Delhi High Court
Lucky Star Estate (India) Pvt. Ltd. vs Municipal Corporation Of Delhi on 30 May, 2003
Equivalent citations: 2003VIIAD(DELHI)567, 105(2003)DLT300, 2003(71)DRJ700
Author: Sanjay Kishan Kaul
Bench: Sanjay Kishan Kaul
JUDGMENT Sanjay Kishan Kaul, J.
1. The legal issue of the period of limitation for creating a charge for recovery of property tax under the Delhi Municipal Corporation Act, 1957 ( hereinafter to be referred to as, `the Act' ) has given rise to the present writ petition.
2. A notice of assessment under Section 126 of the Act was issued to the petitioner on 27.03.1980 and the petitioner filed objections thereto on 02.04.1980. This was for the assessment year 1979-80. A notice was again issued under Section 126 of the Act for the year 1980-81 on 30.03.1981 and objections were filed on 17.04.1981. Another notice was issued under Section 126 of the Act on 19.03.1985 for the assessment year 1984-85 and the petitioner filed objections on 15.04.1985. The assessment order was passed on 27.12.1990 determining the rateable value for the various periods, which was followed by a bill dated 10.09.1991.
3. The petitioner filed the present writ petition seeking quashing of the demand for property tax raised vide the aforesaid bill. Though initially interim orders were granted, the application was subsequently dismissed as withdrawn as payments were made.
4. The only question raised by learned counsel for the petitioner arises from the claim that the period of limitation is 3 years for creation of the liability / charge for levy and recovery of property tax under the provisions of the said Act. Learned counsel in this behalf referred to the provisions of Section 455 of the Act, which is as under :-
"455. Mode of recovery of certain dues.- In any case not expressly provided for in this Act or any bye-law made there under any due to the Corporation on account of any charge, costs, expenses, fees, rates or rent or on any other account under this Act or any such bye-law may be recoverable from any person from whom such sum is due as an arrear of tax under this Act.
Provided that no proceedings for the recovery of any sum under this section shall be commenced after the expiry of three years from the date on which such sum becomes due."
Learned counsel for the petitioner contended that in view of the aforesaid, the period of limitation is 3 years from the date when the sum becomes due.
5. The question, which, thus, arises for consideration is as to when the amount becomes due?
6. Learned counsel for the petitioner submitted that first a charge has to be created on the property and then only the question of raising the demand and recovery thereof arises. It was submitted that the proceedings have to be completed within a period of 3 years from the date when the proceedings are initiated as the cause of action arises when such proceedings are initiated and will continue to run for the period of 3 years. Learned counsel, in this behalf, relied upon the provisions of Section 124(6) of the Act to submit that the property stands charged on the date of authentication of the assessment list under the said provision, which is conclusive evidence for the purpose of assessment of any tax levied under the Act. The relevant provisions are as under :-
"124. Assessment list.-
... ... ... ...
(6) When all objections have been disposed of, and the revision of the ratable value has been completed, the assessment list shall be authenticated by the signature of the Commissioner or, as the case may be, the officer authorised by him in this behalf, who shall certify that except in the cases, if any, in which amendments have been made as shown therein no valid objection has been made to the rateable value or any other matters entered in the said list.
125. Evidential value of the assessment list.- Subject to such alterations as may thereafter be made in the assessment list under Section 126 and to the result of any appeal made under the provisions of this Act, the entries in the assessment list authenticated and deposited as provident in Section 124 shall be accepted as conclusive evidence-
(a) for the purpose of assessing any tax levied under this Act, of the rateable value of all lands and buildings to which such entries respectively relate."
7. Learned counsel contended that this matter has to be considered taking into consideration two aspects. The first aspect is that where there is no change in valuation, the respondent Corporation has a right to issue the demand bill on the existing rateable value on the date of authentication of the assessment list and not prior to it. The second aspect arises when there is a change of rateable value for which notice is issued proposing the said change and in such a situation, the time begins to run for creating further / additional charge on the date of issuance of the notice for amendment of the entries in the authenticated assessment list.
