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The new Income-tax Bill, 2025 was tabled in Parliament on 13th February 2025, with the objective of overhauling and simplifying the six decades old Income Tax Act, 1961. The Bill was subsequently referred to a Select Committee for detailed examination, and its report is expected to be tabled on the first day of the upcoming Monsoon Session of Parliament on 21st July 2025.

Whereas much debate has surrounded the substitution of the expression “notwithstanding anything” with “irrespective of” in the New Income-tax Bill, 2025, raising concerns over potential interpretational shifts, the more critical and deliberate yet subtle transformation in the legislative drafting of the faceless regime provisions has largely escaped attention from all quarters.

Faceless taxation regime was introduced as a transformative reform in the Indian direct tax landscape, designed to eliminate personal interface, reduce discretion, and bolster transparency. The architecture of faceless assessments, appeals, and penalties, as codified under the Income-tax Act, 1961, especially through the insertion of Section 144B and related provisions, represented a formidable thrust on the legal sanctity of the faceless regime.

Successive policy pronouncements from the highest levels of government—most notably the hon’ble Prime Minister and the hon’ble Finance Minister—have celebrated this move as a watershed in ensuring taxpayer rights, institutional neutrality, and administrative efficiency.

Yet, the new Income-tax Bill, 2025, which purports to overhaul the direct tax code and bring in clarity and structural reform, curiously retraces this progress. A deeper dive into the Income-tax Bill, 2025, which aims to replace the current Income-tax Act, 1961, reveals a surprising and counterintuitive development: instead of further strengthening the legal foundation and procedural codification of the faceless system, the Bill appears to weaken it.

By omitting codified procedures and replacing mandatory faceless mandates with open-ended discretionary future notifications or schemes, the new Bill reflects a retreat from the certainty, structure, and legislative sanctity previously accorded to faceless proceedings.

This article critically examines the shift in the legal architecture of faceless assessments, appeals, and penalties under the new Income Tax Bill, and highlights how this transformation, if enacted, would mark a significant departure from the intent and spirit of the faceless regime.

I. Faceless Assessments: From Codified Process to Prescribed Procedure

To understand the seemingly legislative dilution of the faceless assessment regime in the new Income-tax Bill, 2025, it is essential to trace the evolution of the same—from its origins as a notified Scheme to its formal codification in section 144B of the Income-tax Act, 1961.

With the launch of the "Honouring the Honest" platform on 13 August 2020, the CBDT notified the Faceless Assessment Scheme, 2019, bringing in all regular assessments and reassessments proceedings (excluding those under the Central and international tax charge) under the faceless regime.

This change was formalised via CBDT Notification No. S.O. 2745(E) dated 13.8.2020, which amended the earlier scheme and mandated that all e-assessments be conducted in a faceless manner.

Concerns about the legal validity of such a far-reaching change via delegated legislation led to the insertion of section 144B in the Income-tax Act, 1961, via the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, effective 1 April 2021.

This legislative codification of the faceless assessment scheme in a specific section in the Income Tax Act, gave statutory backing and binding legal sanctity to the detailed procedures, definitions, electronic communication protocols, and mechanisms for seeking personal hearings via video conferencing, in the faceless assessment proceedings.

Section 144B comprehensively outlined the step-by-step process for faceless assessments, from automated case allocation to communication, response handling, technical review, draft and final order issuance, and eventual jurisdictional transfer.

This codification was not merely administrative—it accorded a statutory right to procedural fairness for taxpayers and legally restrained the assessment machinery from arbitrary conduct.

Section 273 of the Income-tax Bill, 2025: A Regressive Shift

In stark contrast, Clause 273 of the new Income Tax Bill, 2025 which deals with faceless assessments, merely states:

“273(1) Notwithstanding anything to the contrary contained in any other provisions of this Act, the assessment, reassessment or recomputation under section 270(10) or 271 or 279, as the case may be, with respect to the cases referred to in sub-section (2), shall be made in a faceless manner as per such procedure, as prescribed in this behalf.”

Thus, unlike subsections (1) and (6) of existing section 144B of the existing Act, the new clause 273 in the new Bill, does not contain any of the operational safeguards or procedural codifications. It omits critical provisions relating to:

• Well defined legislative framework of the procedure for the conduct of faceless assessments,

• E-authentication and electronic delivery of communications,

• Right to personal hearing through video conferencing,

• Procedural checks through automated allocation and review mechanisms,

• Standards and protocols for ensuring procedural fairness.

In effect, the detailed and legislatively codified framework governing faceless assessments has now been decodified and replaced with an open-ended provision, delegating all procedural aspects to future notifications and rules.

