Case Law Details
Rockline Entertainments Pvt Ltd Vs Commissioner BBMP (Karnataka High Court)
Karnataka High Court held that BBMP demanded the property tax based on Accountant General report. However the same was not provided to the petitioner. Accordingly, non-provision of Accountant General report amounts to violation of principles of natural justice.
Facts- The petitioner, a private limited company incorporated under the provisions of the Companies Act, 1956. The petitioner has put up commercial complex and it is put to use with effect from October, 2011. The petitioner is said to have paid the property tax from 2012-13 onwards under Self Assessment Scheme (SAS) since the building is put to use from the said year in its entirety. The SAS was based on the usage and occupancy of the building.
Notices u/s. 108A (3) and (12) of 1976 Act were said to have been served on the petitioner during February 2015 alleging short/under-assessment of property tax for the years 2011-12 to 2014-15 and demanded differential tax and penalty amounting to Rs.2,63,74,254/- along with 2% interest per month, calling upon the petitioner to pay the said amount within thirty days.
Conclusion- Held that the respondents calculated and demanded the property tax based on Accountant General report. If the respondent-BBMP has placed reliance on the Accountant General report, the same ought to have been provided to the petitioner. Non-providing of Accountant General report on which, the tax demand is based as could be found from paragraph 24 of the impugned order passed in Miscellaneous Appeal, would amount to violation of principles of natural justice. Any document which is relied upon by respondent-BBMP to determine the tax liability ought to be furnished to the assessee, so that the assessee would be in a position to answer the same.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Petitioner is before this Court under Article 227 of the Constitution of India questioning the correctness and legality of order dated 24.05.2021 in Miscellaneous Appeal No.26/2015 by which, appeal filed by the petitioner under Section 108A(5) read with Section 113(3) of the Karnataka Municipal Corporations Act, 1976 (for short “1976 Act”) and Rule 7-B(19) of 1976 Act and Schedule-III of Taxation Rules is rejected and petitioner has further challenged notices issued under Section 108A(3) and (12) of 1976 Act wherein the respondent-BBMP demanded property tax from the petitioner.
Facts of the case:
2. The petitioner, a private limited company incorporated under the provisions of the Companies Act, 1956 (for short “1956 Act”) claims that it is the owner of land and building bearing property No.8, Khatha No.321, Rockline Mall, NH-4, Jalahalli Cross, Chokkasandra, Bengaluru. It is stated that on obtaining sanction of commercial building plan, the petitioner has put up commercial complex and it is put to use with effect from October, 2011. The petitioner is said to have paid the property tax from 2012-13 onwards under Self Assessment Scheme (SAS) since the building is put to use from the said year in its entirety. The SAS was based on the usage and occupancy of the building. Notices dated 19.11.2014 and dated 20.02.2015 under Section 108A (3) and (12) of 1976 Act were said to have been served on the petitioner during February 2015 alleging short/under-assessment of property tax for the years 2011-12 to 2014-15 and demanded differential tax and penalty amounting to Rs.2,63,74,254/- along with 2% interest per month, calling upon the petitioner to pay the said amount within thirty days. The petitioner replied on 01.03.2015 (Annexure-E) disputing the measurement and further stated that if proper measurement and assessment is made, the petitioner would pay the same. Thereafter, one more notice was issued by respondent-BBMP dated 24.04.2015 (Annexure-F) directing the petitioner to pay the tax amount within seven days. Again, the petitioner replied in terms of Annexure-G disputing the measurement of the building. Thereafter, one more final notice dated 04.06.2015 was issued directing the petitioner to pay the differential property tax amount. The notice stated that, measurement of the building as measured by the respondent-BBMP is 1,22,743 Sq.Ft., whereas the petitioner had measured for calculation of tax purpose at 48,500 Sq. Ft. On difference of 74,243 Sq.Ft., the respondent-BBMP demanded differential tax.
3. Challenging the notices issued by the respondent-BBMP under Section 108A(3) and (12) of 1976 Act and the subsequent demand notices, the petitioner approached the City Civil and Sessions Judge, Bengaluru in Miscellaneous Appeal No.26/2015 under Section 108A(5) of 1976 Act., mainly contending that the respondents have not followed the procedure in assessing the tax, particularly in classifying and categorizing the property for assessing the tax. The Trial Court under impugned order dated 24.05.2021 dismissed the appeal preferred by the petitioner.
