Telangana High Court
M/S Hil Limited vs The Zonal Commissioner on 7 September, 2022
Author: M. Laxman
Bench: M. Laxman
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THE HON'BLE SRI JUSTICE M. LAXMAN
C.M.S.A Nos.38 AND 42 OF 2017
COMMON JUDGMENT:
1. The present appeals have been directed against order dated 04.04.2017 passed in M.A.No.128 of 2014 by the Chief Judge, City Small Causes Court, Hyderabad wherein and whereby the demand notice dt.06.03.2014 issued by the Zonal Commissioner was set aside and the matter was remanded back to Commissioner for fresh consideration, and also directed to pay 40% of the demanded amount pending further fresh assessment enquiry.
2. Aggrieved by the same, both parties to the impugned order have filed the present appeals. The parties are hereinafter referred to as "Assessor and Assessee."
3. The Assessee challenged the order of demand notice on the ground that no public notice has been issued as required under Section 220 (1) and no special notice as required under Section 220(2) of the Greater Hyderabad Municipal Corporation Act (for short, the Act) was also issued and revision has been done without following the procedure. Therefore, according to him, the demand notice suffers from violation of procedure.
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4. The case of the Assessor is that the Assessing authority has followed the procedure contemplated under the Act by duly publishing the revision and thereafter specifically notice was issued to the Assessee. Basing on that, assessment was done and, therefore, the order does not suffer from any procedural illegality.
5. The Court below having considered the material on record found that the notice as required under Section 220(2) of the Act was not issued and consequently, the order of assessment was set aside.
6. The main contention of the learned Senior Counsel representing the appellant/Assessee is that the form of notice as issued by the Assessor is not in compliance with the format and requirements contained in the Section 220(2) of the Act and such notice is only notice for appearance. The Assessee was kept in dark with regard to the entries of assessment Book in pursuance of proposed revision. Therefore, the true purport of the notice was not complied with. It is also his contention that in passing the assessment order, the Assessor grossly violated the conditions contained in the revision notification, particularly, with regard to rebate and the ceiling limit contained in the notification for maximum enhancement of the tax. If these two things are considered, the Assessee has no grievance.
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7. The contention of the learned Standing Counsel representing the Greater Hyderabad Municipal Corporation is that, the ceiling which is contained under the tax rules was amended by G.O.Ms.No.88 dt.05.03.2011 and thereby no ceiling is existing now. According to him, the benefit of 50% ceiling is applicable up to 2011 and thereafter, the Commissioner under Section 225 of the Act is entitled to amend the rateable value in the assessment book. By invoking such power, the tax was increased over and above of 50% in respect of one property in the demand notice and so far as other properties are concerned, the enhancement is below 50%. Therefore, according to him, the enhancement was rightly done by the Commissioner which requires no interference.
8. To resolve the above contentions, it is apt to refer to procedure contemplated under the Statue for revision of tax and to decide such procedure. Sections 214 to 220 of the Act are relevant and they are as under:
"214. Assessment book what to contain:- The Commissioner shall keep a book, to be called the assessment book, in which shall be entered every financial year Commissioner may call for information or returns from owner or occupier or enter and inspect assessable premises. Assessment book what to contain.
(a) a list of all buildings and lands in the City distinguishing each either by name or number, as he shall think fit;
(b) the rateable value of each such building and land, determined in accordance with the foregoing provisions of this Act;4
(c) the name if ascertained of the person primarily liable for the payment of the property taxes, in respect of each such building or land;
(d) if any such building or land is not liable to be assessed to the general tax, the reason of such non-liability;
(e) when the rates of the property taxes to be levied for the year have been duly fixed by the Corporation and the period fixed by public notice, as hereinafter provided, for the receipt of complaints against the amount of rateable value entered in any portion of the assessment book, has expired and in the case of any such entry which is complained against, when such complaint has been disposed of in accordance with the provisions hereinafter contained, the amount at which each building or land entered in such portion of the assessment book is assessed to each of the property taxes, if any, leviable thereon;
(f) if, under section 227 or 228, a charge is made for water supplied to any building or land by measurement of the water tax or water charge, for any building or land is fixed at a special rate, the particulars and amount of such charge, composition or rate;
(g) such other details, if any, as the Commissioner from time to time thinks fit to direct.
215. The assessment book to be made separately for each ward and in parts, if necessary:- (1) Each of the wards into which the City is for the time being divided by the Corporation for efficient administration of Municipal Government, shall have a separate assessment book called 'Ward Assessment Book', and each ward assessment book may, if the Commissioner thinks fit, be divided into two or more parts for such purposes and with such several designations as the Commissioner shall determine. (2) The Ward Assessment Books and their respective parts, if any, shall collectively constitute the assessment book.