8. It was submitted that the proposed amendments are entered provisionally as per the requirement of Bye-Law 9(i) of the Delhi Municipal Corporation (Assessment List) Bye-Laws, 1959 ( hereinafter to be referred to as, `the Bye-Laws' ) and the proposed rateable value gets confirmed if no objections are filed as per Bye-Law 9(iv). In terms of Bye-Law 3, it is a book which is required to be mandatory kept by the Commissioner. The contention, thus, advanced in this behalf was that the entire procedure of amendment has to be completed within 3 years for recovery of the same in view of the provisions of Section 455 read with Sections 125 and 127 of the Act.
9. Learned counsel submits that the bills are issued every year, but only after authentication of the assessment list and such bills are presented under Section 153 of the Act, which becomes arrears of property tax and a charge on the same under Section 123 of the Act. The said Section is as under :-
"123. Property taxes a first charge on premises on which they are assessed.- Property taxes due under this act in respect of any land or building shall, subject to the prior payment of the land revenue, if any, due to the Government thereon, be a first charge-
(a) in the case of any land or building held immediately from the Government, upon the interest in such land or building of the persons liable for such taxes and upon the goods and other movable properties, if any, found within or upon such land or building and belonging to such persons; and
(b) in the case of any other land or building, upon such land or building and upon the goods and other movable properties, if any, found within or upon such land or building and belonging to the person liable for such taxes.
Explanation.- The term "p property taxes" in this section shall be deemed to include the costs on recovery of property taxes and the penalty, if any, payable as specified in the bye-laws."
10. Learned counsel fairly stated that in view of the judgment of the learned Single Judge of this Court in Lakhmi Chand v. Municipal Corporation of Delhi, , the limitation to enforce payment of arrears is 12 years. It was held that Section 123 makes the house-tax the first charge on the premises on which it is levied. Since Article 62 of the Limitation Act, 1963 prescribes a period of 12 years to enforce the payment of money secured by a mortgage or otherwise charged upon immovable property, the house-tax is the first charge on the property. It is the said Article, which would be applicable for recovery of house-tax arrears. It was held that Article 113 would not apply for purposes of recovery of arrears of house-tax. Thus, 12 years would start from the demand bill to be issued under Sections 153 and 154 of the Act.
11. Learned counsel for the petitioner referred to the Division Bench judgment of the Punjab and Haryana High Court in Municipal Committee Bhatinda v. Jaswant Rai, 1990 M.C.C. 27 where it was held that the period of limitation for issuance of a bill for the amount as well as the demand notice would be 3 years and it is only after the respondents have failed to meet the demand that the arrears would become arrears of tax on the property and would be a charge on the property. It was, thus, held that when the arrears become a charge on the property, the limitation gets enlarged and the recovery could be made within 12 years. Learned counsel specially referred to para 22 of the judgment where it was stated that the recovery notice of arrears beyond 3 years without any charge having been created in accordance with methodology provided by the Municipal Act would be barred by time.
12. In view of the aforesaid, learned counsel contended that the period of 3 years would commence from the date of authentication of the assessment list for the year in which notice is issued or from the date of issuance and service of the notice for the proposed amendment in the assessment list in pursuance whereto the charge would be created and referred to the provisions of Section 127 of the Act dealing with preparation of the new assessment list.
13. Learned counsel once again reverted to the judgment in the case of Municipal Committee Bhatinda's case (supra) and referred to para 23 where it was observed as under :-
"23. Thus, in our considered view the answer to the question is that the period of limitation for issuance of bill for the amount as well as the demand notice would be three years and it is only after the respondents have failed to meet the demand that the arrears would become the arrears of tax on the property and would be a charge on the property. When the arrears become a charge on the property, the limitation gets enlarged and the recovery could be made within twelve years. Similarly for recovering any taxes which may include even the house tax from a movable property would be three years from the time it fell due as the limitation would be governed by Article 113 of the Limitation Act."
14. Learned counsel, thus, contended that in case the charge or an additional charge is not created within 3 years of the notice for change of rateable value, the respondent Corporation would have no right to issue the demand bill on the increased rateable value. Thus, the limitation is 3 years which would get enlarged only if the charge is created within that period, since there cannot be enlargement of time if there is no time limit fixed.
