Karnataka High Court
Karnataka State Road Transport ... vs The Commissioner on 10 January, 2025
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF JANUARY, 2025
PRESENT
THE HON'BLE MR. N.V. ANJARIA, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE K.V. ARAVIND
WRIT APPEAL NO. 213 OF 2024 (LB-TAX)
BETWEEN:
1. KARNATAKA STATE ROAD
TRANSPORT CORPORATION
MYSORE URBAN DIVISION
MYSORE
NOW REPRESENTED BY ITS
CHIEF LAW OFFICER, KSRTC
SHANTHINAGAR
BANGALORE - 560 027
... APPELLANT
(BY SRI G. LAKSHMEESH RAO, ADVOCATE)
AND:
1. THE COMMISSIONER
MYSORE CITY CORPORATION
MYSORE - 570 024
REPRESENTED BY ITS
COMMISSIONER
2. REVENUE OFFICER
MYSORE CITY CORPORATION
MYSORE - 570 024
... RESPONDENTS
(SRI R. PALLAVA, ADVOCATE FOR RESPONDENT No.1
RESPONDENT No.2 SERVED & UNREPRESENTED)
---
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT, 1961, PRAYING TO SET ASIDE THE IMPUGNED ORDER DATED 14/09/2023 PASSED BY THE LEARNED SINGLE JUDGE, IN W.P. NO.7173/2011.
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THIS WRIT APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:
CORAM: HON'BLE THE CHIEF JUSTICE MR. JUSTICE N. V. ANJARIA and HON'BLE MR JUSTICE K.V. ARAVIND C.A.V. JUDGMENT (PER: HON'BLE THE CHIEF JUSTICE MR. JUSTICE N. V. ANJARIA) A neat question of interpretation arising in this appeal is what could be the time limit and reasonable period for the Commissioner to reopen the assessment under sub-section (4) of Section 112-A of the Karnataka Municipal Corporations Act, 1976, when the said provision does not prescribe any time limit for such exercise;
whether the view taken by learned Single Judge to hold that such period should be 3 years, could be said to be a correct view in the eye of and in the analysis of law.
1.1 Preferred by the Karnataka State Road Transport Corporation (KSRTC), the original petitioner, in the present appeal judgment and order dated 14.09.2023 passed by learned Single Judge is called in question. Learned Single Judge disposed of the petition by holding and reasoning that the Commissioner, Mysuru City Corporation, was entitled to reopen and assess the returns -3- filed by the petitioner-assessee in terms of Section 112-A(4) of the Municipal Corporations Act taking a view that 3 years period was reasonable period.
2. Heard learned advocate Mr. G. Lakshmeesh Rao for the appellant and learned advocate Mr. R. Pallava for respondent No.1. Respondent No.2 though served, has not chosen to appear.
3. Noticing the basic facts, the appellant-Karnataka State Road Transport Corporation (KSRTC) by filing the petition, prayed to set aside the order dated 02.12.2010 passed by learned II Additional District Judge, Mysore in Miscellaneous Appeal No.9 of 2010 which was a tax appeal filed under Section 113 of the Karnataka Municipal Corporations Act, 1976 (hereinafter referred to as "the Municipal Corporations Act"). It was consequentially prayed to set aside the Demand Notice dated 15.02.2010 issued by respondent No.2-Mysore City Corporation asking the appellant-petitioner to pay the property tax.
3.1 The case of the petitioner-Corporation was inter alia that it was a public utility concern established under the Karnataka Road Transport Corporation Act providing transportation service in the State of Karnataka, and owned the properties bearing Survey -4- Nos.134, 135, 115, 117, 253, 118 and 123 in Bannimantap, Mysore for the purpose of maintenance of its vehicles. It was the case that the KSRTC had not been carrying out any commercial or any manufacturing activity. The properties of the Corporation, it was stated, are exempted under Section 110(j) of the Municipal Corporations Act and that order dated 11.07.1994 was passed by the respondent in that regard.
3.2 It was the further case that the Demand Notice dated 03.02.2009 asking property tax of Rs.87,24,084/- came to be issued to the petitioner-KSRTC, which was replied on 09.02.2009.
