Before 2020, every scrutiny assessment involved direct interaction between the taxpayer (or their CA) and the Assessing Officer assigned to their geographic jurisdiction. This created opportunities for:

• Corrupt practices — payments to expedite or favourably conclude assessments
• Inconsistent outcomes — different AOs treating similar cases differently
• Geographic concentration of high-value cases in a few offices
• Harassment — taxpayers summoned repeatedly for information

The Faceless Assessment Scheme addressed all of this by:

• Eliminating direct taxpayer-AO interaction entirely
• Routing all cases through the National Faceless Assessment Centre (NFAC) in Delhi
• Randomly assigning Assessment Units, Verification Units, Technical Units, and Review Units — located anywhere in India
• Making the identities of the officers involved invisible to both the taxpayer and (in theory) to each other
• Requiring all communication via the IT portal — creating a documented, auditable trail

The taxpayer never knows which specific AU, VU, TU, or RU is handling their case — all communication is from NFAC. Even the AU does not know the taxpayer’s personal identity in the same direct way as the old jurisdictional system.

Faceless assessment applies to most regular scrutiny cases. However, certain categories are explicitly excluded and handled through the traditional jurisdictional system:

• 1Case Selection — Automated and Risk-Based
  The CBDT’s AI-based risk management system selects cases for scrutiny. Selection is based on data mismatches (AIS vs ITR), high-value transactions, sector-specific risk parameters, or random sampling. You receive no advance warning.
• 2Section 143(2) Notice — Scrutiny Initiated
  A notice under Section 143(2) arrives through the IT portal — this must be issued within 6 months from the end of the Assessment Year. For AY 2025-26, the deadline is September 30, 2026. This notice formally initiates the scrutiny — respond by the due date or risk an ex-parte assessment.
• 3Section 142(1) Questionnaire — Information Requested
  The AU sends a detailed questionnaire via NFAC listing specific information and documents required. This is typically the most document-intensive stage — bank statements, purchase/sale contracts, investment proofs, business records. Respond thoroughly and within the given time.
• 4Show Cause Notice (SCN) — Before Any Addition
  Before making any addition to your income or disallowing any claim, the AU must issue a Show Cause Notice explaining what additions it proposes and why. This is your critical opportunity — respond with evidence, case law, and legal argument. This stage often determines the final outcome.
• 5Draft Assessment Order
  The AU prepares a draft order. If there are additions proposed, it goes to the Review Unit. If the RU disagrees, the matter may go to a supervisory RU. The draft order is sent to you for final objections before it is finalised.
• 6Final Assessment Order
  NFAC issues the final assessment order — with the demand (if any). This order carries the same legal standing as any traditional assessment order and can be challenged in appeal.
• 7Penalty Proceedings (if applicable)
  If additions are made, penalty proceedings under Section 270A (misreporting/underreporting) may follow automatically. Under ITA 2025, immunity from penalty is available through Section 440 (Form 161) — replacing the old Section 270AA (Form 68) route.

This is one of the most common questions taxpayers and CAs ask about faceless assessment. The answer is nuanced:

• Physical hearing before an AO: Not available under the faceless scheme — this is by design
• Video conferencing hearing: Available on request — but not automatic and not guaranteed
• How to request: Submit a formal written request through the e-Filing portal during the response to the Show Cause Notice stage
• Grant is discretionary: The Assessment Unit may grant or decline — there is no right to insist

The Facts

Rahul (Delhi CA) received a 143(2) notice for AY 2025-26 in August 2025. The AIS showed a ₹35 lakh credit in his current account that did not match his declared professional income of ₹28 lakh.

Stage 1 — 142(1) Questionnaire

NFAC sent a questionnaire asking for: bank statements for the year, client-wise fee receipts, explanation of the ₹35 lakh credit, contract copies for large engagements, and Form 26AS reconciliation.

Rahul compiled all documents — bank statements showed ₹28 lakh professional fees + ₹7 lakh personal loan repayment received from a friend (not income). He submitted everything through the portal with a detailed covering note within 20 days.

Stage 2 — Show Cause Notice

Despite the explanation, the AU proposed adding ₹7 lakh as “unexplained cash credit” — stating the loan explanation was not substantiated. Rahul filed a detailed SCN response including:

• Loan agreement with his friend (dated 3 years earlier)
• Bank transfer record of the original loan given
• Friend’s ITR showing the repayment outflow
• WhatsApp confirmation messages (supplementary)

Outcome

After reviewing the SCN response, the AU dropped the proposed addition. Final assessment order: income assessed at ₹28 lakh — same as declared. No demand. No penalty.

Lesson: The SCN stage is decisive. A well-documented, specific response — not a generic objection — is what closes proposed additions.

• Respond on time, every time: Missing a portal deadline in faceless assessment can result in an ex-parte order — the AU proceeds based on available information, which is almost always unfavourable
• Be specific, not generic: Generic responses like “the income is correctly disclosed” without documentary evidence are routinely dismissed. Each query needs a specific factual and documentary answer
• Organise submissions by query number: Number your responses to match the query numbers in the questionnaire — this makes it easier for the AU to process and reduces the chance of something being missed
• Cite relevant case law in the SCN response: If the proposed addition has been rejected by courts in similar facts, cite those decisions — the Review Unit takes judicial precedents seriously
• Request extension proactively: If you need more time to gather documents, request an extension before the deadline — not after. Extensions are routinely granted for genuine reasons
• Engage a CA with faceless experience: Return filing and scrutiny are very different skills. A CA who handles faceless proceedings regularly knows what the AU typically asks for, what documentation is critical, and how to frame arguments effectively

Mistake 1 — Not checking the IT portal regularly:
All faceless notices, questionnaires, and orders arrive through the portal — not by post. If you are not monitoring your portal account, you will miss deadlines. Set up email and SMS alerts on your registered contact details.

Mistake 2 — Submitting partial responses and expecting follow-up:
In a faceless system, there is no officer to call and ask “what else do you need?” Submit everything relevant in one comprehensive response. If you miss something the first time, it complicates subsequent submissions and raises questions about why it was not provided initially.

Mistake 3 — Treating the draft order stage as final:
You have the right to object to the draft assessment order before it is finalised. This final objection stage is an underutilised opportunity — many taxpayers do not engage at this point and miss a chance to correct errors before the order is issued.

Mistake 4 — Not applying for Section 270AA immunity when eligible:
If additions are made and you qualify (tax and interest paid, no misreporting), applying for immunity from penalty under Section 270AA (or Section 440 under ITA 2025) within the prescribed time can eliminate the penalty entirely. Many eligible taxpayers miss this window.
Rectification Under Section 154 — How to Fix Assessment Errors