216. Treatment of property which is let to two or more persons in separate occupancies:- (1) When any building or land is let to two or more persons holding in severalty, the Commissioner may, for the purpose of assessing such building or land to the property taxes, either treat the whole thereof as one property, or, with the written consent of the owner of such building or land, treat each several holding therein or any two or more of such several holdings together, or each floor or flat, as a separate property.
(2) When the Commissioner has determined to treat all the several holdings comprised within any one building or land under this section as one property, he may subject to any general 5 conditions which may, from time to time, be specified by the Standing Committee in this behalf, at any time not later than seven days before the first day on any half-year or quarter-year, as the case may be, for which an instalment of general tax shall be leviable in respect of the said property, sanction a draw-back of one-fifth part of the general tax so leviable.
(3) Every person who applies for a draw back under sub-section (2) shall furnish to the Commissioner full and correct information regarding the property in respect of which the claim for drawback is made and the several holdings comprised therein in such form and in such particulars as may be required by the Commissioner in accordance with general conditions specified in this behalf by the Standing Committee.
217. Person primarily liable for property taxes how to be designated, if his name cannot be ascertained:- (1) When the name of the person primarily liable for the payment of property- taxes in respect of any premises cannot be ascertained, it shall be sufficient to designate him in the assessment book and in any notice which it may be necessary to serve upon the said person under this Act, 'the holder' of such premises, without further description.
(2) If, in any such case, any person in occupation of the premises shall refuse to give such information as may be requisite for determining the person primarily liable as aforesaid, the person in occupation shall himself be liable, until such information is obtained for all property taxes leviable on the premises of which he is in occupation.
218. Public notice to be given when valuation of property in any ward has been completed:- (1) When the entries required by clauses (a), (b), (c) and (d) of section 214 have been completed, as far as practicable, in a ward assessment book, the Commissioner shall give public notice thereof and of the place where the ward assessment book or a copy of it, may be inspected.
(2) Such public notice shall be published in the Telangana Gazette and in the local daily newspapers, and also by posting placards in conspicuous places throughout the ward.
219. Assessment Book to be open to Inspection:- (1) Every person who reasonably claims to be the owner or occupier of some premises entered in the assessment book or the agent of any such owner or occupier shall be permitted, free of charge, to inspect and to take extracts from any portion of the said book which relates to the said premises.
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(2) Any person not entitled under sub-section (1) to inspect and take extracts from any portion of the assessment book free of charge shall be permitted to do so on payment of such fee as shall from time to time be determined in this behalf by the Commissioner, with the approval of the Standing Committee.
220. Time for filing complaints against valuations to be publicly announced:- (1) The Commissioner shall, at the time and in the manner provided in section 218, give public notice of a day, not being less than twenty-one days from the publication of such notice, on or before which complaints against the amount of any rateable value entered in the ward assessment book will be received in his office.
(2) In every case in which any premises have for the first time been entered in the assessment book as liable to the payment of property-taxes, or in which the rateable value of any premises liable to such payment has been increased, the Commissioner shall, as soon as conveniently may be after the issue of the public notice under sub-section (1), give a special written notice to the owner or occupier of the said premises specifying the nature of such entry and informing him that any complaint against the same will be received in his office at any time within fifteen days from the service of the special notice."
9. A reading of the above procedure indicates that as per Section 218 of the Act, after entries are completed in a ward assessment book, the Commissioner shall give public notice thereof and the place where the ward assessment book or a copy of it, may be inspected and such public notice shall be published in the Telangana Gazette and in the local daily newspapers, and also by posting placards in conspicuous places throughout the ward.
10. Section 219 of the Act gives access to any person to inspect the Assessment book and it is open for inspection. Section 220(1) requires the Commissioner to issue public notice in the manner of notice issued 7 under Section 218 giving minimum of 21 days time from the date of publication to receive the complaints against amount of rateable value entered in the Assessment Book. Section 220(2) requires a special notice to the Assessee with regard to entries made in the Assessment Book and his complaint on such entries.
11. A reading of Section 218 and 220 of the Act would indicate that the public notice is required at two stages. First stage is with regard to entry in the Ward Assessment Book and place where the Assessment Book is kept so as to enable the Assessees to inspect the book, and the second stage the public notice is required for receiving the complaints with a minimum period of 21 days from the date of publication. Apart from general notice, a special notice under Section 220 is required before revision is given effect for demanding tax from the Assessor.
