Delhi District Court
Manu Jain vs New Delhi Municipal Council on 22 August, 2023
IN THE COURT OF SH. SUDHANSHU KAUSHIK :
ADDITIONAL DISTRICT JUDGE-02 & WAQF TRIBUNAL :
PATIALA HOUSE COURTS : NEW DELHI
HTA NO.1/2022
CNR NO.DLND01-000654-2022
IN THE MATTER OF :-
MRS. MANJU JAIN
W/O SH. ARUN JAIN,
R/O 49, FRIENDS COLONY (EAST),
NEW DELHI-110025
.....APPELLANT
VERSUS
NEW DELHI MUNICIPAL COUNCIL
THROUGH ITS CHAIRMAN,
PALIKA KENDRA, SANSAD MARG,
NEW DELHI
.....RESPONDENT
DATE OF INSTITUTION : 27.01.2022
DATE OF CONCLUSION OF FINAL ARGUMENT : 08.08.2023
DATE OF PRONOUNCEMENT OF ORDER : 22.08.2023
JUDGMENT
1. This is an appeal under Section 115 of the New Delhi Municipal Council Act, 1994 (hereinafter referred to as 'the Act') against the assessment order dated 20.12.2021 passed by Deputy Director (Tax)/Assessing Authority, New Delhi Municipal Corporation (NDMC) whereby the rateable value of premises No.M-48, M Block, Connaught Place, New Delhi-110001 was revised with HTA 01/2022 Manju Jain Vs NDMC Page 1 of 19 effect from 01.06.2006.
2. The brief facts as disclosed in the appeal are; A) Appellant Madhu Jain claims herself to be the owner of property bearing No.M-48, M Block, Connaught Place, New Delhi-110001 (hereinafter referred to as 'the property'). She claims to have purchased the same in the year 1993 from Sh. Sanjeev Gupta. At the time of purchase, M/s R.C.Durant & Company was occupying the property as a tenant on a monthly rent of Rs.300/- (Rupees Three Hundred only). This was a partnership firm of the family members of appellant.
B) On 14.10.1999, appellant inducted Round the Clocks Stores Ltd. Company as tenant in the property on a monthly rent of Rs.10,000/- (Rupees Ten Thousand only) by executing a lease deed. Round the Clock Stores Ltd. was a company incorporated under the Companies Act, 1956.
C) On 17.01.2001, respondent/New Delhi Municipal Corporation (NDMC) issued a notice to the appellant under Section 72 of NDMC Act for enhancing the ratable value of the property. Appellant gave reply to the notice claiming that the property should be deemed to be self occupied as Round the Clock Stores HTA 01/2022 Manju Jain Vs NDMC Page 2 of 19 Ltd. was a closely held family company of the appellant, wherein, appellant and her children were Directors. Respondent did not finalize the assessment and kept the matter in abeyance. After a gap of more than 10 years, appellant received a letter dated 28.09.2011 from the respondents wherein it was disclosed that the assessment of the property is going to be finalized. The authorized representative of the appellant attended the personal hearing at the office of respondent and also filed objections.
3. Thereafter, respondent again went silent for six years. On 16.03.2017, appellant received a letter dated 10.03.2017 from the respondent that her personal hearing has been fixed for 21.03.2017. In response, appellant gave reply dated 30.03.2017 informing the respondent that her authorized representative was on leave. She requested the respondent to fix some other day for personal hearing. Respondent ignored the request and passed the impugned order dated 23.03.2017.
4. On gaining the information about the impugned order, appellant made numerous representation but the same were ignored by the respondent. Respondent issued a notice dated 06.07.2021 under Section 100 (1) of NDMC Act directing the appellant to deposit a HTA 01/2022 Manju Jain Vs NDMC Page 3 of 19 sum of Rs.88,76,790/- (Rupees Eighty Eight Lac Seventy Six Thousand Seven Hundred Ninety only) within 30 days.
5. Appellant filed a writ petition before the High Court of Delhi for quashing of order dated 23.03.2017 as well as notice dated 06.07.2021. The High Court set aside the order as well as notice and remanded the matter back to the respondent for passing a fresh assessment order with liberty to the appellant to file additional objections. In terms of the order passed by the High Court of Delhi, appellant filed her additional objections and attended the personal hearing at the office of respondent. Thereafter, respondent passed the impugned order dated 20.12.2021.