Similar notices were again issued on 12.11.2009 and 17.11.2009. The property tax for the year 2002-2003 to 2008-2009 and 2009- 2010 along with interest and penalty was demanded alleging that the arrears were due. One more notice dated 15.02.2010 was issued asking the petitioner to pay total amount of Rs.1,60,89,812/-. This notice was again replied by the petitioner. 3.3 The aggrieved Corporation preferred appeal before II Additional District Judge, Mysore which was Miscellaneous Appeal No.9 of 2010 disputing the Demand Notice as well as assessment of the property tax. The appeal was dismissed on 02.12.2010. -5- The said order of learned Additional District Judge became subject matter of challenge in the writ petition.
4. Learned Single Judge in the impugned judgment and order held that Section 112-A(4) of the Municipal Corporations Act did not restrict power of the competent authority to reopen the assessment within a period of one year and that the reasonable period within which the Commissioner could reopen and reassess the returns of the assessee would be three years. Accordingly, it was held by learned Single Judge that for the years 2006-07, 2007- 08 and 2008-09, the assessment could be validly opened and reassessed. However, reassessment was not permissible in respect of the past years, beyond three years. 4.1 Learned Single Judge addressed the issue as to what could be the reasonable period within which the Commissioner would be justified in reopening the assessment, by proceeding on the principle that a statutory authority should exercise its powers under the statute within reasonable period and that what should be the reasonable period would depend upon the nature of the statute, rights and liabilities arising thereunder and other relevant factors, observed learned Single Judge.
-6-4.1.1 According to learned Single Judge, for the purpose of determining the reasonable period for reopening a case, the concept of reasonable period could be drawn, gathered and adopted from the ratio of decisions of the Supreme Court in State of Gujarat Vs. Patel Raghav Natha (AIR 1969 SC 1297) and also from Joint Collector, Ranga Reddy District Vs. D. Narsing Rao [(2015) 3 SCC 695].
4.1.2 In holding that three years would be reasonable, learned Single Judge reasoned as under, extracting from paragraph 12, "When this Court is dealing with fiscal matters, regard should be had to the fact that the statutory authorities are duty bound to ensure that due property taxes are paid by the owners of the properties and no scope is given for short payment. When Courts are dealing with fiscal matters and competing claims are made by individual citizens of this country, Courts are required to ensure that legally recoverable taxes are collected from the owners of the property and no scope is given to the persons manning the Corporation to dole out undue advantage or benefits to individual persons or assessees. Having regard to the magnitude of the assessments that are filed and the limited staff manning the Corporation, moreso, in the matters of collection of taxes, the Assessing Officer will no doubt be faced with shortage of time and hands." 4.1.3 Learned Single Judge thereafter noted that sub-section (3) of Section 112-A of the Municipal Corporations Act requires that the -7- assessment under the self-assessment scheme shall be concluded within one year, however when the Commissioner has to reopen the assessment, he may act within three years period. It was thus held that the returns filed by the petitioner could be validly reopened within three years.
5. Having noticed the controversy, Section 112-A of the Municipal Corporations Act which deals with the assessment of property tax may be considered at the outset. 5.1 The said section is reproduced hereunder, "112-A. Assessment of property tax.-(1)Every owner or occupier who is liable to pay property tax under this Act, shall every year submit to the Commissioner or the officer authorised by him in this behalf (hereinafter referred to as authorised officer) a return in such form within such period and in such manner as specified in schedule III.
Provided that if the owner or occupier who is liable to pay tax files return and also pays tax which is due, within one month from the date of commencement of the year, he shall be allowed a rebate of five percent on the tax payable by him.
Provided further that, for the financial year 2020-2021 if the owner or occupier who is liable to pay tax files return and also pays tax which is due or within one month from the date of commencement of the Karnataka Municipalities and Certain Other Law (Amendment) Act, 2021, he shall be allowed a rebate of five percent on the tax payable by him:
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Provided also that, in case property tax is paid in full in the financial year 2020-21 before the commencement of the Karnataka Municipalities and Certain Other Law (Amendment) Act, 2021, the rebate so allowed shall be adjusted in payment of tax for the future years.
(2) Before any owner or occupier submits any return under sub-section (1), he shall pay in advance full amount of the property tax payable by him on the basis of such return and shall furnish alongwith the return satisfactory proof of payment of such tax and the tax so payable shall for the purposes of this Act be deemed to be the property tax due from such owner or occupier. After the final assessment is made the amount of property tax so paid shall be deemed to have been paid towards the property tax finally assessed.