12. In the present case, the assessment order shows that the revision was taken up from the financial tax year 2007-2008 w.e.f. 01.10.2007. Learned Standing Counsel representing the Corporation has produced the public notice issued by the Corporation for revision whereunder revision was taken up from 01.10.2007. There is also no serious dispute with regard to compliance of notices as required under Section 218 and Section 220(1) of the Act.
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13. The only grievance of the Assessee in the present case is that the notice as required under section 220(2) of the Act was not issued but there is no dispute that notice was issued for appearance before the assessing authority to participating in the proceedings. The said notice is dt.18.02.2004. The said notice reads as follows:
"In pursuance of the orders issued by the Hon'ble Apex Court vide refences cited, you are requested to attend the hearing on 22.02.2014 at 3.00 p.m. in Chambers of Zonal Commissioner, Central Zone, GHMC along with relevant documents."
The Counsel for the Assessee has produced the normal notice issued by Assessor under Section 220(2) and it contains all the requirements of Section 220(2) of the Act and it reads as follows:
MUNICIPAL CORPORATIN OF HYDERABAD Special notice of House Tax/New Assessment/Revision No. Date:
1. The Municipal Corporation of Hyderabad is levying property tax on the lands and buildings situated within the limits of MCH in pursuance of the provisons contained in Chapter VIII and Sections 212 to 226 of the HMC Act, 1955.
2. Keeping in view the new philosophy of governance with transparency, accountability, uniformity, equity and effectiveness and analysis was made with regard to the entire gamut of issues connected with property tax system in order rationalize the system and make it simple and tax-payer- friendly.
3. Several Public Notifications were issued in Newspaper from ..... to ....
Requesting the tax-payers to file information regarding property details:
Plinth areas, Rent if rented out, etc., and returns by adopting rental values prevailing in their localities. In response to the MCH Notifications substantial number of property owners have filed their returns.
4. MCH has made an analysis of the rates at which self-assessment returns filed by individual property owners in different areas of the city, the rates at which different properties are leased by individuals/institutions as per computerized lease deed registration database maintained by the Registration Department (CARD Project) etc., the rates at which the properties of MCH are leased out, the rates at which properties were 9 assessed earlier, the prevailing rental values as of now and the rates adopted in the Notification issued by MCH in ......based upon the then prevailing rental values. It is observed that there is vast variation in the rental values at which property tax is assessed and being paid by the individual property owners and the existing rental values. It is also observed that similar properties located in similar localities, being used for similar usage and having similar rent potential have been paying property tax at different rates (rental values). In order to bring about a uniform, just, rational and transparent tax structure the Municipal Corporation of Hyderabad has decided to revise/levy Property Tax, in accordance with the provisions of the HMC Act 1955, based on prevailing / established rental values.
5. The rental values indicated in the Self Assessment Returns of certain property owners of your area and also the rental values data gathered from various sources which are of relevance to your property are detailed overleaf. As per the agreement with your Tenant/property owner you are receiving / paying rent @ Rs...... per sft., per month.
6. Considering the above facts and in exercise of the powers vested with the Commissioner, MCH under Sec.212 and 225 of the HMC Act 1955, the assessment of Property Tax in respect of premises No.......... is fixed as detailed below, with effect from ......
1. Plinth area in Sft.
2. Existing Assessment Annual Rateable Value:
3. Existing Annual Tax Rs.....
4. Revision / New Assessment:
Gross Annual Rateable value @ Rs.:
Net Annual Rateable Value Rs.......
Annual Tax Property Tax :
Library Cess :
Penalty for Unauthorised Constructions:
Total:
7. Take Special Notice under Section 220(2) of the Hyderabad Municipal Corporation Act, 1955 and in case you are dissatisfied with the assessment as fixed above, you may present an application in writing, complaining againstthe assessment so fixed, to the Commissioner or to any Officer authorized by the Commissioner in this behalf within 15 days from the date of receipt of this notice. If no complaint against or objection to the assessment is presented within the above - mentioned period of 15 days, the assessment will become final.
To Sri/Smt. Commissioner, Municipal Corporation of Hyderabad.
14. A reading of the above notice shows that all the requirements under Section 220(2) of the Act were incorporated in the format produced 10 by the produced by the Counsel for Assessee. The notice preceded to the present demand notice impugned in the present proceedings only gives date of appearance for hearing of the revision proceedings.
15. A reading of Section 220(2) of the Act shows that the notice contemplating must contain the nature of entry in the assessment book as consequent to the revision made in the rateable value and the Assessee grievance thereon must be heard. In the present case notice issued by the Assessor do not mention the rateable value entered in the assessment book. Strictly speaking, the notice issued is not in compliance with the Section 220(2).