This represents a fundamental retreat from the legislative discipline embedded in Section 144B of the existing Act. The entire machinery of checks, balances, and procedural mandates has been delegated to subordinate legislation, to be determined by rules or notifications at a future date.

This apparently innocuous line carries significant implications:

a. Procedural Discretion: The detailed procedure previously mandated for the conduct of faceless assessments under the Act itself, will now be left to the subordination and delegated legislation. This reduces the legal sanctity of the process and reintroduces discretion in a scheme that was designed to eliminate it.

b. Lack of Legislative Oversight: By omitting the detailed procedure from the statute, Parliament effectively outsources procedural integrity to administrative notifications and rules, thereby diluting legislative accountability.

c. Reversion to Scheme-based Notifications: This change signals a return to the pre-144B era, where faceless assessments were governed by CBDT schemes, which could be amended or withdrawn without parliamentary approval. The faceless assessment regime, having graduated to statutory legitimacy, is now demoted back to the domain of administrative schemes and CBDT circulars, which lack the force of law and are susceptible to unilateral change.

d. Legal Vulnerability: The codification of Section 144B was not merely procedural — it was judicially tested and became an enforceable right for taxpayers. Replacing it with delegated legislation weakens legal remedies in case of procedural lapses by the department.

In effect, what was once a statutory right has now become an administrative expectation. The proposed legislation, instead of codifying and reinforcing the faceless regime, dismantles its legislative framework, reverting back to a discretionary model. This backward shift signals a regression, moving away from codified statutory safeguards and back towards a framework driven by future notifications.

It is difficult to decipher the true intent behind such an omission of critical procedural safeguards—especially those codified in sub-sections (1) and (6) of section 144B and the statutory right to a virtual personal hearing—in the new section 273. Whether this is a mere attempt to reduce the word count of the bare provision and shift operational details to a future scheme or notification, or a conscious move to dilute the growing body of judicial rulings from High Courts across India that have struck down faceless assessment orders for non-compliance with section 144B, remains a matter of concern.

II. Faceless Appeals: Silent Omission of Subsection (6B) of Section 250 of the existing Income Tax Act

The subsection (6B) of section 250 of the existing Income Tax Act was inserted as an enabling clause in the Legislature, to render statutory recognition and the binding legal sanctity to the Faceless Appeal Scheme, for the conduct of appellate proceedings before the CIT(Appeals) in a faceless manner.

Section 359 of the New Bill: Absence of Mandatory Faceless Adjudication

The new Bill’s Section 359, which deals with appellate procedures, is conspicuously silent on the manner of conduct of appeals—there is no mandate to conduct these in a faceless manner. Instead, the entire discretion is left to the general provision under clause 532, which provides:

“The Central Government may, by notification, make a scheme for…….”

The substitution of a specific, mandatory direction with a general, permissive clause is not merely a stylistic change—it has far-reaching implications:

• The erstwhile mandatory nature of faceless appeals is diluted.

• The taxpayer now faces uncertainty regarding whether the appeal will be assigned to a faceless unit or a jurisdictional authority.

• The absence of codified processes opens the door to subjectivity and variability in appellate conduct.

III. Faceless Reassessments: Omission of Section 151A: A Void in Reassessment Mechanism

Recognising the controversy and potential for misuse in reassessment proceedings, section 151A was inserted in the existing Income Tax Act, to ensure that the sacrosanct window of reassessment proceedings, is also subject to faceless protocol.

Conspicuously, the new Bill does not contain any specific pari-materia clause akin to the existing section 151A of the existing Income Tax Act. It only contains a residual and open-ended clause 532, offering CBDT a discretionary hand, rather than imposing a legislative obligation as mandated in section 151A of the existing Act.

Legal Jurisprudence in Flux: Legal Implications of Omission of Section 151A

The conspicuous omission of a specific mandate akin to Section 151A of the Income-tax Act, 1961, in the proposed Income-tax Bill, 2025, assumes added significance in light of the rapidly evolving judicial discourse on the faceless regime, particularly in the context of reassessment proceedings. Section 151A currently provides a clear statutory command that both the issuance of notice under Section 148 and the conduct of the entire reassessment proceedings must be undertaken in a faceless manner. This has led to a series of legal challenges, where assessees have questioned the jurisdiction of local Assessing Officers (AOs) to issue reassessment notices in violation of the mandate that such actions be taken by the designated faceless assessment units. A plethora of litigations—where the issuance of reopening notice by a jurisdictional AO instead of the faceless unit has been challenged—is now pending adjudication before the Hon’ble Supreme Court.