15. Learned counsel also referred to the judgment of the Full Bench in Municipal Corporation of Delhi v. M/s. Palace Cinema & Anr, 2nd (1972) I Delhi 163 where the matter in issue was the advertisement tax under Section 142 of the Act. It was held that the recovery of taxes which are and can be imposed by the Corporation under Section 113 of the Act being provided for in Sections 152 to 162 of the Act, is not covered by Section 455 and, therefore, the proviso fixing the period of 3 years for recovery cannot be called in aid to contend that the recovery of advertisement tax for any period in the case was barred by time.
16. Learned counsel for the petitioner lastly contended that there cannot be an indefinite time period for the authority to have jurisdiction to exercise the power under the Act after which another 12 years have to be given to recover the said amounts.
17. Learned counsel for the respondent, on the other hand, contended that there was no such time limit prescribed, as was sought to be contended by the learned counsel for the petitioner.
18. Learned counsel relied upon the judgment of the learned Single Judge of this Court in Municipal Corporation of Delhi v. Dharam Bhushan Jain & Ors., . The matter in issue was related to the maintainability of an appeal under Section 169 of the Act and it was held that if there was no levy or assessment, no such appeal would be maintainable. Learned Single Judge considered the scheme of the provisions of Sections 124 to 127 of the Act and was of the view that the said provisions were inter-linked and inter-connected and it be read together in order to ascertain the scheme of the Act with regard to the procedure, which was to be followed for determination of tax. It was held that when a notice is issued under Section 124(3) of the Act, objections can be filed to the same under Section 124(4) of the Act, which are to be enquired into and investigated and only after they are disposed off, can the assessment list be authenticated under Section 124(6) of the Act. If no objections are filed, then again the list prepared under Section 124(1) can be authenticated under Section 124(6) of the Act. It is only thereafter the tax would become payable. Under Section 126, the amendment in the assessment list for the current year can only be made after deciding the objections, which may be filed to the notice under Section 126(1) of the Act and thereafter the liability to pay tax would arise.
19. In the said judgment, the learned Single Judge also referred to the Full Bench judgment of this Court in Lok Kalyan Samiti v. Municipal Corporation of Delhi, . The Full Bench was of the view that the effect of Section 125 is that the assessment list finalized and authenticated and deposited under sub-sections (6) and (7) of Section 124 of the Act is subject to such alterations as may be made under the provisions of Section 126 or the result of any appeal under the provisions of the Act. In view thereof, it was held that the assessment list for any year where it is subject to a notice under Section 126 is really finalized only after the investigation to the proposed enhancement having been completed and finalized and the authentication and deposit of the list under sub-sections (6) and (7) of Section 124 is subject to such finalization. Thus, when objections under Section 126 are decided, then if any list had to be prepared under Section 124 for the subsequent year, the rateable value for those years would stand automatically amended or altered as a result of the decision of such objections.
20. Learned counsel for the respondent also referred to the Bye-Laws to contend that in terms of Bye-Law 9(v), the property tax on the basis of amended assessment list shall be due on the date in which the amendment is finally made in the assessment list and as per Bye-Law 3, no demand can be raised till the list is authenticated under Section 124(6), which can only be done fter the disposal of objections filed under Section 124(4). Since Section 124(6) itself stipulates that the list shall be authenticated only after the objections have been disposed off, the question of a person being required to pay the tax till such authentication is made does not arise.
21. Learned counsel for the petitioner lastly referred to the case of Dharam Bhushan Jain's case (supra) in respect of the factual matrix to state that though the notice was issued under Section 126 in March, 1976 and 11 years had elapsed since the objections were filed, it was still held that the appeal could be filed only after the tax is levied or assessment and rateable value is determined. It was stated that, really speaking, it is the Corporation which loses the revenue because of its own inefficiencies and default and it was in view thereof it was observed in Dharam Bhushan Jain's case (supra) that the effort should be made to dispose off the objections within a reasonable period of time.
