The revenue department's penchant for seeking blanket customer information from banks under the garb of "roving and fishing enquiries" has spurred the Reserve Bank of India to move the finance ministry to resolve the vexatious issue.
With banks expressing their inability to comply with the taxman's diktat, the regulator has taken up the cudgels on their behalf.
Given the difficulties in complying with the taxman's demand for blanket information on customer transactions exceeding Rs 50,000, the regulator has told banks that "they may hold in abeyance any action on the advice received from the income-tax department in this regard" while it is sorting the issue, which has been dogging the banking industry for the past few years.
The department, in an attempt to widen the tax base and unearth black money, recently directed all banks to furnish, before August 25, information on customer transactions exceeding Rs 50,000 in 2002-03.
It has halved the eligibility criterion for "roving and fishing enquiries" from Rs 100,000 to Rs 50,000.
Dubbing the income-tax department's action as "totally unjustified", bankers wondered what the department did with the transaction reports submitted by banks, in compliance with Section 139A of the Income-Tax Act, 1961, in October and April. They also feel that it is against the spirit of bank secrecy laws.
Banks feel that enquiries under Section 133 (6) of the Income-Tax Act, 1961, should be restricted to cash transactions of Rs 10 lakh (Rs 1 million) and above and data on assets offered against loans or overdrafts of Rs 50 lakh (Rs 5 million) and above.
Submission of details on cash transactions of Rs 10 lakh and above can be made by banks without additional workload at the branches since a reporting system exists for such transactions.
Moreover, under Section 139A, every person is required to quote the permanent account number or general index number, or make a declaration in Form 60 for specified transactions such as opening bank accounts, purchasing bank drafts of more than Rs 50,000 in cash and depositing more than Rs 50,000 in cash in a single day.
These details are sought in all transactions to ensure that nobody escapes the tax dragnet. In view of this, banks want the income-tax enquiry to be only "case specific" and "area specific" and not blanket.
Bankers pointed out that Section 13 of the Banking Companies (Acquisition) Act, 1970, requires confidentiality to be maintained in relation to the affairs of banks' customers except where it is otherwise required by law.
Though submission of such information in pursuance of statutory obligation may not be a breach of banker-customer relationship, it impinges upon the secrecy ethos of banks.
Customer transactions that are under the revenue department's scanner include time deposits exceeding Rs 50,000, purchase of bank draft of more than Rs 50,000 in cash, deposit of more than Rs 50,000 in cash in a single day, foreign exchange exceeding Rs 25,000 purchased by an individual and finance advanced to purchase motor vehicles other than two-wheelers.