4. This Court, by interim order dated 13.08.2021 granted stay of the impugned order dated 24.05.2021 in Miscellaneous Appeal No.26/2015 subject to petitioner depositing Rs.40,00,000/-. The petitioner is said to have deposited the said amount. On the submission of learned counsel appearing for the respondent-BBMP that a joint survey/inspection of the property and its assessment would be done afresh, this Court by order dated 23.10.2021 directed the BBMP to conduct survey/inspection. As directed the BBMP conducted fresh inspection and filed its report along with affidavit dated 03.12.2021. The report indicated the built up area of the petitioner building at 1,28,431 sq. ft. During the course of hearing on 08.02.2023, learned senior counsel Sri. Shyamsundar submitted that the survey conducted by the respondent-BBMP on 15.11.2021 was without the presence of the petitioner or his representative and it was further alleged that the measurement said to have been conducted by BBMP is without entering the building or premises. This Court without accepting the contention or allegation, in the interest of justice, to provide one more opportunity to the petitioner to be present in the premises at the time of survey by BBMP, directed BBMP to conduct fresh survey/measurement at the cost of the petitioner on 16.02.2023. Accordingly, respondent-BBMP conducted one more survey/measurement of the petitioner’s building and filed report along with affidavit dated 21.02.2023 of the Assistant Revenue Officer wherein total measurement of the building which consists of lower basement, upper basement, ground floor, first, second and third floor is shown at 1,26,105 Sq. Ft. The petitioner filed memo dated 21.03.2023 enclosing representation dated 17.03.2023 submitted to the Special Commissioner, BBMP wherein the petitioner prayed for re-determination of the taxes and waiver. In the said representation, the petitioner admits the physical measurement shown in the report dated 16.02.2023 as correct.
5. Learned senior counsel for the petitioner contends that the Trial Court while passing the order in Miscellaneous Appeal No.26/2015, failed to consider the grounds and contentions urged by the petitioner, in that the petitioner mainly contended that the procedure, method, classifying and categorizing the property for assessing the tax was not proper and the tax demanded was exorbitant. Learned senior counsel referring to sub-Section (2) of Section 108A of 1976 Act, submits that the respondent-BBMP failed to properly calculate unit area value. It is his submission that on the total measurement of the built up area, respondent-BBMP shall in terms of Explanation to sub-Section (2) above, calculate unit area value. Learned senior counsel would submit that the respondent-BBMP is required to follow the guidelines issued for SAS which is placed on record along with memo dated 16.03.2023. Learned senior counsel would also invite attention of this Court to notifications dated 13.01.2009 as well as 09.03.2016 wherein BBMP published unit area value for the categories of the properties applicable for the respective periods.
6. Learned senior counsel would submit that the Trial Court held that the re-assessment was based on audit report of the Accountant General, but the copy of the same was not made available to the petitioner which amounts to violation of principles of natural justice.
7. Per contra, learned counsel Sri.Jagadeeswara.N.R., for respondent-BBMP justifies the re-assessment order by pointing out that the petitioner under-assessed the tax by taking total built up area roughly at 48,500 Sq.Ft. as against actual measurement of 1,26,105 Sq.Ft., which the petitioner admits in his latest representation dated 17.03.2023. Learned counsel would submit that the petitioner’s property is measured at 1,26,105 square feet which consists of lower basement, upper basement, ground floor, and three floors. It is submitted that in terms of notification dated 13.01.2009, the petitioner’s property falls under Category-VIII and in terms of the guidelines laid down therein, the unit area value is arrived at. Further, learned counsel referring to notification dated 09.03.2016 submits that the petitioner’s building would fall under Category-VI of Table-II.
8. Learned counsel Sri.Jagadeeswara.N.R., referring to sub-Sections (3) and (13) of Section 108A of 1976 Act would submit that the BBMP is empowered to levy and collect the property tax and also re-assess the property tax, if the Authorized Officer has reason to believe that there is under-assessment. Learned counsel also refers to Section 112A of 1976 Act with regard to SAS.
9. Having heard the learned counsel for the parties and on perusal of the writ petition papers, the point which falls for consideration is as to,
“Whether the order passed by the Trial Court in Miscellaneous Appeal No.26/2015 and the re-assessment orders of the BBMP requires interference?”
