Karnataka High Court Issues Guidelines To Be Followed While Reopening Self-Assessment Of Property Tax
The Karnataka High Court has issued guidelines to be followed by Bruhat Bengaluru Mahanagara Palike (BBMP) while reopening self-assessment of property tax against property owners where returns are not filed and in cases of random scrutiny.A single judge bench of Justice S Sunil Dutt Yadav said “It is noticed that in most of the petitions filed by the property owners, the contention that...
The Karnataka High Court has issued guidelines to be followed by Bruhat Bengaluru Mahanagara Palike (BBMP) while reopening self-assessment of property tax against property owners where returns are not filed and in cases of random scrutiny.
A single judge bench of Justice S Sunil Dutt Yadav said “It is noticed that in most of the petitions filed by the property owners, the contention that is taken is that the demand notice raised as well as the show cause notice issued, are not preceded by the procedure stipulated under the Bruhat Bengaluru Mahanagara Palike Act, 2020 and accordingly, it is submitted that unless there is an inspection in their presence, the consequential notices and orders are required to be set aside.”
Further it said, “In light of numerous petitions filed questioning the correctness of the procedure followed by BBMP while reopening the self-assessment returns, need has arisen to lay down the procedure that is required to be followed in cases of reopening self-assessment where returns are not filed and in cases of random scrutiny.”
Accordingly it issued the following directions:
1: Section 144 (13) of the Act provides for the procedure in cases of random scrutiny where returns are already filed and in cases where returns are not filed as stipulated under sub-section (7) of Section 144 of the Act, the Chief Commissioner or any person authorised by him may enter, inspect, survey or measure any land or building after giving notice to the owner or occupier. It is the first step as stipulated under Section 144(13) of the Act which would come into play either in case of random scrutiny or in case of evasion where though properties are constructed and liable for tax and returns under self-assessment ought to have been filed, such returns are not filed.
2: In such of the above cases in terms of Section 144(13) of the Act, the Chief Commissioner or person authorised by him may inspect, survey and take measurement of the building. However, it is clear that such inspection, survey or measurement must be after giving notice to the owner or occupier.
3: In terms of Section 144(13) of the Act, at the time of inspection, owner or occupier is bound to furnish necessary information required, which would be the basis for the purpose of reassessment.
4: Even where there is an incorrect self-assessment return filed by the property owners, resort to inspection under Section 144(13) of the Act is required to be conducted.
5: At the time of inspection, if the property owner or occupier refuses to allow the authorised officer to inspect the premises even after the officer has given reasonable opportunity, such refusal shall be recorded and the officer shall proceed to assess the property to the “best of his judgment”.
6: The power of the officer to proceed on the premise of “best judgment assessment" would also come into play where the property owner refuses to furnish information required, as such information would be only in the knowledge of the property owner. This requirement of furnishing of information in the event of reassessment would arise where there are disputes relating to the year and the month when the property was let out as in many disputes it is found that the self-assessment made declaring portion of the property as self-occupied and tenanted, is disputed by the respondent – BBMP. However, such necessity of furnishing information will also arise regarding the usage of the premises, i.e., whether the premises is used for residential or non-residential use.
7: At the time of inspection if the Chief Commissioner is seeking to reopen the self-assessment, he is required to ascertain relevant facts making out grounds for reopening of self-assessment including relating to the applicable zone.
8: Subsequent to the report prepared after the procedure to be followed under Section 144(13) of the Act as referred to above, procedure under Section 144(15) would then come into operation.
9: For the purpose of reopening such assessment in terms of the contingencies referred to above i.e., (i) random scrutiny (ii) where no returns are filed and (iii) where self-assessment is found to be faulty, proceedings under Section 144(15) of the Act will have to be followed.
10: In terms of the procedure under Section 144(15) of the Act, it is clear that procedure under Section 144(15) (a) to (e) of the Act will have to be followed, in the event on the basis of the physical inspection and information gathered and preparation of report by the officer as contemplated under Section 144(13) of the Act, it is found that reassessment of the self-assessment property tax return is required to be made.
11: In terms of the reassessment made by the authority on the basis of the report after inspection, the penalty as contemplated under Section 144(15)(b) of the Act will come into play along with interest to be paid on the fresh demand.
