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The institution of the Ombudsman has been functioning in Mumbai . This is perhaps a good time to assess how it has functioned so far and what needs to be done to improve its effectiveness.

2. Over the last six months, it has dealt with about 325 applications relating to administrative deficiencies in the functioning of the Income-tax Department in Mumbai. Taxpayers have complained about the delay in the issue of refunds, disposal of rectification applications, giving effect to Appellate orders, releasing seized valuables and disposal of interest-waiver petitions. Complaints have also been received about failure to give credit for taxes paid including tax deducted at source and high-handedness in lifting attachment on a bank account even after the tax had been paid. Of the 325 applications received so far, about 200 have been disposed of — on an average, between one or two months of the receipt of the complaint. Tax-payers have been allowed to file their complaints on plain paper and in any language of their choice. About 98 to 99% of the complaints have been settled by agreement in favour of the taxpayers; only about 1-2% of the cases resulted in awards.

3. The functioning of the system could have improved further if the taxpayers had in the first instance itself complied with the requirements of the Guidelines prescribed by the Government (the Income-tax Ombudsman Guidelines, 2006); for example, disposal could have been faster if taxpayers had first complained to the authority superior to the officer complained against, rather than to the Ombudsman directly. No application however was rejected on account of this defect. In all such cases, the Ombudsman has in the first instance been referring the applications to the Commissioner concerned for redressal of the grievance. When such redressal is not forthcoming, the taxpayer is given the option to revert back to the Ombudsman, so that the prescribed mechanism for redressal of the grievance could be activated.

4. At a technical level, however, the Guidelines would need to be liberalised. There are certain cases where gross injustice has been done to the taxpayers, but the Ombudsman was totally helpless in granting them relief. As an instance, some taxpayers who sought premature retirement were clearly seen to be eligible for relief u/s.89 of the Income-tax Act, in addition to the exemption available to them u/s.10. The jurisdictional High Court has already pronounced its decision in favour of the taxpayers. The Ombudsman could not grant the rebate prayed for by the taxpayers, because the Guidelines specifically debar him from considering any issue which is or has been the subject matter of a proceeding before a judicial or quasi-judicial forum or which has the effect of modifying the total income tax or penalty assessed. The consequence of this bar is that many small taxpayers — senior citizens, widows and retired persons who approached the Ombudsman for justice — had to return home disappointed. Since they had not and perhaps could not afford to appeal against the decision of the Assessing Officers, they were denied justice altogether. Thus, if severe limitations are placed on the powers of the Ombudsman, the very purpose of setting up this institution is defeated. It should always be possible for the Ombudsman to grant immediate relief to a distressed taxpayer, regardless of whether alternative remedies are available to him or not.

5. Currently, the Guidelines stipulate that the aggrieved taxpayer should have approached the superior authority of the officer complained against. The Guidelines do not specify the designation of such authority. Is it the Jt. CIT/Addl. CIT/ Commissioner or Chief Commissioner of the Assessing Officer concerned ? Since the Guidelines are vague, the Ombudsman in Mumbai has construed these stipulations to mean any of the above authorities. In other words, if any of the superior authorities has been approached once, at least a month earlier, that is taken as sufficient compliance with the rules.

6. The restriction itself however deserves to be reconsidered. A number of taxpayers have pointed out that the common man is very reluctant to approach superior authorities out of fear of annoying his Assessing Officer. This is because the latter often misconstrues such complaints as being directed towards him personally rather than as an attempt by the taxpayer to seek justice. Another similar restriction relates to debarring complaints where the superior authorities were approached but twelve months have lapsed since the reply was received or thirteen months have lapsed where no reply was received. In Mumbai, this limitation has been interpreted to run from the last occasion on which the assessee addressed any superior authority. In order to give further benefit of doubt to the taxpayers, if such time limitation sets in and if the taxpayer ’s grievance still remains unredressed, he is encouraged to write again to the superior authority, so that the time limit can be recomputed from such later date. Alternatively, the Ombudsman himself endorses a copy of the complaint to the superior authority for his consideration. In other words, the onus of referring the matter to the superior authority afresh is assumed by the Ombudsman himself. As a result, the requirements of the scheme are met by the Ombudsman on behalf of the assessee, without rejecting the complaint of the assessee.

7. It has thus been possible at a practical working level to help taxpayers overcome some of the difficulties faced by them, and in this way, take advantage of the scheme.

8. On the whole, the experience in Mumbai clearly suggests that with some changes in the Guidelines this institution could slowly emerge as an effective alternative mechanism for resolution of disputes. The procedure deployed is much simpler than that adopted by courts of law or even various Government departments. Considerable flexibility has been built into it. Taxpayers who have approached the Ombudsman have found it an effective way to obtain justice expeditiously and inexpensively. What should be of concern, however, to the Government is the comparatively smaller number of taxpayers who have taken advantage of the scheme so far. Perhaps greater publicity would make more taxpayers shed their reservations and approach the Ombudsman in much greater numbers for settlement of their grievances. From the Government’s point of view, the institution would justify itself, only if the taxpaying public takes full advantage of it.

Author/s :

Hardayal Singh,


Income-tax Department


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April 2024