10. The answer to the above point would be in the affirmative and the re-assessment orders stated above require interference for the following reasons:
The impugned notice and demand notices are issued in terms of Section 108A(3) and (12) of 1976 Act. Sub-Section (3) empowers the BBMP to levy and collect the property tax from every building, vacant land or both. Sub-Section (13) empowers the Authorized Officer on random scrutiny, if he has reason to believe that any return furnished is incorrect or has been under-assessed, to re-assess the property tax.
11. Sub-Section (2) of Section 108A of 1976 Act provides for levy of percentage of property tax and it also provides for calculation of property tax. It would state that the taxable annual value of a building, vacant land or both shall be calculated by multiplying corresponding “Unit Area Value” with the total built-up area of a building, vacant land or both for 10 months minus depreciation at such rate, as may be prescribed, depending on the age of a building. Explanation to sub-Section (2) explains the meaning of ‘Unit Area Value’ and how to arrive at ‘Unit Area Value’. The Government in Urban Development Department under notification bearing No.UDD 220 MNU 2006 (P), Bangalore dated 13.01.2009 published Rules called “Bruhat Bangalore Mahanagara Palike Property Tax Rules, 2009”. Rule 2(vi) defines “Built-up area” and Annexure-II to the rules provides for ‘Unit Area Value’ for assessment of non-residential property within the Bruhat Bangalore Mahanagara Palike jurisdiction. Under notification bearing No.UDD 220 MNU 2006 (P) dated 13.01.2009, the Commissioner published in exercise of power under proviso to sub-Section (2) of Section 108A of 1976 Act, “Unit Area Value” for the categories of properties for Block period 2016 to 2019 mentioned in Table-I and Table-II. Table-II provides “Unit Area Value” for assessment of non-residential property within the Bruhat Bangalore Mahanagara Palike jurisdiction.
12. Sub-Section (13) of Section 108A of 1976 Act reads as follows:
(13) Upon random scrutiny, if the authorized officer has reasons to believe that any return furnished, which is deemed as assessed, is incorrect or has been underassessed resulting in evasion of property tax,-
(a) may, on the basis of information available on record and after physical inspection proceed to re-assess the property, in the manner provided under this section;
(b) if the tax-reassessed is more than 5 percent than the tax remitted alongwith the returns, the evaded tax shall be payable together with a penalty not less than twice the tax so evaded payable alongwith interest for the difference in tax paid and payable calculated at 24 percent per annum;
(c) if upon inspection and re-assessment as made under this section by the Commissioner or the authorized officer, shall issue a notice of re-assessment to the tax payer demanding that the tax shall be paid within thirty days of the service of the notice and after giving the tax payer the opportunity of show cause in writing;
(d) the owner or occupier may either accept the property tax assessed and the penalty levied or send objections to the Commissioner or the authorized officer within a period of thirty days from the date of receipt of a copy of the notice under this sub-section;
(e) the Commissioner or the authorized officer shall consider the objections and pass such orders either confirming or revising such assessment within a period of sixty days from the date of filing objections and a copy of the order shall be sent to the owner or occupier concerned.
The above sub-Section provides the Authorized Officer to reassess the returns furnished, which is deemed as assessed, if the Authorized Officer has reason to believe that the return furnished is incorrect or has been under-assessed resulting in evasion of property tax. Clause (c) to sub-Section (13) above requires the Commissioner or Authorized Officer, upon inspection and re-assessment to issue a notice of re-assessment to the Tax Payer demanding that the tax shall be paid within 30 days of service of notice and after giving the Tax Payer an opportunity of show cause in writing. The owner or occupier may either accept the property tax assessed and the penalty levied or send objection to the Commissioner or Authorized Officer within 30 days from the date of receipt of a copy of notice of re-assessment. Clause (e) of sub-Section (13) of Section 108A of 1976 Act requires the Commissioner or Authorized Officer to consider the objection and pass such orders either confirming or revising such assessment within a period of 60 days from the date of filing objections and a copy of the order shall be sent to the owner or occupier concerned.
