Delhi High Court
Seth Pokharmal Educational ... vs Mcd And Ors. on 22 March, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 18.01.2018
Pronounced on: 22.03.2018
+ W.P.(C) 3946/2011
SETH POKHARMAL EDUCATIONAL SOCIETY..... Petitioner
Through: Sh. B.B. Jain, Sh. Abhay Jain and Sh. Prashant
Sharma, Advocates.
versus
MCD AND ORS. .... Respondents
Through: Ms. Amita Gupta, Advocate, for MCD.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A.K. CHAWLA
MR. JUSTICE S. RAVINDRA BHAT
%
1. The petitioner is aggrieved by an assessment order issued on
02.05.2011 by the Joint Assessor and Collector of the North Delhi Municipal
Corporation (hereafter called "the Corporation") dated 02.05.2011, levying
vacant land tax with effect from 01.04.2005 for the use of its land as play
field for its school, i.e. Rukmini Devi Public School at Pitampura, Delhi. The
diverse claims are mentioned in the writ petition, including the validity of
amendments to the Delhi Municipal Corporation Act, 1957 and the levy of
vacant land tax under the enactment. However, during the hearing of
petition, learned counsel confined the relief to the question of levy of vacant
land tax upon the play ground, having regard to the overall circumstances of
the lease and the validity of the assessment order to the extent that it was
decided on the ground that it was unenforceable as having been decided after
an inordinate period of time.
2. The facts are that the petitioner is a society, which established a
recognized school. The petitioner applied and was allotted a plot of land,
being 8271.09 square metres by the Delhi Development Authority (DDA) on
perpetual leasehold basis on 25.03.1987. The petitioner was also offered
temporary lease of a plot admeasuring 5861.39 metres. This was subject
matter of lease deed dated 29.11.1995. This lease was between the petitioner
(lessee) and the L&B Department of the Delhi Administration (later
succeeded to by the GNCTD). The relevant conditions in this temporary
lease deed are extracted below:
―Provided that the land is leased for a period of one year
subject to each and all of the terms and conditions of this
indenture and not otherwise:-
Clause I: The Lessee shall duly and regularly pay to the Lessor
through the Housing Commissioner, Delhi Administration or
such other officer as the Lessor may hereinafter appoint on this
behalf a sum of Rs.1-00 per annum. The rent shall be payable
annually in advance and if any portion of the rent be not paid
on or before the expiry of fifteen days - from the date on which
it become so payable whether it be demanded or not, it shall be
deemed to be in arrears.
Clause 2: The lease shall commence on and from the 22nd day of
May one thousand nine hundred and eighty nine and the rent
for the first year shall be due and payable on that date. The
lease is granted for a period of one year/years by if, by mutual
consent for bearance, it shall be allowed to continue in force
after the expiry of the said period of one year/years, then,
subject to such modification (if any) as the lessor and lease
may, in writing mutually agree to, the terms and conditions of
this lease shall.......to or and shall have full force and effect.
XXXXXX XXXXXX XXXXXX
Clause 4: In lessor and all persons acting under his order shall
be at liberty at all times during the said terms to enter upon the
said land for any purposes connected with the full discovery
and enjoyment of all or any of the rights hereby reserved to the
lessor, as well as for the purpose of enforcing compliance with
each and all of the terms, conditions and requirement of this
lease, and no compensation, whether by reduction or rent of
otherwise, shall become due to or shall be recoverable by the
lessee, by reason of anything done under the rights herein
reserved for powers hereby conferred on the lessor.
Clause 5: The lessee shall not, without the previous consent in
writing of the lessor, sell or mortgage or create any charge
upon or sublet or otherwise transfer all or any of his rights,
under this lease, and every or attempted transfer made without
such consent shall be void as against the lessor.
Clause 6: The lessee will not erect upon the land any building
or structures by use the land only for play grounds:
XXXXXX XXXXXX XXXXXX
Clause 8: The lessee shall not, without the permission in writing
to be previously obtained of the Lieutenant Governor Delhi, or
such officer or body as the President of India may appoint in
this behalf, at any time use or cause or permit any person to use
the land, for any purposes other than for the play grounds.
XXXXXX XXXXXX XXXXXX
Clause 12: Upon the expiry or sooner determination of the
lease, it shall be lawful for the lessor to remove all materials
and things from the land to restore the land to the state in which
it was in when this lease was executed and to all expenses
incurred thereby or in connection therewith from the lessee in
due course of law.
Provided that nothing in this clause shall be held to prevent or
disentitle the lessee from himself removing any materials and
things belonging to him from the land any restoring the land to
its original conditions at any time prior to the determination of
the lease.
