Indian Kanoon - Search engine for Indian Law

2. The said Sale Deed was presented to the Sub-Registrar, Chikodi (First Respondent) for registration on 29.8.1985. The Sub-Registrar impounded the Document on the ground that the Document was undervalued and therefore not duly stamped under Section 33 of the Karnataka Stamp Act, 1957 ('Act' for short) read with Rule 15A of Karnataka Stamp Rules, 1958 ('Rules' for short). After verification of sale statistics and other information, the Sub-Registrar came to the conclusion that the value set forth in the Deed was less than the market value and assessed the market value as Rs. 90,000/-. He held that the Document has been deliberately undervalued to evade payment of higher Stamp Duty and thus the Document is not duly stamped. Hence, the Sub Registrar, purporting to exercise power of the Deputy Commissioner under Section 39 of the Act, directed recovery of deficit Stamp Duty of Rs. 6,930/-, penalty of Rs. 69,300/-(at 10 times the Stamp Duty) and deficit Registration Fee of Rs. 770/-, in all Rs. 77,000/- from the person in enjoyment of the property, vide Order dated 5.9.1985 (Annexure-A). The said Order was passed without notice to the petitioner and the order was not communicated to him. Petitioner came to know about the order only in March 1989, when he received a notice demanding payment of Rs. 77,000/-. Immediately he filed this Petition for quashing of Annexure-A. Rule and stay of the impugned order was granted on 1.8.1989.

10. Having answered the two Questions in the negative, a brief reference as to the position and procedure in regard to instruments which are found to be undervalued is necessary.

11. While Stamp Duty was always payable with reference to the terms and contents of the instrument or the consideration/value/price mentioned in the instrument, a far-reaching change was effected by Karnataka Stamp (Amendment) Act, 1975 (Act 12 of 1975). By this amendment, in Article 20 relating to conveyances, for the words "where the amount or value of the consideration for such conveyance as set forth therein", the words "where the market value of the property which is the subject matter of the conveyance", were substituted. Consequently, even in regard to instruments of Exchange (Article 26), Gift (Article 28), for which the same duty as conveyance was prescribed, "market value" of the property became the basis for payment of the Stamp Duty. Thus, for the first time, it became necessary to look beyond the contents of the instrument, for determination of the stamp duty as the consideration price/value mentioned in the instrument was not necessarily the market value. As a consequence, it became necessary to provide a machinery for determination of the market value for recovery of proper duty. Hence, Section 45A was also introduced by the said Act 12 of 1975.

16. Before 1.4.1991, in areas where Section 45A was not brought into force, there could be no action either under Sections 33 and 39 or under Section 45A, even if the consideration/price/value mentioned in Instruments of Conveyance, Exchange or Gift was less than the market value. In such case, action could be taken only under Sections 28 and 61 of the Act. Section 28 provided that the consideration, if any, and all other facts and circumstances affecting the chargeability of any instrument with duty or the amount of duty with which it is chargeable, shall be fully and truly set forth therein. Section 61 provided that any person who wilfully, with intent to defraud the Government, executed any instrument in which all the facts and circumstances required by Section 28 to be set forth in such instrument, are not fully and truly set forth, shall be punishable with fine which may extend to Rs. 5,000/-. Sub-section (2) of Section 28 which was introduced by Amendment Act 17 of 1966 with effect from 15.11.1966, required that in the case of instrument relating to immovable property chargeable with an ad valorem duty on the value of the property and not on the value set forth, the instrument shall fully and truly set forth, the annual land revenue or the annual rental value, local taxes, Municipal or other taxes etc., as may be prescribed by the Rules. The said amendment Act No. 17 of 1966 also amended Article 28 relating to instruments of Gift with effect from 15.11.66 making an adValorem stamp duty payable for a consideration equal to the value of the property. With effect from the same date i.e., 15.11.1966, Rule 15A was introduced under the Karnataka Stamp Rules 1958, which provided that every person mentioned in Section 33 before whom any instrument of the kind mentioned in Sub-section 2 of Section 28 is produced, or comes in his performance of the functions, shall, verify in each case the value of the land, building or garden as the case may be, from such facts as are stated in the instrument and as may be available for determining the value of the property; and also provided for having recourse to local enquiry or independent evidence after giving due notice to the party concerned. Rule 15A applied only to Instruments of Gift when it was introduced on 15.11.1966.

17. It was only by Act 12 of 1975 that even in regard to Instruments of Conveyance, Stamp Duty became payable on the market value of the property instead of on the consideration set forth in the document. Thus, after 1.5.1975, in regard to instruments of Conveyance, Section 28(2) and Rule 15A became applicable to Deeds of Conveyance executed in areas to which Section 45A was I not made applicable. The combined effect of Section 28 (1) and (2) and Section 61 and Rule 15A was that if there was any undervaluation, the person executing the document could be prosecuted and punished under Section 61. Once Section 45A was made applicable, of course, the deficit stamp duty could also be collected. But under no circumstances, penalty could be levied under Section 39, in regard to undervalued instruments.