13. Annexure-C/notice dated 19.11.2014 as well as Annexure-D/ notice dated 20.02.2015 are issued under sub-Sections (3) and (12) of Section 108A of 1976 Act. Sub-Section (12) empowers the Authorized Officer to enter to inspect the premises. If the occupier of the property refuses to allow the Authorized Officer, the Officer after giving reasonable opportunity shall record the refusal and shall proceed to assess the property to the best of his judgment. In the instant case, admittedly the petitioner had self-assessed the property for tax by under-assessing, and providing incorrect built-up area, which resulted in evasion of property tax. The respondent-BBMP under sub-Section (12) of Section 108A of 1976 Act assessed the tax liability taking total built-up area at 1,22,743 sq.ft. and called upon the petitioner to pay differential tax for the above stated built-up area. The petitioner submitted reply/objection in terms of Annexure-E which reads as follows:
In the above reply, the petitioner stated that if the proper tax is assessed by the concerned authority, the petitioner would pay the same. Under Annexure-F/ notice dated 24.04.2015 on consideration of petitioner’s reply, the respondent-BBMP called upon the petitioner to pay tax demanded under notice dated 20.02.2015 within 7 days. Thereafter, the petitioner is said to have submitted one more objection on 30.05.2015 and the respondent-BBMP issued one more final notice on 04.06.2015 calling upon the petitioner to pay tax as determined.
14. As noted above, at the instance of the petitioner, fresh survey/measurement was conducted on 16.02.2023 in the presence of the petitioner. The petitioner was present at the spot as could be seen from the mahazar dated 16.02.2023 drawn at the time of measurement/survey of the building in question. The petitioner admits the physical measurement shown in the report dated 16.02.2023 i.e., 126105 sq.ft. in his representation dated 07.03.2023 submitted to the Special Commissioner which is placed on record along with memo dated 21.03.2023. Since the petitioner admits the total measurement of the property in question, i.e., 126105 sq.ft., it becomes necessary for the respondent-BBMP to re-assess the tax liability in terms of sub-Section (2) of Section 108A of 1976 Act and in terms of notification bearing No.UDD 220 MNU 2006(P) dated 13.01.2009 as well as notification bearing No. Commr/BBMP-DC (Rev)/5675/15-16, Bangalore dated 09.03.2016.
15. Learned senior counsel Sri.Shyamsundar during the course of argument invites attention of this Court to calculation of the property tax by the petitioner for the assessment years 2011-12 to 2021-22 and submits that according to the petitioner, the petitioner would be liable to pay Rs.1,92,13,945/-. The said calculation sheet signed by the representative of the petitioner is produced along with memo dated 18.04.2023. Learned senior counsel on behalf of the petitioner undertakes to deposit the above said amount before the respondent-BBMP forthwith.
16. On perusal of the order passed by the City Civil Judge in Miscellaneous Appeal No.26/2015 it is seen that the respondents calculated and demanded the property tax based on Accountant General report. If the respondent-BBMP has placed reliance on the Accountant General report, the same ought to have been provided to the petitioner. Non-providing of Accountant General report on which, the tax demand is based as could be found from paragraph 24 of the impugned order passed in Miscellaneous Appeal, would amount to violation of principles of natural justice. Any document which is relied upon by respondent-BBMP to determine the tax liability ought to be furnished to the assessee, so that the assessee would be in a position to answer the same.
17. For the reasons stated above, in the facts and circumstances, I deem it appropriate to pass the following:
ORDER
The writ petition is allowed.
The order dated 24.05.2021 in M.A.No.26.2015 passed by the City Civil Judge is set aside.
Consequently, the impugned demand notice bearing No. DA/39/41/SAS/VERI/PR/742/14-15 dated 19.11.2014 (Annexure-C) and demand notice bearing No. DA/39/41/SAS/VERI/PR/762/14-15 dated 20.02.2015 (Annexure-D) are also quashed.
The petitioner is directed to deposit a sum of Rs.1,92,13,945/- excluding the amount deposited in terms of the interim order dated 13.08.2021 within a period of 4 weeks from the date of uploading the order copy on the website of the High Court. Failing to deposit the above stated amount, the assessment orders quashed above as well as the order dated 24.05.2021 in M.A.No.26/2015 would stand revived and the respondent-BBMP is at liberty to recover the amount determined under Annexure-R/notice bearing No. ………..55/2021-22 dated 15.07.2021.
If the petitioner deposits the amount as directed above, the respondent-BBMP is directed to treat the representation dated 17.03.2023 submitted to the Special Commissioner, produced before this Court along with memo dated 21.03.2023 as objections and reassess the property tax in accordance with law and determine the tax liability of the petitioner.
Time for compliance, 3 months from the date of uploading the order in the website of the High Court.
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