Clause 13: The tree, if any standing on the plot shall remain as
Government property and shall not be removed or otherwise
dispossess off without obtaining prior permission of the lessor.
Clause 14: The needs of Government shall be given preference
as regards the use of the land.‖
3. It is submitted that the plot of land which was allotted by the DDA
was used to construct a school building and that the vacant land lease
executed exclusively by the GNCTD for the purpose of use as play ground
was never constructed upon. Learned counsel highlighted that the intrinsic
character of the land is that of an open area on which no construction has
been made. It is submitted that the petitioner does not possess any property
rights and is only the occupier/user. In such event, it cannot be made to pay
vacant land tax in the overall circumstances. The petitioner relies upon the
judgment of a Full Bench decision of this Court in MCD v. Shashank Steel
Industries (P) Ltd. 100 (2002) DLT 66. It was argued that the said judgment
was affirmed by the Supreme Court in its ruling reported as MCD v.
Shashank Steel Industries Private Limited 2009 (2) SCC 349. It was argued
that the definition of "land" in Section 2(24) as well as the provision of
Section 120 which deals with Incidence of Property Taxes of the Act
remains the same; though the definition of "owner" under Section 2(37) has
undergone a change, the amendment does not in any way impact the facts of
this case because the contents of the lease in the present case is that of a
temporary occupancy by the lessee whose status is in the nature of a monthly
tenancy at the pleasure of the lessor or the GNCTD. In these circumstances,
the levy of vacant land tax without application of mind to the effect that the
lease is temporary and entirely dependent upon discretion of the lessor, and
completely restrictive in that its use as a play ground is at all times subject to
full control by the lessor takes it out of the purview of the Act. It is thus
submitted that the calculation and levy of vacant land tax in the facts of this
case are entirely unjustified.
4. It was submitted next that the Use Factor under the Unit Area Method
(UAM) imposed upon the petitioner is discriminatory and also arbitrary. By
adopting UAM criteria for arriving at the rateable value and the levy of tax,
the respondents acted in a discriminatory manner. It is also urged that the
Use Factor 3, applied in this case, is inappropriate for schools having regard
to the objectives for which they are set up; instead, they should be classified
in Use Factor 1.
5. It was submitted that the long delay in the finalization of assessment
proceedings renders the impugned order dated 02.05.2011 unreasonable.
Learned counsel relied upon a Division Bench ruling of this Court in
Springdales School v. North Delhi Municipal Corporation and Anr. 238
(2017) ELT 487, to say that though the acts or enactments do not impose any
time limit, nevertheless after applying the relevant precedents, it was held
that an unreasonable delay in the finalization of an assessment order based
upon a Show Cause Notice validly issued, would be arbitrary.
6. The respondent Corporation has resisted the petition. It points out that
the challenge to the UAM introduced by the amendment to the Act failed as
the amendments were upheld in the judgment reported as Vinod Krishna
Kaul v. Lieutenant Governor of Delhi 192 (2012) DLT 241. Therefore, the
challenge to the imposition of one or the other Use Factor has no force. On
the question of vacant land tax, it is submitted that the amendment to the
Act, brought into effect after the judgment of the Full Bench in Shashank
Steel (supra) has altered the circumstances completely. In this regard, it was
submitted that the reliance upon Shashank Steel (supra) is of no avail. The
basic facts of this case are that the petitioner is lessee of the lands; it is in
occupation and enjoyment of the land continuously for the last 22 years. In
these given circumstances, the levy of vacant land tax, after notice was
justified and proper. In the event the petitioner has any object as to the
working of the right or the period of applicability, it ought to raise those
grounds in a properly filed appeal instead of this writ petition. It was
submitted that as far as the alleged unreasonable delay in finalization of
assessment is concerned, the petitioner has not disclosed the details of its
objections nor even when Show Cause Notice was issued to it. Relying upon
the assessment order, it was submitted that notice under Section 123D of the
Act was issued to the petitioner society on account of application of wrong
factors and non-payment of vacant land tax. Those essential details are
missing. The petitioner has not cared to file essential facts and the delay of
six years or so in finalizing the assessment cannot be characterized as
unreasonable. It is lastly urged that the proper Use Factor has been applied in
this case.