22. I have considered the submissions advanced by learned counsel for the parties.
23. In view of the judgment in Lakhmi Chand's case (supra), there is no doubt about the proposition that the period for recovery of tax is 12 years. Thus, the only question to be considered is as to when the charge can be stated to be created under Section 123 of the Act?
24. In my considered view, the effect of the provisions dealing with this issue has been considered in depth in the case of Dharam Bhushan Jain's case (supra). It may be noticed that even in the said case, the notice was issued under Section 126 of the Act in March, 1976 proposing the rateable value, but the objections were not decided and for the accounting year 1984-85, the assessment list was prepared under Section 124(1) of the Act and published and objections were invited, which were also filed. Despite this fact, the Court came to the conclusion that there was no levy or assessment in the case which could give rise to an appeal.
25. In Dharam Bhushan Jain's case (supra), the ambit and scope of Sections 124 to 127 of the Act were fully discussed and it was held that the four provisions are inter-linked and inter-connected. The scheme of the said provisions was considered in paras 13 and 14 of the judgment and reference was also made to the judgment of the Full Bench of this Court in Lok Kalyan Samiti's case (supra) wherein it was observed as under :-
"13. As I read the said provisions the following seems to be the scheme which emanates there from :-
(a) Section 124 read with Section 127 indicates that an assessment list has to be in existence for each year. Section 127 makes it clear that for each year either an assessment list will be prepared or an assessment list of an earlier year will be adopted with such alterations as may be necessary.
(b) The assessment list which is prepared and/or adopted under Section 124 and/or 127 is to be in respect of the following year in which this list is prepared or adopted.
(c) If an assessment list has been prepared for a year, but amendment is to be made therein, then recourse has to be had to provisions of Section 126 of the Act. In other words, Section 126 is applicable to the current year and not to the years succeeding the year in which the notice proposing change is issued under Section 126.
(d) Under provisions of Section 124 a list under sub-section (1) is first prepared. Objections are invited to the said list under sub-section (3) by a public notice and if land and building is going to be assessed for the first time, or if rateable value is proposed to be increased, then individual notices have to be given to the owners or to the lessees or occupiers of the land or building.
(e) When notice is issued under Section 124(3) objections can be filed to the same under Section 124(4). These objections are to be enquired into and investigated, and only after they are to be disposed off, can the assessment list be authenticated under Section 124(6) of the Act. If no objections are filed then again the list prepared under Section 124(1) can be authenticated under Section 124(6). It is only thereafter that tax would become payable.
(f) Section 125 provides that the list authenticated under Section 124(6) shall be conclusive subject to such alterations which may be made thereto under Section 126 or as a result of any appeal which may be filed against the authenticated list.
(g) Under Section 126 the amendment in the assessment list for the current year can only be made after deciding the objections which may be filed to the notice issued under Section 126(1). Thereafter the liability to pay tax would arise.
A full bench of this Court in the case of Lok Kalyan Samiti vs. Municipal Corporation of Delhi was concerned with a case where notice under Section 126 had been issued and an increased rateable value was proposed. This increased rateable value was thereafter indicated in the list for the subsequent years which were prepared under Section 124 of the Act. One of the questions which arose for consideration before the full bench was as to whether the assessment list for the subsequent years could be modified after the disposal of objections under Section 126 or not. At page 197 of the report, it was observed by this court as :-
"The effect of S. 125 is that the assessment list finalised and authenticated and deposited under sub-secs. (6) and (7) of S. 124 of the Act is subject to such alterations as may be made under the provisions of S. 126 / or the result of any appeal under the provisions of this Act.
Once the list so authenticated under S. 124(6) is, by virtue of S. 125, made subject to the provisions of S. 126, the assessment list for any year where it is subject to a notice under S. 126 is really finalised only after the investigation to the proposed enhancement has been completed and finalised; authentication and deposit of the list under S. 124(6) and (7) is subject to such finalisation."