Grounds of Appeal
6. Appellant has challenged the impugned order dated 20.12.2021 on following grounds; (a) That the impugned order is a non-speaking order and the same has been passed mechanically; (b) That the impugned order has been passed arbitrarily and respondent failed to take into account that appellant was using the property for self use; (c) That the assessing authority ignored crucial facts while passing the impugned order; (d) That the assessing authority did not take into account the settled principle of law that the status of HTA 01/2022 Manju Jain Vs NDMC Page 4 of 19 a closely held family run company is equivalent to a quasi partnership; It failed to take into consideration the settled preposition of law laid down in the matter of "Sangramsinh P. Gaekwad & Ors. Vs. Shantidevi P. Gaekwad (Dead) through LRs & Ors." 2005 (11) SCC 314, "M.S.D.C Radharamanan Vs. M.S.D.Chandrashekhara Raja & Ors." 2008(6) SCC 750, "Draegerwerk Aktiengesellschaft Vs. Usha Draeger Pvt. Ltd." 2007 (136) DLT 355; (e) That the assessing authority failed to consider the ground of limitation; It failed to take into consideration that there is a gap of more than 20 years between the issuance of notice under Section 72 of the NDMC Act and the passing of the impugned order; The assessing officer failed to take into account the law laid down by the Division Bench of the High Court of Delhi in the matter of "Ved Marwah & Ors. Vs. New Delhi Municipal Corporation & Ors." 248 (2008) DLT 781; (f) That the assessing authority failed to consider that the monthly rent tendered by Round the Clock Stores Ltd. was commensurate with the market rental prevalent at the time of the relevant assessment year; It failed to take into account the judgment in "Sir Sobha Singh & Sons Pvt. Ltd. Vs. New Delhi Municipal HTA 01/2022 Manju Jain Vs NDMC Page 5 of 19 Council" 1996 (63) DLT 319; (g) That the assessing authority wrongly interpreted the preposition of law laid down in the matter of "State Trading Corporation India Ltd. Vs. New Delhi Municipal Council" 2016 (12) SCC 603. It failed to consider that it has been held in the said judgment that the annual rent of let out properties is the actual rent unless inflated or depressed; (h) That the assessing authority wrongly calculated the total area of the property as 2900 sq. feet whereas the actual area is 2675 sq. feet;
(i) That the assessing authority mechanically concluded that the comparable rent of a similarly situated property is Rs.61/- per sq. feet.
7. Notice of the appeal was issued to the respondent. Respondent filed a detailed reply and took preliminary objection on the maintainability of the appeal.
8. Arguments were heard.
9. I have perused the record in the light of respective arguments.
10.In order to adjudicate upon the present controversy, it would be appropriate to refer to the relevant provisions of the NDMC Act.
11.Section 60 of the NDMC Act is the charging section, which authorizes the NDMC to levy various type of taxes including HTA 01/2022 Manju Jain Vs NDMC Page 6 of 19 property tax. Section 61 of the Act prescribes the rates of the property tax.
12.Section 61 (1) of the Act provides that property tax shall be levied on lands and buildings in New Delhi and shall consist of not less than ten and not more than thirty per cent of the rateable value of lands and buildings. The proviso to Section 61(1) of the Act states that the NDMC may, while fixing the rate at which the property tax shall be levied during any year, determine the rate leviable in respect of lands and buildings or portions of lands and buildings in which any particular class of trade or business is carried on shall be higher than the rate determined in respect of other lands and buildings or portion of other lands and buildings by an amount not exceeding one-half of the rate so fixed.
13.The expression 'rateable value' is defined under Section 2 (42) of the Act to mean the value of any land or building fixed in accordance with the provisions of this Act and the Bye-laws made thereunder for the purpose of assessment to property taxes.
14.Section 62 of the Act relates to the 'premises in respect of which tax is to be levied'. This includes lands exclusively occupied and used for public worship or by a society or body for a charitable HTA 01/2022 Manju Jain Vs NDMC Page 7 of 19 purpose. It also includes lands and buildings vested in the NDMC in respect of which the tax, if levied, would be leviable primarily on the NDMC and agricultural lands and buildings (other than dwelling houses). Section 62 (3) of the Act clarifies that if a portion of the land or building is exempted from property tax by reason of the exclusive use or occupation for public worship or charitable purpose then such portion shall be deemed to be a separate property for the purpose of municipal taxation.