12: Right is conferred upon the property owners for notice under Section 144(15)(c) of the Act where the Chief Commissioner or the Authorised Officer is required to issue notice of reassessment to the taxpayer demanding that the tax shall be paid within 30 days of service of notice and after giving tax payer an opportunity of show cause in writing. This opportunity is to enable the occupier to accept the property tax assessed on the basis of the inspection which would be in the nature of reassessment and further it is open for the property owner to accept the penalty levied or object to such reassessment proceedings within a period of 30 days from the date of receipt of copy of the notice under Section 144(15)(c) of the Act.
13: The Chief Commissioner thereupon is required to consider the objections and pass orders confirming or revising such assessment (could also be reassessment) within a period of 60 days from the date of filing of objections and a copy of the order under Section 144(15)(e) of the Act either accepting the objections or rejecting the same, shall be sent to the owner or occupier concerned.
14: This whole procedure that comes out from a plain reading of Section 144(13), (14) and (15) of the Act is however subject to the point of limitation provided under Section 144(16) of the Act.
15: Section 144(16) of the Act provides that assessment or reassessment shall not be made (i) Five years after filing of tax returns under Section 144 of the Act, (ii) Five years after the evidence of facts, sufficient in the opinion of the Chief Commissioner or Authorised Officer justifying making of reassessment comes to such officer's knowledge, whichever is later.”
16: The power is also conferred wherever there are disputes as regards classification of zones, unit area value and class of property, for the Chief Commissioner to clarify, which clarification shall be final. Such power can be exercised simultaneously with passing of an order under Section 144(15)(e) of the Act. However, any such clarification under Section 144(18) of the Act shall be information made to the occupier or property owner to enable him to take his stand before passing of the order under Section 144(15) (e) of the Act.”
17: Once such order is passed in light of the statutory scheme, any challenge to the orders ought not to be entertained by the writ court in a routine manner in light of the law laid down in the case of Phoenix ARC Private Limited vs. Vishwa Bharati Vidya Mandir - Civil Appeal No. 257-259/2022, wherein the Apex Court has stated that intervention by way of writ proceedings cannot be made routinely bypassing the statutory procedure for grievance redressal. Though in exceptional cases at the discretion of the Court when circumstances are so made out, the Court may entertain such petitions. Once an order is passed and as the same would involve factual disputes and other contentions, the orders are open for challenge by way of appeal under Section 179 of the Act. Such appeal under Section 179 would be subject to deposit as contemplated under Section 148(3) of the Act.
The court also took on record the memo filed by the BBMP indicating the persons authorised as referred to in Section 144(13) of the Act. It said “Needless to state, in the event demands made is not subject to challenge by way of appeal or any other legal proceedings, the power is available to the respondent – BBMP to take recourse to measures for recovery as stipulated under Sections 148 (4) and (5) of the Act.”
The directions were given during the hearing of a petition filed by Shariff Constructions seeking for de-sealing the premises and has further sought for setting aside the demand notice issued by the respondent – BBMP stipulating the property tax, cesses, interest, penalty, solid waste management cess and total amount due with respect to the year 2019-2020. Petitioner also sought for refund of excess tax collected from the petitioner.
Referring to the report filed by BBMP in the instance case the court said “Procedure as stipulated above are ought to recommence from the stage of post inspection as contemplated under Section 144 (13) of the Act.”
Accordingly it set aside the impugned order and said BBMP is at liberty to take further steps in terms of the procedure stipulated above. All contentions on merit as regards the contents of the inspection report if any are kept open while it is made clear in the present case.
The court also noted that in many of the matters, the petitioners have challenged the validity of the standard operating procedure as being in violative of the statutory scheme. It said “Wherever the SOP is contrary to the statutory scheme as observed above, the BBMP will take appropriate steps to have the SOP amended so as to bring it in consonance with the statutory scheme as observed above.”
Appearance: Advocate Syed Akmal Hasan Razvi for Petitioner.
Advocate Sumana Baliga M for Respondents.
Citation No: 2024 LiveLaw (Kar) 105
Case Title: Shariff Constructions AND Bruhat Bengaluru Mahanagara Palike & ANR
Case No: Writ Petition No 1867 of 2024