(3) If the Commissioner or the authorised officer is satisfied that any return submitted under sub-section (1) is correct and complete, he shall asses the property tax in accordance with the provisions of this Act and the rules made thereunder and shall send a copy of the order of assessment to the owner or occupier concerned. Assessment under this sub-section shall be concluded within one year from the date of submission of return under sub-section (1).
(4) If any owner or occupier fails to submit a return as required under sub-section (1) or fails to pay in advance the amount of property tax payable by him as required under Sub-section (2) or submits an incomplete or incorrect return, the Commissioner or the authorised officer, shall cause an inspection of the land and building and may also cause such local enquiry as may be considered necessary, and based on such inspection and information collected, he shall -9- assess the property tax and send a copy of the order of assessment to the owner or occupier concerned.
(5) When making an assessment of property tax under sub-section (3) or (4), the Commissioner or the authorised officer may also direct the owner or occupier to pay in addition to the property tax assessed a penalty,-
(a) at the rate of two percent per month of the amount of property tax assessed and due in case of failure to pay the amount of property tax and to submit a return;
(b) not exceeding two times the amount of difference between the property tax assessed and the property tax paid along with his return in the case of knowingly submitting an incomplete or incorrect return.
(c) One hundred rupees in case of failure to submit a return after payment of property tax in full.
(6) The owner or occupier may either accept the property tax assessed and the penalty if any, levied or send objections to the Commissioner or the authorised officer within a period of thirty days from the date of receipt of a copy of the order under sub-section (3) or (4).
(7) The Commissioner or the authorised officer shall consider the objections and pass such order either confirming or revising the assessment of such tax and penalty if any, 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.
(8) In order to facilitate filing of a return by an owner or occupier of any building or vacant land and assessment of property tax under this
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section, the corporation shall, from time to time issue guidelines for determining the taxable capital value and property tax payable thereon." 5.1.1 While sub-section (3) of Section 112-A of the Act provides that assessment of any return submitted by the owner or occupier of the property under sub-section (1) is correct and complete, the assessment shall be done and the same shall be concluded within one year from the date of submission of the return. However, under sub-section (4), no time limit is prescribed by the Legislature. Sub-section (4) provides that if any owner or occupier fails to submit the return or submits incomplete or incorrect return or fails to pay the property tax payable under the provisions, the Commissioner is authorized to assess the property tax. 5.2 There will be no gainsaying that Section 112-A of the Act dealing with the assessment of property tax is a complete scheme operating through its various conjoint sub-sections, the provisions prescribe different limbs of the assessment of property tax. It casts obligation on the owner or occupier of the property to submit every year to the Commissioner return in prescribed form. It also enjoins the owner or occupier of the property to pay in advance full amount of property tax on the basis of the return he may file upon self- assessment. As noted above and sub-section (3) of Section 112
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requires the Commissioner to correct and complete the returns to assess the tax within one year. The power is available under sub- section (4) of the Commissioner to reopen the incomplete or faulty assessment requiring the assessee to pay property tax as assessed. This exercise is contemplated but, no time limit is provided.
5.2.1 A reading of Section 112-A of the Act with its all sub-sections together, the return filed by an assessee in sub-section (1) will be assessed and the assessment shall be concluded within one year from the date of submission of the return, as noted above. This one year timeframe is provided for in sub-section (3). The period of one year stipulated in sub-section (3) would commence from the date of submission of the return.
5.2.2 The provision of sub-section (4) of Section 112-A is in the nature of suo motu powers which is exercisable by the Commissioner for reopening and undertaking the assessment. This suo motu mechanism operates in three specific circumstances. Firstly, when the assessee has failed to file the return. Secondly, there is a failure to remit the property tax in advance by the assessee. The third eventuality in which sub- section (4) of Section 112-A could be invoked is that the assessee
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has submitted incomplete or incorrect return for the particular financial year.
5.2.3 The object of sub-section (4) is to facilitate the assessment of property tax by inspection and inquiry in the cases where the defaults, as above, have occurred. The different sub-sections in the aforementioned Section 112-A is a complete code in itself. It is an entire scheme for assessment statutorily provided, to be read and construed with uniformity and with harmonious approach. 5.2.4 One of the important cannons for interpretation of statutes is to apply the criteria of internal aid. Internal aid for the construction may be available in different ways, namely from the title of the section, the objects and reasons, headings, marginal notes, the proviso, the explanation and such other considerations. The total language and the combined reading of the sub-sections and section is itself an important tool of internal aid, which would guide the construction and interpretation of the part of the section which requires to be interpreted.