15.Section 63 of the Act sets out the method of determination of the rateable value of lands and buildings assessable to property tax. Section 63 (1) of the Act provides that the rateable value of any land or building assessable to property tax shall be the annual rent at which such land or building might reasonably be expected to let from year to year less a sum equal to 10% of the said annual rent which shall be in lieu of all allowances for cost of repairs, insurance, and other expenses necessary to maintain the land or building in a state to command that rent. The proviso to Section 63 (1) of the Act states that in respect of any land or building the standard rent of which has been fixed under the Delhi Rent Control Act, 1958, the rateable value thereof shall not exceed the HTA 01/2022 Manju Jain Vs NDMC Page 8 of 19 annual amount of the standard rent so fixed.
16.Section 63(2) of the Act states that the rateable value of any land which is not built upon but is capable of being built upon and any land on which a building is in process of erection shall be fixed at five per cent of estimated capital value of such land. Under Section 63(3) the Chairperson of the NDMC can by public notice, with the approval of the NDMC, specify a plant and machinery which will be deemed to form part of such land and building for the purposes of determination of rateable value. Section 65(1) of the Act clarifies that lands and buildings being properties of the Union shall be exempt from the property tax specified in Section 61 of the Act.
17.Section 66 of the Act speaks of the incidence of the property tax. It is primarily on the lessor if a building or land is given on lease. It is on the superior lessor if the land or building is given on a sub- lease. If it is not leased then on the person on whom the right to let the same vests.
18.Section 67 of the Act talks of apportionment of liability of the property tax when the premises are let or sub-let. Section 68 of the Act clarifies who will be primarily liable for the property tax due HTA 01/2022 Manju Jain Vs NDMC Page 9 of 19 in respect of any land or building and in the event of default of the person liable to pay such property-tax as specified in Section 66 of the Act. It is clarified that this would be the occupier of such land or building.
19.Section 70 of the Act deals with the Assessment List. This is a list of all lands and buildings which contains such particulars with respect to each land and building as may be prescribed by the Bye- laws. When such Assessment List is prepared, the Chairperson under Section 70 (2) of the Act gives a public notice thereof and every person claiming to be an owner, lessor or occupier of a land or building included in the List shall be at liberty to inspect the List and take extracts therefrom free of charge. Under Section 70 (3) of the Act, the Chairperson is to give a public notice of a date not less than one month thereafter when he would proceed to consider the rateable value of the lands and buildings entered in the Assessment List. He is also to give the written notice where the rateable value is proposed to be increased. Section 70 (4) of the Act provides for objections to be filed to the Assessment List in writing to the Chairperson. Section 70 (5) of the Act talks of an objection being notified into and investigated, and the person HTA 01/2022 Manju Jain Vs NDMC Page 10 of 19 making them shall be allowed an opportunity of being heard either in person or by authorized agent before the final Assessment List is prepared under Section 70 (6) of the Act. Section 72 of the Act provides for amendment of the Assessment List and Section 73 for preparation of new Assessment List.
20.Section 72(2) of the Act provides that before making the amendment, Chairperson shall give to the effected person, a notice of not less than one month that he proposes to increase the amount of rateable value of the property. The Section further mandates that Chairperson shall consider the objections before amending the assessment list and revising the rateable value.
21.Coming to the facts of the present case. It is an admitted position that the impugned assessment order dated 20.12.2021 has been passed in respect of notice dated 17.01.2001 issued under Section 72 of the Act. Although, the NDMC Act does not specify any period of limitation for finalizing the assessment but this does not mean that respondent is at liberty to sleep over the matter for a period of more than 16 years. It is expected that after issuance of notice, respondent should finalize the assessment within a reasonable period. The Division Bench of the High Court of Delhi HTA 01/2022 Manju Jain Vs NDMC Page 11 of 19 has observed in the matter of Ved Marwah Vs. NDMC & Ors. (Supra) that the proceedings initiated pursuant to Section 72 of the NDMC Act should be concluded in a reasonable period of not more than three years. In the said matter, notices for revising the assessment list were issued over a decade prior to passing of the final orders by the NDMC. The High Court observed that the inordinate delay was unreasonable and quashed the assessment orders. While doing so, the High Court issued the following directions :
"16. In Sunil Rai v. Municipal Corporation of Delhi & Ors. 48 (1992) DLT 621 (DB) after the judgment in Shyam Kishore (supra) a Division Bench of this Court had interpreted a provision identical to Section 116 (b) and held that the proper exercise of discretion by the appellate forum in cases where assessment orders are framed for a number of years, is to direct the assessee to deposit the disputed tax in respect of the base year and then to proceed to hear and decide the appeal in respect to the base year assessment and after deciding the said appeal the decision of the appeal in respect of the base year would automatically govern the assessment for the subsequent years. Adoption of such an approach, in the opinion of this Court, saves the provision of Section 116 of the Act.
