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Tax ombudsmen abolished: Experts raise concern

  • In the absence of the tax ombudsmen, taxpayers should be alert to the structure of the available alternative grievance systems and their limitations
  • Govt said the number of new complaints had fallen to single digits, implying that fewer aggrieved taxpayers were approaching these agencies

Earlier this month, the government decided to abolish the offices of the Income Tax Ombudsman and the Indirect Tax Ombudsman. An ombudsman is a quasi-judicial body established to address the grievances of customers.

A press release issued by the Cabinet stated that the ombudsman had “failed in its objectives". It said the number of new complaints had fallen to single digits, implying that fewer aggrieved taxpayers were approaching these agencies.

However, experts have pointed out that the inefficiency of the ombudsman was largely on account of failure to fill vacant positions and create a tech-friendly process. While the Income Tax Ombudsman resolved cases of delayed refunds and other taxpayers’ complaints, the Indirect Tax Ombudsman performed functions such as giving effect to unimplemented instructions of entities like the Central Board of Excise and Customs (CBEC).

What did Ombudsman do?

The Income Tax Ombudsman was set up in 2010 to receive and settle complaints from taxpayers. It could settle these complaints either through agreements or by passing an award. An award was legally binding on the income tax department, provided it was accepted by the complainant. If the complainant rejected the award, he/she could approach a court of law.

As a quasi-judicial body, the ombudsman had the power to ask the income tax authority to provide information or furnish certified copies of any document relating to the complaint. The ombudsman had the power to adjudicate on a wide range of complaints such as those pertaining to refunds, non-acknowledgement of letters or documents, delay in allotment of Permanent Account Number (PAN) and non-credit of tax paid, including tax deducted at source. To see full list, click here.

Taxpayers could only lodge a complaint with the ombudsman after they had first approached the authority superior to the one they were complaining against and the resolution by that authority was either unsatisfactory or no resolution was received for a month after the complaint. For example, if you did not receive your refund in time, you would have first had to approach your assessing officer (AO). If the grievance was not addressed satisfactorily by the AO, you would have had to approach the commissioner of income tax. Failure of satisfactory redressal on part of the commissioner would have given you grounds to approach the ombudsman, finally. However, if the issue was under a formal appeal to the commissioner or to higher authorities like the Income Tax Appellate Tribunal (ITAT), high court or Supreme Court, you could not approach the ombudsman. For example, if you have appealed against an order passed by an AO to the Commissioner of Income Tax (Appeals), you could not approach the income tax ombudsman on the same grounds.

The Indirect Tax ombudsman operated along similar lines.

Expert take

While some experts support the abolition of the ombudsmen, saying they had become ineffective and alternative grievance redressal mechanisms are doing the job well, there are others who believe the offices could have been empowered instead of being dismantled.

Abhishek Rastogi, partner at Khaitan & Co., a law firm, welcomed the abolition stating that the “effectiveness of public grievance redressal mechanisms is questionable". He expressed faith in the alternative systems currently available for grievances. “The involvement of assessee-friendly, IT-enabled systems has at least proven to be more popular and has, therefore, reduced the reliance on the Income Tax and Indirect Tax Ombudsman. In contrast to dwindling complaints before Ombudsman offices, Centralised Public Grievance Redress and Monitoring System (CPGRAMS) received over 1,80,000 grievances in 2019 alone."

Deepak Rao of Acer Tax and Corporate Services, a chartered accountancy firm, agreed. He said the ombudsman was “not effective as it did not have control of jurisdictional officers. Resolution of issues was a lengthy and time consuming process and there was fear of antagonising jurisdictional authorities by complaining. The alternative methods such as tax helplines, Aykar Seva Kendras and centralised public grievance systems are more effective as they are online and easy to approach. People have also preferred lodging grievances online versus a face-to-face-based complaint filing process."

However, some other experts question the effectiveness of the alternative systems and believe the ombudsmen offices could have been empowered. “The office of ombudsman was effective and in fact should have been given more authority. There were many cases of CBEC instructions not being implemented or judgments which had attained finality not being given effect to. The ombudsman would address these important issues and give timely redressal," said S. Dutt Majumder, former chairman, CBEC, and former Indirect Tax Ombudsman.

Gautam Nayak, a chartered accountant, highlighted the need for an effective grievance redressal authority when the existing authority is abolished. “Most of the issues before the Income Tax Ombudsman related to delayed refunds. However, the institution was considerably weakened, by not appointing ombudsman in time, and with several positions under this office lying vacant over prolonged periods of time, reducing the effectiveness of the office. The alternative grievance redressal system , e-Nivaran, is convenient to use but often fails to effectively resolve grievances. In many cases, the grievances are sent back over the system to assessing officers and treated as resolved, without actually being resolved. Delayed refunds are still commonplace, especially in case of large refunds in years where the fiscal situation is tight. We do need an effective grievance redressal system, but this should be done by having an effective authority, which can be physically approached under the e-Nivaran system, in cases where the system does not really resolve the issue."

Ameet Patel, partner, Manohar Chowdhry & Associates, a chartered accountancy firm, and chairman, taxation committee, Bombay Chartered Accountants’ Society drew a distinction between the Ayakar Seva Kendras, e-Nivaran and the CPGRAMS, “The Aayakar Seva Kendras and e-Nivaran are not really independent. They are both run by the income tax department. CPGRAMS, on the other hand, seems to be directly monitored by the PMO. I have been informed in the past by several commissioner-level officers that CPGRAMS is the best place to lodge a grievance because they are compelled to take immediate action in light of the PMO’s monitoring," he said.

Kuldip Kumar, partner and leader, personal tax, PwC India, said the government should consider “setting up an independent and empowered body, rather than merely abolishing the ombudsman office. Also, the person in charge of grievance redressal should not be from the tax department to infuse confidence of the taxpayers on fairness."

The alternatives

e-Nivaran is an online grievance filing system that can be accessed through the e-filing account. It is supplementary to CPGRAMS and Aykar Seva Kendras. Grievances can be raised for e-Nivaran at any stage after the filing of your return. There is no monetary threshold for e-Nivaran. For GST complaints, the government has established an online grievance redressal system through the GST Portal (selfservice.gstsystem.in). However, no independent ombudsman has been established under this portal.

The alternative complaint redressal systems are tech friendly and convenient to use but, as experts have pointed out, there is no attempt to maintain their independence from the authority being complained against. Taxpayers should be alert to the structure of the alternative grievance systems and their limitations. For substantial issues, their best recourse is a court of law.

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