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Comparative Analysis between the current Banking Ombudsman and the abolished Tax Ombudsman

The Banking Ombudsman has been a success to a large extent in catering to the needs of the aggrieved customers of the bank. However, very recently the Income Tax Ombudsman was abolished by the central government. This section aims to comparatively analyze the differences between the two Ombudsmen, and what factors determined the two contrary outcomes. The central government abolished the institutions of direct and indirect tax Ombudsmen with the reasoning that the alternative redressal mechanisms were functioning better and citizens preferred them to the tax ombudsmen.

The government claimed that the public was satisfied with the workings of Centralised Public grievance Redressal and Monitoring System (CPGRAMS) and Aaykar Seva Kendra and therefore the complaints registered with the Ombudsman had started to drop to single-digit numbers.

It was stated that the institution of Ombudsman had been unable to fulfill its purpose. It is important to note that the central government has the power to amend the structure of the Ombudsmen in order to make it function more successfully, as it did in 2005 by enhancing the banking ombudsmen and widening its scope. However, in the tax ombudsmen case, they chose to dissolve the institution instead of making any changes for improvement.

The primary responsibility of the taxpayer Ombudsman was to manage the grievances of the taxpayers, similar to how the banking Ombudsman does with every bank’s aggrieved customers. The tax Ombudsman was also tasked with informing the CBEC and finance ministry about the matters that increased the compliance burden for taxpayers. It was also required to recommend remedies for the complaints faced.

This is similar to how the Banking Ombudsman functions by giving guidelines to banks, to avoid conflict with clients. The tax Ombudsman was also expected to draft a yearly report that assessed the standard of working of the tax departments, through a reflection of the complaints managed by him. He also had to provide suggestions for improving the administration.[1]

The key differences between the two ombudsmen are discussed to understand the different outcomes of both.

Firstly, taxpayers may have hesitated to complain because they are likely to be dealing with the same officials in the future as well and do not want to put themselves in a position where any official holds a grudge against them. Customers may not hesitate to complain against banks to the ombudsman, because they know that if their complaints aren’t resolved, or if it forms a bias in the mind of the bank employees against them, they can always transfer their accounts to another bank.

The banks will have more to lose if there is little customer retention and the competitive banks will get their business. The tax departments have no competition and they do not need to worry about retaining taxpayers. That is one of the significant differences between the two. [2]

One major cause of the failure of the tax ombudsmen is that the posts of ombudsmen, at different locations were vacant for a long duration. This made the public believe that the tax ombudsmen were irresponsible. It compelled the public to opt for parallel institutions like CPGRAM. The efficiency of the CPGRAM and Aaykar Seva Kendra is surely a determinative factor for the public shift from the ombudsman.

Therefore the second difference between the two ombudsmen, are the different alternatives available to complainants. When it comes to the banking ombudsman, the only alternative is the consumer forum. The degree of financial loss will decide whether it’s the national, state, or district consumer forum. The forum will require evidence to be readily available with a specific and articulate complaint against the bank. Even though a lawyer is not mandatory, having one is highly beneficial.[3]

The Banking Ombudsman simply requires you to mention all your information when filing a complaint, and even if you do not follow the format and have no legal assistance, it does not make much of a difference. This makes the Banking Ombudsman far more approachable and convenient for a common man than the alternative of a consumer court.[4] Additionally, the Ombudsman does not charge a fee but the court would based on the amount in dispute. The procedure of the Banking Ombudsman is relatively informal and quicker than as compared to court. For these reasons, the public is less likely to opt for courts in place of the Banking Ombudsman but when it comes to the tax ombudsman, the public may prefer the alternative.[5]

The third difference between the two Ombudsmen is the upper limit of the amount they are authorized to award to the complainant. The maximum amount that the tax Ombudsman could grant is Rs. 5000, which is a mere gesture and not sufficient compensation. However, the Banking Ombudsman can grant an award up to Rs.20 lakh, and even give Rs. 1 lakh for the mental agony, inconvenience and delay endured by the customer. The amount of compensation that may be potentially received can incentivize a customer to register a complaint if he has been wronged by the bank, but in case of tax ombudsman, people are less likely to bother with the entire procedure for such a small amount.

Fourthly, complainants could not access Tax ombudsman online but the Banking Ombudsman is digitally updated. This makes the process for bank customers hassle-free but the aggrieved taxpayers do not enjoy this convenience.

Last but not the least, although both the ombudsmen are only authorized to handle the complaints that have emerged on specified grounds, but in the case of the Banking Ombudsman there have been progressive amendments to increase the scope of these grounds. For instance, in the 2017 revision of the Scheme, mis-selling of third party products by the banks was also included as a ground for complaint. However, tax ombudsman did not undergo similar expansion of grounds.

End-Notes:
  1. Majumdar, S., 2019. Indirect Tax Ombudsman: Premature Closure - India Legal. [online] India Legal. Available at: [Accessed 11 May 2020].[Majumdar]
  2. Ibid
  3. National Consumer Disputes Redressal Commission (Ncdrc.nic.in, 2020) accessed 23 May 2020
  4. National Consumer Disputes Redressal Commission (Ncdrc.nic.in, 2020) accessed 23 May 2020
  5. Majumdar, Supra, Note 14

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