Negligence on part of banks may prove costly to customers
Negligence by banks takes many forms and here is a case where a bank failed to pay the income tax authorities, the advance tax deposited by the customer, resulting in his having to pay heavy penalty
Negligence by banks takes many forms and here is a case where a bank failed to pay the income tax authorities, the advance tax deposited by the customer, resulting in his having to pay heavy penalty.
In its order of July 29, 2021, the apex consumer court held the bank guilty of providing deficient service and said the consumer was entitled to refund of the amount deposited by him, penalty paid to the tax authorities, travelling expenses incurred on account of his visits to the income tax offices, cost of litigation and in addition, compensation for the physical and mental harassment undergone.
The case dates back to the income tax assessment year 2007-2008 , when Santosh Kumar Sethi, a resident of Noida, deposited ₹13,880 at one of the branches of Punjab National Bank towards advance tax, to be remitted to the tax authorities. The amount however was never deposited with the income tax, resulting in Sethi being asked by the tax authorities to pay penalty.
First, in response to Sethi’s complaints in 2012, the bank alleged that it was not allowed to credit the amount by the tax authorities. Subsequently, to his repeated letters in 2012 and 2013, the bank insisted that the amount had been deposited with the income tax, but hinted that there could be some error in the assessment year in the challan and advised him to have it corrected. Consequently, Sethi travelled to Deoghar (where he was being assessed) and Dhanbad, Jharkhand, to meet the assessing authority and the income tax commissioner respectively, but was told that the amount had not been deposited at all. In 2014, after he got a demand notice from the tax authorities, the bank informed Sethi,, in response to an RTI query, that the amount had been deposited, but there was a clerical error on its part in the assessment year in the challan!
While upholding the order of the Delhi District Consumer Disputes Redressal Commission, awarding ₹50,000 as compensation and ₹10,000 as costs of litigation, the apex consumer court pointed out that the bank had not provided any evidence in support of its claim that it had paid the amount to the tax authorities. On the other hand, the consumer had placed on record the letter of the Income Tax Commissioner dated September 18, 2014, stating that the money had not been deposited by the bank. (Santosh Kumar Sethi Vs Punjab National Bank, RP NO 1172 of 2017)
The apex consumer court thus held the bank liable for the consequences of its failure to deposit the tax amount. However, I must point out that even if the bank had made the deposit, it would still be guilty of negligence for making a mistake, as per its admission, in the assessment year in the challan! Because first and foremost, when the consumer deposited the advance tax to be credited to the income tax authorities, the bank was duty bound to credit the amount without any mistakes. Failure to do so constituted deficiency.
Next, having committed that error, the bank should have borne in mind its consequences and immediately informed the customer of it. Failure to do so was also sheer negligence. Third, the bank should have immediately made the effort to rectify the mistake in the assessment year made by it. It did not do that.
Fourth, if for any reason the bank could not make the necessary corrections, it should have again informed the customer and made a fresh deposit, at its cost, after getting the customer’s approval. Or, it should have informed the customer of its failure to make the correction, refunded the amount along with consequent damages. In other words, the bank could easily have made amends for its mistake and ensured that the customer was not put to unnecessary harassment and made to pay penalty. It did not do any of those things, despite repeated letters from a distressed customer.
Lastly, to an honest tax payer, any accusation of having evaded payment of tax would not only come as a shock, but also cause utmost anguish. The bank should have been sensitive to that. Thus the bank failed on many fronts and in fact it should have paid a bigger price for its negligence.