5.2.5 If in one sub-section, a particular stipulation is incorporated by the legislature, the other sub-section or interacting section could be construed correspondingly to make operation of provisions
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consistent. Such course of construction would not only go with the scheme of the section, but also would harmonise its operation and lend uniformity to the application of the section. There may be two situations contemplated in the provision, which are otherwise belong to same class, but one part may be silent in some respect, to be construed in the similar fashion by resorting to the principle of internal aid.
5.3 It is also the principle of interpretation that the best way of understanding and applying the legal provision by knowing the 'reason' underlying it. This 'reason' is often capable of being detected by applying the internal aid available from the corresponding section, etc. 5.3.1 The principle of applying reason for its construction came to be highlighted by the Hon'ble Supreme Court in Utkal Contractors and Joinery Pvt. Ltd. vs. State of Orissa [(1987) 3 SCC 279], "A statute is best understood if we know the reason for it. The reason for a statute is the safest guide to its interpretation. The words of a statute take their colour from the reason for it. How do we discover the reason for a statute?
There are external and internal aids. The external aids are statement of Objects and Reasons when the Bill is presented to Parliament, the reports of committees which preceded the Bill and the reports of
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Parliamentary Committees. Occasional excursions into the debates of Parliament are permitted. Internal aids are the preamble, the scheme and the provisions of the Act. Having discovered the reason for the statute and so having set the sail to the wind, the interpreter may proceed ahead."
(para 9) 5.4 The interpretation of a provision would also depend upon the text and the context of the provision. Again, the concept of the text and the context in interpretation will be best served by applying the internal aid. The text is a texture, whereas the context is something which gives colour to the provision. The Supreme Court has observed that both of them are important not to be ignored. 5.4.1 In Reserve Bank of India vs. Peerless General Finance and Investment Co. Ltd. [(1987) 1 SCC 424], the Supreme Court highlighted the text and context as a tool for interpreting the statutory provision. It was stated that they are the cannons to be applied for internal aid. The section and the words in the section may take colour from the context of the statute, it was observed. 5.5 A particular word in a Section may guide interpretation of another corresponding or interacting Section. In all, one provision may be used to implant similar purpose in another provision which may ultimately seek to achieve the same purpose or that such
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other provision operates to from fact on similar lines. It is therefore reasonable to construe the Section for its two similar purposes by adopting express provision engrafted for one purpose, to be employed for achieving other similar purpose is silent in some respect. This would amount to employing the internal aid. 5.6 The interpretation of statutory provision through internal aid has a harmonizing effect in reading and applying the provisions. It brings uniformity in applying a concept in the statute which otherwise a silent, for, such concept may take colour from a provision which is expressed or vocal in its providence. 5.6.1 The statute should be construed according to the intention of the Legislature and the Court should act upon and carry forward, the true legislative intention while applying and interpreting the law. Internal aid could be the best method to interpret the law to invoke the doctrine of upholding the intention of the legislation. It might be that for one purpose the Legislature may have provided a specific provision but, for other similar purpose which may be conceptually interactive, making of similar specific provision has escaped for some reason.
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5.6.2 The Legislature is not immune from committing lapses and omissions. The gap may have to be filled in by the Court applying the interpretative aid to be culled out within the statute and from the provisions incorporated. It is a process construing a Section or applying a concept where the law is silent, is a process to expound and it would not amount to interpreting a provision or applying a concept by means of internal aid, is a textual interpretation only applied in different way. Interpretation by internal aid is also a facet of attaching the interpretation according to purpose of the provision being interpreted. Internal aid is indeed a reason for a statute, and the reason for a statute is the best guide to its interpretation.
6. Viewed in light of the aforesaid cardinal principles, sub- section (3) of Section 112-A of the Act stipulates that any return submitted under sub-section 1 shall be subjected to assessment by the authority concerned within one year from the date of submission, therefore, it is quite logical to apply the time limit of one year for the purpose of operation of sub-section (4) also. Sub- section (4) of section 112-A authorizes the Commissioner to assess the property tax in the category of contemplated cases, however, the provision is silent as to the time limit within which such suo moto powers could be exercised by the Commissioner.
