Allahabad High Court
Ajai Kumar vs Commissioner Meerut Division Meerut ... on 18 February, 2020
Author: Pankaj Bhatia
Bench: Pankaj Bhatia
HIGH COURT OF JUDICATURE AT ALLAHABAD ?Court No. - 30 Case :- WRIT - C No. - 48416 of 2007 Petitioner :- Ajai Kumar Respondent :- Commissioner Meerut Division Meerut And Others Counsel for Petitioner :- Amitabh Agarwal,Pramod Kumar Jain Counsel for Respondent :- C.S.C. Hon'ble Pankaj Bhatia,J.
Heard Sri Abu Bakht, Advocate holding brief of Sri Amitabh Agarwal, counsel for the petitioner and Standing Counsel for the State-respondents.
The present petition has been filed challenging the order dated 30.12.2006 passed by respondent no. 2 and the order dated 16.8.2007 passed by respondent no. 1.
The brief facts, giving rise to the present petition, are that the petitioner purchased a property, which was recorded as grove in the revenue records by virtue of a sale deed on 29.7.2006 and paid the requisite stamp duty, valuing the property in terms of the U.P. Stamp (Valuation of Property) Rules relating to valuation of grove and in terms of the rate list, issued by the State Government.
On 4.8.2006, an ex-parte report was submitted to the Collector mentioning that the property in dispute has the potential to be used for residential and commercial purposes and on the basis of the said report, notices were issued and proceedings were initiated under Section 47-A of the Stamp Act, to which the petitioner filed the objections. The Collector (Stamps) vide its order dated 30.12.2006, passed an order assessing the stamp duty at Rs. 3,57,860/- and a penalty of Rs. 2140/- was also directed to be paid by the petitioner along with statutory interest. The petitioner preferred an appeal before the Commissioner against the said order, which too was dismissed.
Counsel for the petitioner argues that it is well settled that the valuation of the property cannot be done on the basis of its potential future use. He further places reliance on a circular issued by the State on 16.8.1995 that the property cannot be assessed on the basis of its future potentiality and thus the orders passed are liable to be set aside.
A perusal of the order dated 30.12.2006 makes it clear that while assessing the deficiency of stamp duty, the Collector observed that in the same Khasra number, a Petrol Pump of Reliance is functioning and on the other side of the road, a go-down and a Dhaba is functioning and in respect of another sale deed pertaining to Khasra No. 2282, a sale deed was registered as Document No. 4757 of 2006 and was valued at residential rates. He also observed that on the property in question, 30 trees are standing which are more than 22 years old and 10 trees are of 8 years, however no evidence has been produced with regard to the age of the trees. He thus held that on the basis of a Document No. 4757 of 2006, the contention of the counsel for the petitioner cannot be accepted that the property in question is an agricultural property and thus held that the potentiality of the property in question was a valid criteria for fixing the stamp duty, on the basis of its potential use as residential. He further held that the valuation of the properties was assessed at Rs. 52,17,000/- and on that also the stamp duty was imposed.
The question of charging of duty on the basis of potential use came up for consideration before this Court in the case of M/s Prosperous Buildcon Pvt. Ltd. v. State of U.P. and others, Judgment dated 20.9.2017 passed in Writ-C No. 53008 of 2012, wherein it was observed as under:-
"A Division Bench of this Court in 2015 (9) ADJ 503, Smt. Vijaya Jain vs. State of U.P. and Others has held in paragraphs 20 and 23 which read as under:
"20. Having extracted the relevant statutory provisions above, the following principles emerge therefrom. Sub-section (1) (a) of Section 47-A of the Act empowers the registering officer to call upon the person who has presented an instrument for registration to pay deficit stamp duty. This power is exercisable by the registering officer immediately after presentation of an instrument and before accepting it for registration and taking any action under Section 52 of the Act. This power is liable to be exercised in a situation where the market value of the property as set forth in the instrument is less than even the minimum value fixed by the Collector in accordance with the rules made under the Act. In distinction to the above, the power under sub-section (3) of Section 47-A is exercised by the Collector either suo motu or on a reference from any Court or from the Commissioner of Stamps or an Additional Commissioner of Stamps, Deputy Commissioner of Stamps, an Assistant Commissioner of Stamps or any officer authorized in that behalf by the State Government. This power confers jurisdiction and authority on the Collector to call for and examine any instrument for the purpose of satisfying himself as to the correctness of the market value of the property which forms the subject matter of the instrument and if upon such examination, he has reason to believe that the market value of such property has not been truly set forth in such instrument, he may proceed to determine the market value of such property and the duty payable thereon. The first distinguishing feature of sub section (3) is that it is available to be exercised even after the instrument has been registered. Secondly the Collector proceeds under sub section (3) upon finding that the "market value" of the property has not been truly set forth in the instrument as distinct from the "minimum value fixed by the Collector in accordance with the rules made under the Act" which is the benchmark for initiation of action under sub section (1).