16. The question is whether defective notice renders entire proceedings vitiated? In interpreting the statutory provision, the essence of requirement of provision is to be looked into and not the technical compliance and this principles is called doctrine of substantiate compliance. In this regard, the decision of Constitutional Bench of Apex Court in Commnr. Of Central Excise, New Delhi vs M/S. Hari Chand Shri Gopal & Ors (CIVIL APPEAL NOS. 1878-1880 OF 2004, dt.18 November, 2010) is relevant which reads as under:
"24. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements. Like the concept of "reasonableness", the acceptance or otherwise of a plea of "substantial 11 compliance" depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means "actual compliance in respect to the substance essential to every reasonable objective of the statute" and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed. Fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non- compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential."
17. In the light of the above principles, it has to be seen whether non- prescription of all requirements of Section 220(2) of the Act in the notice vitiates the proceedings. The requirement of special notice is only to intimate the rateable value entered in the assessment book. This 12 intimation is an alternative mode to the general notice issued under Sections 218 and 220(1). A reading of the Section 219 of the Act indicates that the assessment book whereunder the rateable value was entered in consequence of the revision, was kept open to any party for inspection. This means the Assessee had access to the assessment book to know the entry with regard to rateable value after revision. This gives an opportunity to the Assessee to know what is the value entered in respect of his property in Ward Assessment Book.
18. A reading of Sections 218 to 220 of the Act would show that a special notice is intended only to give an opportunity to the Assessee to place his complaint on entries made in the Assessment Book. Mere non- mention of details of rateable value as entered in the Assessment Book do not vitiates notice for the reason that the assessee has opportunity to know the rateable value entered in the Assessment Book since such book is kept open, the place of availability of such and rateable value is already published in gazette, local papers and conspicuous place in compliance of Sections 218 and 219 of Act. If the assessee had shown some diligence, he would know everything. This means before he was asked to place his complaint, he had every opportunity to know the rateable value entered in the Assessment Book and such entries are only required to mention in the 13 special notice. He was not kept in dark about the rateable value entered in the Assessment Book.
19. In the present case, there was scope to know the entries in the Assessment Book to the Assessee, but in view of his own negligent and lack of diligence, he could not know. There is deemed knowledge. The essence of the notice contemplated under Section 220(2) of the Act is only to give an opportunity to the Assessee to explain about the entries in the Assessment Book. This opportunity was given to him by way of formal notice though which does not contain the rateable value entered in ward assessment book. Therefore, the defective notice does not vitiate entire proceedings since there was substantial compliance of statutory requirement.
20. The other contention of the learned Counsel for the Assessee is that, the building which is under tax, is of more than 25 years old and rebate as stated under the notification of revision, is not given in the demand notice. Whereas learned Standing Counsel representing the Greater Hyderabad Municipal Corporation concedes that in the demand notice, the rebate as notified in the revision notification, was not extended. It is not in dispute that by exercise of power under Section 212 of the Act, the authorities are required to give rebate. Admittedly, in the 14 present case as per notification, 20% rebate is given for the building which is above 25 years.
21. Learned Standing Counsel for Greater Hyderabad Municipal Corporation had submitted that he had information from the Commissioner that admittedly all the buildings which are taxed under the demand notice are more than 25 years old. Therefore instead of remanding the matter to the Assessment Authority, this Court feels that such rebate can be extended to the Assessee in view of no factual dispute about the age of the building under taxation.
22. The other grievance of the learned Counsel for Assessee is that, as per the notification of the revision, 50% was the ceiling for increase in the rateable value. It is also not in dispute as per the notification, 50% was the higher limit for increasing the rateable value on the existing tax. Learned Standing Counsel for Greater Hyderabad Municipal Corporation has contended that ceiling which was there under the Hyderabad Municipal Corporation Assessment of Property Tax Rules 1990 was withdrawn by way of G.O.Ms.No.88 dt.05.03.2011. This position is not seriously in dispute.