In this backdrop, the absence of a counterpart to Section 151A in the new legislation, and the insertion instead of a vague, discretionary enabling clause in Section 532, appears to be more than inadvertent. It is arguably a deliberate legislative choice, designed to circumvent judicial scrutiny by removing the statutory mandates that are presently being interpreted and enforced by courts. Such an approach risks not only nullifying emerging jurisprudence but also creates a legislative vacuum where procedural safeguards are subject entirely to administrative fiat.

This shift may shield future proceedings from procedural challenges but does so at the cost of legal certainty, transparency, and the rule of law and the core values which the faceless regime was intended to institutionalize. While, the new Bill does introduce a revised reassessment framework, it fails to incorporate the faceless mandate previously codified.

IV. Faceless Penalty Proceedings: Vanishing Mandate of Section 274(2A)

The subsection (2A) of section 274 of the existing Income Tax Act was inserted as an enabling clause in the Legislature, to render statutory recognition and the binding legal sanctity to the Faceless Penalty Scheme, for the conduct of penalty proceedings in a faceless manner.

Absence of Faceless Mandate in New Bill

In the Income-tax Bill, 2025, the provisions relating to penalties (particularly clause 471 onward) do not contain any analogous clause. There is no legislative requirement for penalty proceedings to be conducted in a faceless manner.

The omission is particularly alarming given the subjective nature of penalty imposition and the need for insulation from personal biases. Once again, the safeguard is diluted, and taxpayers are left at the mercy of Board notifications that may or may not implement faceless processes.

V. Section 532: The Catch-All Clause in New Bill that Undermines Specific Mandates

Clause 532 is a general enabling provision in the new Income Tax Bill, intended to empower the Central Government to extend faceless functioning to any provision or process. However, its phrasing—“may... make a scheme”—is purely discretionary and lacks the mandatory character of earlier provisions.

Therefore, critically:

• Section 532 lacks any procedural contours or minimum standards.

• It operates in administrative vacuum, without guarantee of implementation timelines or uniformity.

• It introduces ambiguity into core processes that were previously clear and enforceable under the statute.

The move from existing mandatory statutory legislative provisions to discretionary administrative powers represents a dilution of the faceless regime reform, both in spirit and in substance.

VI. Dissonance Between Policy Pronouncements and Legislative Drafting

The dilution of the faceless regime in the Income-tax Bill, 2025, is particularly perplexing when juxtaposed against public statements by government leadership. The Hon’ble Prime Minister and Finance Minister have consistently upheld faceless tax administration as a flagship reform, aimed at eradicating corruption, building trust, and ushering in a technology-driven tax ecosystem.

However, the legislative drafting in the new Bill fails to reflect this vision. Instead of deepening and strengthening the faceless regime, it subverts the very legislative scaffolding that enabled it to function impartially and efficiently.

VII Recommendations and Way Forward

To preserve the gains of the faceless regime and ensure that they are not diluted in the transition to the new law, the following corrective measures are recommended:

a. Codify Key Procedural Safeguards: At the very least, essential steps — like draft notices, response timelines, automated allocation, prohibition on physical interface — should be embedded in the statute itself.

b. Retain Mandatory Language: The words “shall be conducted in a faceless manner” should be restored in provisions dealing with assessments, appeals, reassessments, and penalties.

c. Avoid Over-Reliance on Board Notifications: While administrative flexibility is important, core processes must remain under legislative control to ensure taxpayer rights are protected.

d. Ensure Uniform Application: The faceless regime should not be left to sectoral or geographic variation based on Board discretion. A nationwide standard must be maintained.

e. Subject Rule-Making to Parliamentary Scrutiny: Rules issued under Section 532 should be laid before Parliament to maintain democratic oversight.

VIII. Conclusion: Reform Requires Reinforcement, Not Retreat

As India stands at the cusp of overhauling its direct tax law after more than six decades, the Income-tax Bill, 2025 offers a historic opportunity to reimagine and reinforce administrative mechanisms. However, in the case of faceless adjudication, the Bill has regrettably opted for retreat over reinforcement.

The systematic dismantling of statutory safeguards and codified processes under the guise of simplification and delegation is not mere legislative housekeeping—it has the potential to erode hard-won taxpayer protections and disrupt the very trust the faceless system was designed to cultivate.

Unless these provisions are revisited and re-codified with legislative clarity, consistency, and compulsion, the faceless regime risks becoming an optional tool rather than a constitutional commitment.

The faceless system was never about anonymity alone—it was about accountability through system-driven governance. That ideal deserves not just policy applause, but statutory permanence.

[This Article, authored by our Founder, Shri Mayank Mohanka, FCA, has also been published in Taxmann with the Citation [2025] 176 taxmann.com 354.]