circular 8/2013 dated 10 October 2013). The eligible exemption under s. 10(13A) is the lower of: actual HRA received, 50% of basic in metro cities, or rent paid minus 10% of basic. She uses the HRA exemption walkthrough on Oquilia to reconfirm the formula. The Rs 2,00,000 claim is intact.
• 80CCD(1B): She uploads the NPS Tier-I transaction statement showing four quarterly contributions of Rs 12,500 each (PRAN ending in 4421) and the contribution receipts generated by the Central Recordkeeping Agency. The deduction stands.

Within 18 days of the SCN, NaFAC passes a "no addition" final order. The DIN is embedded; Priya downloads the PDF and stores it for the full retention window prescribed under Section 149.

If she had instead missed the SCN window, the Assessment Unit would have proceeded under Section 144B(9) read with Section 144 to a best-judgement assessment — accepting the tentative additions and triggering recovery proceedings.

Where the calculators help

Before responding to any faceless notice, run the numbers in two places:

• The Income Tax Calculator shows the marginal impact of each contested deduction.
• The Old vs New Regime calculator confirms whether the regime choice is still optimal — for FY 2025-26, the new-regime Section 87A rebate is Rs 60,000 up to a total income of Rs 12,00,000, materially lowering the breakeven against an old-regime claim like Priya's. Note again that switching to the new regime would forfeit her 80CCD(1B), HRA exemption and 80C deductions, since 80CCD(1B) is NOT allowed in the new regime.
• The TDS calculator helps reconcile Form 26AS and AIS entries cited in the notice; for a deeper walkthrough of the 26AS-vs-AIS reconciliation step, see the tax credit mismatch resolution guide.

Taxpayer Rights Under Faceless Assessment

The procedural updates in 2024 sharpened four discrete rights every assessee should know:

1. Right to written reasons. Every variation proposed must be accompanied by reasons, the statutory provision invoked, and a quantification — bare assertions are not permitted.
2. Right to video conferencing. Once requested, a hearing through the Income Tax Business Application (ITBA) VC platform "shall be granted" — Section 144B(6)(viii)(B). The hearing is recorded and the recording forms part of the assessment record.
3. Right to additional time. A taxpayer can seek adjournment in writing through the portal; NaFAC routinely grants 7 to 15 days where reasons are bona fide and supported.
4. Right to a reasoned final order on materially altered facts. If the final order proposes additions or reasoning that materially deviate from the SCN without a fresh opportunity to be heard, the order is open to challenge — a position upheld by the Bombay High Court in Mantra Industries Ltd. v. NaFAC.

If procedure is violated — for example, if no SCN was served before an addition — the order is liable to be set aside as "non est" under Section 144B(9). The Madras High Court has quashed faceless orders on exactly this ground in the Salem Sree Ramavilas Chit Co. line of cases.

FAQ

Can I refuse a faceless assessment and demand a physical hearing?

No. Section 144B applies notwithstanding anything contained in any other provision of the Act. The only exceptions are cases of search and seizure under Sections 132 and 132A, and matters specifically excluded by CBDT order — which today are limited to international taxation cases handled by Central Charges. For all regular scrutiny, the faceless route is mandatory.

What is the difference between Section 144B and the old Section 143(3)?

Section 143(3) is the older provision that allowed face-to-face scrutiny by a jurisdictional Assessing Officer. Section 144B is the overriding faceless mechanism — a single multi-unit team handles drafting, verification, technical input and review, all anonymous to the taxpayer. Final orders are still passed "under Section 143(3) read with Section 144B".

What if I do not respond to the Section 143(2) notice on time?

NaFAC will serve a reminder. If you remain non-responsive, the case is escalated to a best-judgement assessment under Section 144, where the Assessment Unit makes its own estimate and you lose the chance to argue. Penalty under Section 272A(1)(d) — Rs 10,000 per default — also applies.

Are penalty proceedings also faceless?

Yes. The Faceless Penalty Scheme brings Sections 270A, 271AAB and 271AAC within the same anonymous framework, with a separate National Faceless Penalty Centre. Show-cause notices, replies and the final penalty order all flow through the e-filing portal.

Can my Chartered Accountant file the response on my behalf?

Yes, provided your CA is added as an Authorised Representative under the e-filing portal "Authorised Partners" tab. The CA can attend video conferences using their own login, with the taxpayer present where required. For TDS matters, Form 26A may also need to be uploaded.

What documents should I keep ready before any faceless notice arrives?

At a minimum: Form 16, Form 26AS, the Annual Information Statement (AIS) and Taxpayer Information Summary (TIS), all bank statements for the financial year, rent receipts and landlord PAN if HRA is claimed, premium-paid certificates for 80C and 80D items, and the NPS Tier-I transaction statement for any 80CCD(1B) claim.

How long does the entire faceless assessment usually take?

From issue of Section 143(2) notice to final order, typical scrutiny cases close in 6 to 9 months. The statutory ceiling under Section 153(1) is 12 months from the end of the assessment year — so AY 2024-25 cases must ordinarily be closed by 31 March 2026, subject to the specific extensions allowed by the second proviso to Section 153.