23. The contention of the learned Counsel for Assessee is that even though there is withdrawal of enhancement limit that cannot be applied to 15 the present revision which was taken up in pursuance of general notification. According to him, the procedure as laid down for revision has to be followed after ceiling limit has been withdrawn in case of any general increase is done. On the contrary, learned Standing Counsel for Greater Hyderabad Municipal Corporation has submitted that Section 225 of the Act gives empowers to the Commissioner to amend the rateable value entered in the Assessment Book. Such power extends either to increase or decrease in the rateable value. When such power is there, any increase subsequent to withdrawal of G.O. over and above 50% is a valid increase and such increase cannot be interfered. In this regard, it is apt to refer Section 225 of Greater Hyderabad Municipal Corporation Act, which reads as under:
"225. (1) Subject to the provisions of sub-section (2) the Commissioner may upon the representation of any person concerned or upon any other information at any time during the financial year to which the assessment book relates amend the same:
(a) by inserting therein the name of any person whose name ought to be so inserted or any premises previously omitted;
(b) by striking out the name of any person not liable to the property tax;
(c) by increasing or reducing the amount of any rateable value and of the assessment based thereupon;
(d) by altering the assessment on any land or building which has been erroneously valued or assessed through fraud, accident or mistake; Authentication of ward assessment books when all complaints have been disposed of. Assessment book may be amended by the Commissioner during the financial year.
(e) by inserting or altering an entry in respect of any building erected, re-erected, altered, added to or reconstructed in whole or in part after the preparation of the assessment book;16
(f) by making or cancelling any entry exempting with the approval of the Standing Committee any premises from liability to any property tax.
(2) Where any amendment is made under sub-section (1) which has the effect of imposing on any person any liability for the payment of property taxes which would not be incurred but for such amendment or which has the effect of increasing the rateable value of any premises as stated in the assessment book, a special written notice as provided in sub-section (2) of section 220 shall be given by the Commissioner, and as far as may be the procedure laid down in sections 221, 222 and 223 shall be followed.
(3) Every such amendment shall be deemed to have been made, for the purpose of determining the liability or exemption of the person concerned in accordance with the altered entry, from the earliest day in the current financial year when the circumstances justifying the amendment existed. (4) (i) If at any time it appears to the Commissioner that any person or property has been inadvertently omitted from the assessment records or inadequately or improperly assessed relating to any tax, or a clerical or arithmetical error is committed in the records maintained in relation to such assessment, he may assess or reassess or correct such errors, as the case may be: Provided that no such action shall be taken where it involves an increase in the assessment, unless the person affected is afforded an opportunity to show cause against the proposed action.
(ii) Such assessment or reassessment or correction of records shall not relate, to a period earlier than the five half years immediately preceding the current half year.]
24. A reading of Section 225 of the Act would indicate that the Commissioner is empowered either to increase or decrease the amount in the rateable value and make such assessment accordingly. Section 225(2) indicates that when such power is exercised if it creates liability on the Assessee to pay additional tax, notice under Section 220(2) of the Act required to be issued. This means, even the Commissioners intends to exercise the power under Section 225 of the Act, a special notice as 17 required under Section 220(2) of the Act has to be issued to give an opportunity to the Assessee to explain on the individual enhancement which is over and above the general assessment. Without issuing such notice, the increase cannot be made over and above 50% even if the G.O. is withdrawn.
25. In the present case, the notice is issued only for appearance, which is at the most even if it is treated no defective, it is confined to general revision. When special revision of tax is to be taken up by invoking under Section 225 of the Act by the Commissioner, he is again required to issue a special notice under section 220(2) of the Act. Such notice is not issued in this case. Therefore, without special notice under section 220(2) of the Act, any increase over and above 50% of the tax existing is without power; such increasing is unsustainable.
26. Admittedly, in the present case such notice is not issued. Therefore, enhancement effected in the demand notice over and above 50% is unsustainable. It is always open to the Commissioner if law permits him to take up special assessment by invoking the power under Section 225 of the Act for increase of any tax in pursuance of withdrawal of G.O. whereunder ceiling limit in enhancement is withdrawn. Without following such procedure, if any increase is made over and above 50%, it 18 is unsustainable. To that extent, the orders of the assessment authority and the order of the Appellate Authority is liable to be modified.
27. Accordingly, both the appeals are disposed of as follows:
i) The Commissioner is permitted to issue fresh demand notice by giving rebate of 20% on the tax assessed.
ii) The Commissioner is directed to restrict the increase in rateable value 50% only on the existing tax. By giving such benefits, fresh demand shall be made. On receipt of such demand notice, the Assessee has to deposit the amount within a month and the amount already paid, shall be adjusted.
iii) It is always open to the Commissioner to take up special revision, if any, under Section 225 of Greater Hyderabad Municipal Corporation Act in pursuance of withdrawal of ceiling limit. If such power is invoked, necessary notice under Section 220(2) of the Act has to be issued to Assessee to enable him to participate in the fresh assessment proceedings.
iv) If the demand notice is complied with, the distress warrant, if any, is pending, the same shall not be given effect.
There shall be no order as to costs. As a sequel, pending miscellaneous applications, if any, shall stand closed.
_______________ M. LAXMAN, J DATE: 07.09.2022 BDR