MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 12th January, 2021
INCOME-TAX
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:__
- 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
- (c) seeking technical assistance or conducting verification;
- (x) the National Faceless Penalty Centre shall, upon receipt of request, referred to in sub-clauses
(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 modification 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.