17. In view of the above reasoning, it is held the impugned final orders of assessment and the demands issued are clearly unreasonable and void. They are hereby quashed. Consequently, it is held that the NDMC is at liberty to rework the assessments in respect of the properties that are the subject matter of these proceedings, by issuing fresh notices for the periods HTA 01/2022 Manju Jain Vs NDMC Page 12 of 19 commencing from 3 years prior to the date on which the final notices were issued, and finalize the assessments within reasonable time. In the event of grievance on the part of the assessee to such fresh assessment orders, it is open to them to approach the appellate tribunal; provided they deposit the amount towards the tax liability for the base year."
22.The High Court of Delhi categorically held in Ved Marwah's case (supra) that there cannot be any unreasonable delay in finalizing the assessment after a notice has been issued under Section 72 of the Act. The High Court relied on various decisions of the Supreme Court of India and observed that the Assessing Officer must finalize the assessment within a reasonable period. It made the following observations;
"Analysis and Conclusions
13. The notices for revising the assessment list in all these cases were issued over a decade prior to the passing of final orders. In one case, it was 16 years; in others, it was 14 years. In two cases, the same property was subject to multiple notices for later periods, without finalization of rateable value, for the previous year. Clearly, the finalization of these cases after inordinate delay of 14 to 16 years was plainly unreasonable. Where such open ended power-like in the present case, in Section 72 was conferred upon a statutory authority, i.e. a sales tax authority official in Punjab, the Supreme Court had outlined the correct approach in State of Punjab & Ors. v. Bhatinda District Co-op Milk P. Union Ltd 2007 (11) SCC 363 with respect to the limitations to exercise of such power. It was held that:
"5. In respect of the assessment for the year ending 31.3.2000, the assessment proceedings were HTA 01/2022 Manju Jain Vs NDMC Page 13 of 19 completed relying on the return filed by the appellant on 20.3.2001. Indisputably, in terms of Section 11 of the 1948 Act, a period of three years has been prescribed as a period of limitation as contained under sub-section (3) of Section 11 for completing assessment from the last date for filing of return. Sub-section (6) of Section 11 reads as under :
"_If upon information which has come into his possession, the Assessing Authority is satisfied that any dealer has been liable to pay tax under this Act in respect of any period but has failed to apply for registration, the Assessing Authority shall, within five years after the expiry of such period, after giving the dealer a reasonable opportunity of being heard, proceed to assess to the best of his judgment, the amount of tax, if any, due from the dealer in respect of such period and all subsequent periods and in case where such dealer has willfully failed to apply for registration, the Assessing Authority may direct that the dealer shall pay by way of penalty, in addition to the amount so assessed, a sum not exceeding one and a half times that amount. Section 21 of the said Act provides for revision. Section 21 of the Act with which we are concerned herein reads as under :
"21. Revision-(1) The Commissioner may of his own motion call for the record of any proceedings which are pending before, or have been disposed of by any authority subordinate to him, for the purpose of satisfying himself as to the legality or propriety of such proceedings or order made therein and may pass such order in relation thereto as he may think fit.HTA 01/2022 Manju Jain Vs NDMC Page 14 of 19
(2) The State Government may by notification confer on any Officer the powers of the Commissioner under sub-
section (1) to be exercised subject to such conditions and in respect of such areas as may be specified in the notification.
(3) A Tribunal, on application made to it against an order of the Commissioner under sub-section (1) within ninety days from the date of communication of the order, may call for and examine the record of any such case and pass such orders thereon as it thinks just and proper.
(4) No order shall be passed under this section which adversely affects any person unless such person has been given a reasonable opportunity of being heard".
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15. Sub-section (1) of Section 11 empowers the Commissioner to extend the period of three years for passing the order of assessment where for reasons are required to be recorded in writing subject, however, to the maximum period of five years. Ordinarily, therefore, a period of three years has been prescribed for completion of the assessment in terms of the provisions of the Act. We may also notice that in cases where an assessment order is to be reviewed, the same should be done within a period of one year.