Taking the aforesaid reasoning to its logical extent, and considering the fact that the objections under Section 126 are never decided within the year in which notice is issued, and in this particular case they have not been decided for the last 12 years, it must follow that as and when objections under Section 126 are decided then if any list has been prepared under Sec. 124 for the subsequent years the rateable value for those years would stand automatically amended or altered as a result of the decision of the said objections. It must of course stand to reason that no amendment of an authenticated list under Section 124 can take place, even under the provisions of Section 125, without complying with the principles of natural justice and this would mean that if as a result of decision of objections under Section 126 for a particular year amendment is sought to be made in the duly authenticated list for the subsequent years, by virtue of Section 125, then notice will have to be given of the amendment proposed to be made before final action is taken.
14. I think the scheme of the Act, which has been referred to herein above, may best be understood by taking a hypothetical illustration which is as follows :-
Let us assume that a house has been constructed and is ready for occupation as on 1st January 1976. For the assessment year 1975-76, let it also be assumed, that there is a duly authenticated list prepared under Section 24 which is in existence. It is then proposed to subject this house to property tax. What are the steps which has been or can be taken?
(i) If it is proposed to tax this house for the year 1975-76 then notice will have to be issued under Section 126 of the Act. Assuming that such a notice is issued proposing that the Corporation intends to amend the assessment list and to determine the rateable value of the house in question at Rs. one lakh. Then the owner will have an opportunity to file objections to the proposed amendments. Assume for the sake of arguments that objections are filed but they are not decided till 1st January 1980 then by virtue of provision of bye-law 9(v) no tax becomes due in respect of the year 1975-76 till 1st January, 1980 when the objections are finally determined. Bye-law 9(v) reads as under :-
"Property taxes on the basis of the amended Assessment list shall be due on the day in which the amendment is formally made in the Assessment list.
Provided that payment of taxes on the basis of the Assessment List, existing before such amendment cannot be withheld on the ground that some amendment is to be made in the List under this bye-law."
(ii) For the year 1976-77, i.e., year subsequent to the one in which the notice under Section 126 had been issued in respect of the said house, if it is proposed to subject the said house to tax when the same will have to be included in the list prepared under Section 124. If such a list is prepared and a rateable value is again proposed as Rs. One lakh, which was mentioned in that notice under Section 126 even for the year 1975-76, then notice has to be issued under Section 124(3). Objections to such a notice will have to be filed under Section 124(4) within the time prescribed in such a notice.
(iii) If no objections are filed under Section 124(4) in respect of the years 1976-77 then the list prepared under Section 124(1) can be authenticated under Section 124(6). If however objections are filed under Section 124(4) then the list cannot be authenticated unless and until those objections are disposed of.
(iv) If objections are filed under Section 124(4) then by virtue of provisions of bye-law 3 no demand can be raised till the list is authenticated under Section 124(6) which can only be done after the disposal of the objections filed under Section 124(4). Bye-law-3 reads as under :-
"Save as otherwise provided in the Act, property taxes shall be payable in respect of each year on the day on which the assessment list is authenticated under sub-section (6) of Section 124."
As has been already pointed out Section 124(6) itself stipulates that the list shall be authenticated only after the objections have been disposed of. Therefore, the question of a person being required to pay tax till such authentication is made does not arise.
15. From the aforesaid will follow that if objections are filed under Section 126 for the year 1975-76 and in respect of 1976-77 and onwards whenever a list under Section 124(1) is prepared and objections are filed under Section 124(4) then in neither of the cases will a person be required to pay any property tax till the objections filed either under Section 126 or under Section 124 are disposed of. This is clearly in consonance with the principles of natural justice. Both under Sections 124 and 126 opportunity is granted to file objections. It will be travesty of justice if on an assessment proposed under Section 126 an assessed is required to pay taxes for that/or further years without the Corporation first determining the objections which are filed. One thing further should be made clear. From the aforesaid example it will be seen if for the year 1976-77, on the basis of the assessment which was proposed in the notice under Section 126 for the year 1975-76, notice is issued under Section 124(3), but no objections are filed then the assessed would be liable to pay tax when a list under Section 124(6) is authenticated. Such authentication for the year 1976-77 can be done without waiting for the disposal of the objections filed under Section 126 in respect of the earlier year namely 1975-76. If the assessed had been vigilant and if a notice under Section 124(3) is given then he is given an opportunity to file objections and thereby avoid payment of taxes till the objections decided. If the assessed chooses not to file the objections despite notice being given under Section 124(3) then he will have to pay taxes on the authentication of the list, which list may be revised after the objections under Section 126 are disposed of."
