Section 142B: Faceless Inquiry, Special Audit, and Valuation

Section 142B of the Income Tax Act, 1961 empowers the Central Government to make schemes for faceless inquiry, direction for special audit, and valuation to enhance efficiency, transparency, and accountability in tax proceedings. The intention is to minimize direct interface between taxpayers and tax authorities and to ensure impartial and technologically advanced administration.

What Does Section 142B Cover?

Section 142B authorizes the government (primarily through the Central Board of Direct Taxes, CBDT) to notify schemes for:

• Issuing notices under Section 142(1) (calling for accounts, documents, or evidence before assessment).
• Making inquiries before assessment under Section 142(2).
• Directing the assessee to have their accounts audited under Section 142(2A) (“special audit”).
• Estimating the value of any asset, property, or investment by a Valuation Officer under Section 142A.

These functions can now be carried out in a faceless manner, utilizing digital platforms and team-based approaches, reducing subjectivity and potential for malpractice.

Objectives of the Faceless Scheme

• Elimination of Direct Interface:Reduces the need for physical meetings between officials and taxpayers.
• Efficiency and Specialization:Assigns work using teams of tax officials, leveraging their specific expertise.
• Dynamic Jurisdiction:Team-based approach means any case can be digitally allocated across the country.
• Transparency and Accountability:Ensures objective proceedings through electronic records and communications.

Key Features

Special Audit (Section 142(2A))

• When is it Directed?
  Ordered if accounts are complex or there are doubts about correctness.
• Procedure:
  Issued after giving the assessee an opportunity to be heard. The audit is conducted by an independent Chartered Accountant or Cost Accountant nominated by authorities, and costs are borne by the government.
• Reporting:
  Reports are submitted through prescribed forms (e.g., Form 6B for audit, Form 6D for inventory valuation).

Valuation (Section 142A via Faceless Scheme)

• A reference may be made to a Valuation Officer for fair market value determination of assets, property, or investments.
• The entire process (from issuance of notice to the Valuation Officer’s report) is conducted through digital platforms with all communications tracked electronically.

Recent Developments

• The Faceless Inquiry or Valuation Scheme, 2022was notified to formalize these procedures.
• No directions under Section 142B are to be issued after 31 March 2022, following the transition to updated provisions in the law, but the core objectives and framework remain relevant for understanding assessment proceedings.

Summary Table