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6.1 Sub-section (2) and sub-section (4) of Section 112-A, are not only part of one section displaying a scheme of assessment of property tax, in all respects, especially for the purpose of time limit within which the assessment to be completed, they may be better read and applied in the same way in terms of the time period of assessment. If a return filed under sub-section (1) is to be assessed within one year as per sub-section (3), the power under sub-section (4) to assess the return which is omitted to be filed or incompletely filed or incorrectly filed, when the assessment on such score is undertaken by the Commissioner, it is both trite and reasonable that this assessment is also done within one year and the Commissioner or the competent authority exercises the powers within one year.
6.1.1 It will be only reasonable to apply that the time limit for reopening the assessment by the competent authority, which is otherwise not provided or in respect of which the statute is silent, to be one year, when Sections 212-A(3) of the Act contemplate that self-assessment of context should be done within one year. 6.1.2 If the said time limit is prescribed for the assessee to have the self-assessment, it is consistent to hold that the Commissioner shall act within some period if it is inclined to reopen the
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assessment. The express provision of time limit of one year in Section 212 -A(1) of the Act is a glass through which the time limit for reopening the assessment may be looked at to make both uniform.
6.1.3 Sub-section (3) of Section 112-A which contemplate one year period for assessment is an internal aid to interpret and construe sub-section (4) where the legislature has not provided for time limit. Both the sub-sections relate to carrying out of assessment of the return filed by the property owner. The language and text of sub-section (3) becomes context for interpreting sub-section (4) and reading the same time limit for the exercise which may be undertaken by the Commissioner under the said sub-section. It also becomes the reason to apply sub-section (4) accordingly. Reading of period of one year for the purpose of applying and interpreting sub-section (4) would ensure a uniformity in the scheme of Section 112-A of the Act.
7. In light of the aforesaid discussion, it has to be held that the period of one year for exercise of powers under sub-section (4) of Section 112-A of the Act would not only be reasonable, but such timeline is also consistent with what is contemplated in sub-section (3), thus becomes coordinated with the scheme of the Section.
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7.1 However, the next question would be as to what should be the starting point for commencement of one year period as read into for the purpose of invoking Section 112-A (4). As far as sub-section (3) of Section 112-A is concerned, the period of one year stipulated therein would start from the date of submission of the return. Considering the purpose for which sub-section (4) is inacted and having regard to the circumstances which may be noticed by the Commissioner to assort to invocation of powers under sub-section (4), the point of commencement of one year period for the purpose of sub-section (4) can occur after the completion of the assessment under sub-section (3). It is reasonable to interpret that the initiation of proceedings under sub-section (4) has to be within one year period provided for under sub-section (3) of the Act.
7.2 The timelines for the operation of sub-sections (3) and (4) of Section 112-A of the Act would be thus, (i) the assessment under sub-section (3) shall have to be completed within one year from the date of submission of the return as statutorily provided, (ii) the proceedings under sub-section (4) will be possible shall be permissible to be initiated by the Commissioner within one year from the expiry of period of one year specified in sub-section (3).
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One of the contingencies for exercise under sub-section (4) is that return which is submitted is incomplete or incorrect, (iii) the assessment under sub-section (4) shall be completed within one year from the date of initiation of proceedings as held above. The operation of sub-section (4) of Section 112-A of the Act and the timeline for exercise of powers thereunder are read down as above.
8. Learned Single Judge was not justified in law in introducing concept of reasonable period for the purpose of interpreting sub- section (4) to hold that a reasonable period of three years for the competent authority to undertake the assessment, when the internal aid by virtue of sub-section (3) of Section 112-A was available to be applied.
9. It is held that the power under Section 112-A (4) of the Act shall have to be exercised within one year as per the timeline specified and stated in paragraph 7.2 above. The Section stands interpreted accordingly and respondent-Mysore City Corporation shall apply the same to act within such period of one year for the purpose of assessment of property tax to be levied from the appellant-Karnataka State Road Transport Corporation.
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10. For the foregoing reasons and discussion, the judgment and order dated 14.09.2023 of learned Single Judge is hereby set aside.
11. The present appeal stands allowed in the terms above.
Sd/-
(N.V. ANJARIA) CHIEF JUSTICE Sd/-
(K.V. ARAVIND) JUDGE AHB