16. A bare reading of Section 21 of the Act would reveal that although no period of limitation has been prescribed therefor, the same would not mean that the suo-moto power can be exercised at any time.
HTA 01/2022 Manju Jain Vs NDMC Page 15 of 19
17. It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors.
18. Revisional jurisdiction, in our opinion, should ordinarily be exercised within a period of three years having regard to the purport in terms of the said Act. In any event, the same should not exceed the period of five years. The view of the High Court, thus, cannot be said to be unreasonable. Reasonable period, keeping in view the discussions made hereinbefore, must be found out from the statutory scheme. As indicated hereinbefore, maximum period of limitation provided for in sub- section (6) of Section 11 of the Act is five years.
14. Bhatinda (supra) was noticed and followed subsequently in Ram Prakash (supra). In a more recent decision Ram Karan (D) by LRs v. State of Rajasthan 2014 (8) SCC 282, it was held that:
"38. State of Punjab & Ors v Bhatinda District Co- op Milk P. Union Ltd (supra) this Court held that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. However, what shall be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors. In the present case, neither any objection was raised nor was any application filed by vendors for restoration of land in their favour. The suit was filed by the Tehsildar, Viratnagar after more than 31 years. No ground is shown to file such petition after long delay nor it was mentioned as to whether the vendors i.e. original landholders made any application for restoration of land in their favour.HTA 01/2022 Manju Jain Vs NDMC Page 16 of 19
39. In view of the matter, we hold that the suit being filed beyond the reasonable period was fit to be dismissed. The Additional Collector rightly dismissed the suit being barred by limitation."
15. In the present case, the finalization of assessment list or its revision, after over 12 years in all the cases, cannot be countenanced. It is clearly unreasonable and arbitrary and calls for interference."
23.The High Court of Delhi observed in Ved Marwah's case (supra) that a delay of over 12 years in finalizing the assessment of property tax is arbitrary and the same cannot be countenanced. It quashed the assessment order of the competent authority on the ground of unreasonable delay. While quashing the order, it granted liberty to NDMC to rework the assessment by issuing fresh notice for the period commencing from three years prior to the date on which final notices were issued. NDMC was further directed to finalize the assessment within a reasonable time. NDMC challenged the order of the High Court by filing a Special Leave Petition No.25403/2018 titled as "New Delhi Municipal Council Vs. Pyare Lal & Sons Pvt. Ltd." but the same was dismissed by the Supreme Court of India. Resultantly, the findings in Ved Marwah's case (supra) attained finality.
24.Coming back to the present case. In the present matter, there is an HTA 01/2022 Manju Jain Vs NDMC Page 17 of 19 inordinate delay on the part of NDMC in finalizing the assessment. The notice under Section 72 of the NDMC Act was issued on 17.01.2001 while the final assessment order was passed on 23.03.2017. There was a time gap of more than 16 years between the issuance of notice and the finalization of the assessment. On a previous occasion, appellant challenged the assessment order before the High Court of Delhi. The High Court set aside the assessment order and remanded the matter back to the assessing authority to pass a fresh assessment order. Thereafter, the assessing authority passed the impugned order on 20.12.2021. Admittedly, the impugned order has been passed more than 19 years after the issuance of notice under Section 72 of NDMC Act. Relying on the observations made in Ved Marwah's case (supra), the delay is certainly inordinate and arbitrary. This, in itself, is a sufficient ground for setting aside the impugned order. I am of the considered opinion that since the order is not sustainable on this ground, therefore, there is no point in evaluating the other grounds of appeal. The impugned is bad in law. Accordingly, the appeal is allowed and the impugned order is set aside. NDMC shall be at liberty to rework the assessment in respect of the property of the HTA 01/2022 Manju Jain Vs NDMC Page 18 of 19 appellant by issuing fresh notice under Section 72 of the NDMC Act for the period commencing from three year prior to the date on which the final notice was issued.
25.Copy of the judgment be sent to the NDMC.
26.Decree Sheet be prepared. Ahlmad is directed to return the trial court record forthwith as per rules.
27.File be consigned to record room.
Announced in the open court on 22.08.2023 (Sudhanshu Kaushik) Addl. District Judge-02 & Waqf Tribunal New Delhi District, Patiala House Courts, New Delhi HTA 01/2022 Manju Jain Vs NDMC Page 19 of 19