26. The aforesaid is a lucid explanation of the scheme of the said Sections and in view of what is stated in sub-para (e) of para 13, it is clear that it is only after the objections are disposed off, can the assessment list be said to be authenticated under Section 124(6) of the Act and it is only thereafter the tax would become payable. It cannot, thus, be said that the whole proceedings have to be completed within a period of 3 years from issuance of notice for creation of a charge under Section 123 of the Act. In fact, the contention of the petitioner is that the property stands charged on the date of authentication of the assessment list and it has been held in Dharam Bhushan Jain's case (supra) that it is only after the objections are disposed off, can the assessment list be authenticated under Section 124(6) of the Act. Thus, the issue is no more res integra in view of the said judgment. In this context, Bye-Law 3 may also be usefully referred to as no demand can be raised in terms thereof till the list is authenticated under Section 124(6) which can be done only after the disposal of the objections filed under Section 124(4). Section 124(6) itself stipulates that the list shall be authenticated only after the objections have been disposed off and there, thus, no question of any tax being paid till such authentication. The question of issuance of the bill would only arise after the proceedings are completed and the assessment order is passed. It is in that context the Division Bench of the Punjab and Haryana High Court in Municipal Committee Bhatinda's case (supra) observed that the period for issuance of the bill for the amount as well as the demand notice would be 3 years and it is only after the respondents have failed to meet the demand that the arrears would become arrears of tax on the property and would be a charge on the property. In the present case, it is not as if the bill has been sent more than 3 years after the assessment order has been passed. The question of issuance of the bill arises only when the assessment is completed. Thus, I fail to appreciate how the judgment of the Division Bench of the Punjab and Haryana High Court in Municipal Committee Bhatinda's case (supra) would come to assistance of the petitioner.
27. I am, thus, unable to accept the contention of the learned counsel for the petitioner that the proceedings have to be completed or the bill has to be issued within 3 years of issuance of the notice for increase of the rateable value. The cause of action cannot be stated to have arisen from the date of issuance of the notice, but would arise only after the assessment order is passed. The issuance of the demand or the bill would create a charge on the property, which will have to be issued within 3 years of authentication of the assessment list which can only occur on the assessment order being passed. The sum would become due only after the assessment order is passed and Section 455 of the Act provides a period of 3 years only after the sum becomes due.
28. I am, thus, unable to accept the contention of the learned counsel for the petitioner that the bill impugned in the present case is liable to be quashed and I find no merit in the said submission.
29. Before parting with the matter, I cannot, but once again reiterate the observations in Dharam Bhushan Jain's case (supra) in para 17 of the said judgment, which is as under :-
"17. Coming back to the facts of the present case, it is very sorry state of affairs which is disclosed. Notice was issued under Section 126 to the respondents way back in March, 1976. 11 years have elapsed and the objections filed thereto have not yet been decided. Up till now no demand has been raised by the petitioner because of no assessment list has been authenticated. It is a Corporation which is losing revenue because of its own inefficiency and default. The assessed is also afraid that he may be asked to pay the entire amount of property tax in respect of number of years at one single point of time when the assessments are finalised. The provisions for filing the appeal also provide that it is not to be entertained till the tax in dispute is deposited. I hope that the objections which have been filed will be disposed of within a reasonable time."
30. The present case is one more such case of a long period of time to conclude the assessment proceedings, which results in the Corporation losing revenue for a relevant period of time and creates apprehension in the mind of the assessed. I, thus, would like to once again reiterate that the respondent Corporation must take steps to expeditiously conclude the assessment proceedings, which are dragged on for years together.
31. The writ petition is dismissed leaving the parties to bear their own costs.