23. From the provisions extracted above, it is apparent that the Collector proceeds under sub section (3) of Section 47-A read with rule 7 when he has reason to believe that the market value of the property comprised in the instrument has not been truly set forth and that in the opinion of the Collector, circumstances exist warranting him to undertake the enquiry contemplated under rule 7. What we however find from the notice dated 09 September 2013 is that the Collector has proceeded to record, albeit prima facie, that the instrument in question has been insufficiently stamped to the extent of Rs.8,89,000/-. The notice apart from referring to a note dated 20 May 2013, received from the Assistant Inspector General of Registration neither carries nor discloses any basis upon which the Collector came to the prima facie conclusion that the appellant was liable to pay Rs. 8,89,000/ as deficit stamp duty. In our opinion a notice of this nature must necessarily disclose to the person concerned the basis and the reasons upon which the Collector has come to form an opinion that the market value of the property has not been truly set forth. In the absence of a disclosure of even rudimentary details on the basis of which the Collector came to form this opinion, the person concerned has no inkling of the case that he has to meet. A notice in order to be legally valid and be in compliance with the principles of natural justice must necessarily disclose, though not in great detail, the case and the basis on which action is proposed to be taken against the person concerned. Not only this and as is evident from a bare reading of rule 7, at the stage of issuance of notice, the Collector has to proceed on the basis of material which may tend to indicate that the market value of the property has not been truly and faithfully disclosed in the instrument. The stage of computation of market value comes only after the provisions of sub rules (2) (3) and (4) of rule 7 come into play. At the stage of issuance of notices, the Collector calls upon the person concerned to show cause "as to why the market value of the property.... be not determined by him".
There is another aspect of the matter, which ought not to go un-mentioned, namely, the notice under Section 47-A (2) of the Act, 1899 refers to the potential value of the land as being more than the rates prescribed by the Collector for residential land. It is not denied by the authorities that the land in question was agricultural land but the authorities have proceeded for determining the stamp duty on a presumption that the said land has a potential of future user for residential purposes because the Village Shahpur Bamhaita, Pargana Dasna, District Ghaziabad has been declared as Hi-tech City and Integrated City. The Supreme Court and this Court have time and again held that the potential user of the property cannot be the determining factor for computing its market value or the consequent stamp duty payable thereon.
In (2012) 5 SCC 566, State of U.P. Vs. Ambrish Tandon and others, the Supreme Court has held that merely because the property is being used for commercial purposes at the later point of time may not be a relevant criterian for assessing the value for the purpose of the nature of user is relatable to the date of purchase and it is relevant for the purpose of calculation of stamp duty.
The judgment of the Supreme Court in the case of Ambrish Tandon (supra) has been followed by the Full Bench of this Court reported in 2015 (3) ADJ 136 (Smt. Pushpa Sareen Vs. State of U.P.) wherein the Full Bench has also held that the nature of the user is relatabe to the date of purchase which is relevant for the purposes of computing the stamp duty. Where however the potential of the land can be assessed on the date of execution of the instrument itself by referring to exemplar or comparable sale instances that is clearly a circumstances which is relevant and germane to determine the true market value. Paragraph 27 of the said judgement reads as under:
"27.The fact that the land was put to a particular use, say for instance a commercial purpose at a later point in time, may not be a relevant criterion for deciding the value for the purpose of stamp duty, as held by the Supreme Court in State of U.P. and others vs. 23 Ambrish Tandon and another, 2012 (5) SCC 566. This is because the nature of the user is relatable to the date of purchase which is relevant for the purpose of computing the stamp duty. Where, however, the potential of the land can be assessed on the date of the execution of the instrument itself, that is clearly a circumstance which is relevant and germane to the determination of the true market value. At the same time, the exercise before the Collector has to be based on adequate material and cannot be a matter of hypothesis or surmise. The Collector must have material on the record to the effect that there has been a change of use or other contemporaneous sale deeds in respect of the adjacent areas that would have a bearing on the market value of the property which is under consideration. The Collector, therefore, would be within jurisdiction in referring to exemplars or comparable sale instances which have a bearing on the true market value of the property which is required to be assessed. If the sale instances are comparable, they would also reflect the potentiality of the land which would be taken into consideration in a price agreed upon between a vendor and a purchaser."
A Division Bench of this Court in 2016 (2) ADJ 533 (DB) Sumati Nath Jain Vs. State of U.P. and another has held in paragraphs 18 and 19 as under:
"18. We may note that on the date of execution of the instrument the land was admittedly recorded as agricultural. In fact the Khasra of the property remained unchanged throughout and continued to represent the land as recorded for agricultural purposes. The respondents were in our opinion wholly unjustified in initiating proceedings based on an unsubstantiated assumption that the property in future was likely to be put to non-agricultural use.
19. The perceived or presumed use to which a buyer may put the property in the future can never be the basis for adjudging its value or determining the stamp duty payable. The Act, we may note is a fiscal statute. The taxable event with which it concerns itself is the execution of an instrument which is chargeable to duty. The levy under the statute gets attracted the moment an instrument is executed. These propositions clearly flow from a plain reading of the definition of the words "chargeable", "executed" and "instrument" as carried in the Act. In the case of an instrument which creates rights in respect of property and upon which duty is payable on the market value of the property comprised therein, since the tax liability gets fastened immediately upon execution it must necessarily be quantified on the date of execution. The levy of tax or its quantum cannot be left to depend upon hypothetical or imponderable facets or factors. The value of the property comprised in an instrument has to be adjudged bearing in mind its character and potentiality as on the date of execution of the instrument. For all the aforesaid reasons we fail to find the existence of the essential jurisdictional facts which may have warranted the invocation of the powers conferred by section 47A (3). We are therefore of the firm opinion that the initiation of proceedings as well as the impugned order based upon a presumed future use of the property for residential purposes was wholly without jurisdiction and clearly unsustainable. Dealing with this aspect of the matter and after noticing the consistent line of precedent on the subject the Division Bench in Smt Vijaya Jain observed: -
"This Court on more than one occasion has held that the market value of the land is not liable to be determined with reference to the use to which a buyer intends to put it in future. The market value of the property is to be determined with reference to its character on the date of execution of the instrument and its potentiality as on that date.
xxx xxx xxx The above principles of law enunciated in the aforementioned judgments have been consistently followed by this Court. We however find that the order of the Collector relies upon no evidence which would support imposition of residential rates on a property which was stated to be agricultural on the date of execution of the instrument."
Thus, the settled law is that potentiality of a property cannot be the basis for valuation and determination of stamp duty payable and in the present case, the stamp duty has been assessed only on the basis of potentiality, as such following the law laid down in the case of M/s Prosperous Buildcon Pvt. Ltd. v. State of U.P. and others (Supra), the order dated 30.12.2006 is set aside. For the same reasoning, the appellate order is also set aside.
The amounts deposited by the petitioners in terms of the order dated 5.10.2007 shall be refunded to the petitioner on his moving an application before the respondent no. 3, in accordance with law, within a period of three months from the date of moving an application.
The writ petition is disposed off.
Order Date :- 18.2.2020 SR