Analysis and Conclusions:
7. To appreciate the disputes in this case, it would be necessary to notice
the essential provision of the Act. They are extracted as follows:
―Definitions.-In this Act, unless the context otherwise requires,-
XXXXXX XXXXXX XXXXXX
(24) ―land‖ includes benefits to arise out of land, things
attached to the earth or permanently fastened to anything
attached to the earth and rights created by law over any street;
XXXXXX XXXXXX XXXXXX
(37) ―owner‖ includes a person who for the time being is
receiving or is entitled to receive, the rent of any land or
building whether on his own account or on account of himself
and others or as an agent, trustee, guardian or receiver for any
other person or who should so receive the rent or be entitled to
receive it if the land or building or part thereof were let to a
tenant and also includes--
(a) the custodian of evacuee property in respect of evacuee
property vested in him under the Administration of Evacuee
Property Act 1950 (31 of 1950); and
(b) the estate officer to the Government of India, the Secretary
of the Delhi Development Authority, constituted under the Delhi
Development Act, 1957 (61 of 1957); the General Manager of a
railway and the head of a Government department, in respect of
properties under their respective control;
XXXXXX XXXXXX XXXXXX
CHAPTER VIII
TAXATION
Levy of Taxes
120. Incidence of property taxes.--(1) The property taxes shall
be primarily leviable as follows:--
(a) if the land or building is let, upon the lessor;
(b) if the land or building is sub-let, upon the superior lessor;
(c) if the land or building is unlet, upon the person in whom the
right to let the same vests.
Provided that the property taxes in respect of land or building,
being property of the Union, possession of which has been
delivered in pursuance of section 20 of the Displaced Persons
(Compensation and Rehabilitation) Act, 1954 (44 of 1954),
shall be primarily leviable upon the transferee.]‖
8. The definition of land and owner has remained unchanged. However,
the incidence of property tax by reason of new Section 120 has changed. It
reads as follows:
―120. Incidence of property tax.-
(1)(a) The property tax on any land or building shall be
primarily leviable upon the owner thereof.
(b) The liability of the several owners of any land or building
constituting a single unit of assessment, which is, or purports to
be, severally owned in parts including flats or rooms, for
payment of property tax or any instalment thereof, payable
during the period of such ownership shall be joint and several;
Provided that the Commissioner may apportion the
amount of property tax on such land or building among several
co-owners:
Provided further that in any case where the
Commissioner is, for reasons to be recorded in writing, satisfied
that the owners is not traceable, the occupier of such land or
building for the time being shall be liable for payment of the
property tax and shall also be entitled to the rebate, if
admissible.
(c) In the case of any land or building which is not self-
occupied and where the owner is constrained by any law, order
of the Government, or order of a Court from recovering the tax
due, such tax shall be recovered from the occupier or occupiers,
as the case may be:
Provided that the owner shall continue to pay such
amount of tax as he was liable to pay before the coming into
force of the Delhi Municipal Corporation (Amendment) Act,
2003 and only the balance amount, if any, shall be recovered
from the occupier.
(d) The property tax on any land or building, which is the
property of [a Corporation] and the possession of which has
been delivered under any agreement or licensing arrangement,
shall be leviable upon the transferee or the licensee, as the case
may be.
(e) The property tax in respect of any land or building, being
the property of the Union, the possession of which has been
delivered in pursuance of section 20 of the Displaced Persons
(Compensation and Rehabilitation) Act, 1954 (44 of 1954),
shall be leviable upon the transferee.
(2) If any land has been let to a tenant for a term exceeding
one year and such tenant has built upon such land, the property
tax assessed in respect of such land and the building erected
thereon shall be payable by such tenant, whether the land and
the building are in the occupation of such tenant or a sub-tenant
of such tenant.
Explanation - For the purposes of this section, ―tenant‖ shall
include any person deriving title to the land or the building
erected upon such land, from the tenant, whether by operation
of law or by transfer inter vivos.‖
9. The Full Bench of this Court's decision in Shashank Steel (supra)
dealt with precisely the issue of whether a lessee of land, for the period it
was not used or any part of which was not constructed, could be held liable
for vacant land tax. The Court held in the negative, observing as follows:
―35. With respect, in our opinion, the learned Single Judge
failed to pose unto himself the correct question. The definition
of land is a wider one and that definition is to be construed for
the purpose of finding out as to whether any benefit derived out
of land would also be subject to the property tax. Such a
question would not arise when a deed of lease has been
executed. By reason of such a deed of lease, some interests in
the land are transferred and once a deed of lease is executed,
the charging provision will have to be applied having regard to
the status of the parties so as to fix the primary liability under
the said Act. We, therefore, are unable to subscribe to the
aforementioned view.
36. In terms of the said perpetual lease, the lessee has no
right to sell, transfer or otherwise part with possession of any
part or whole of the industrial plot in any form or manner,
benami or otherwise to any person whomsoever, without the
permission of the Lesser who is entitled to refuse to grant such
permission, if sought for in its absolute discretion as per Clause
6(b) of the lease deed.
37. The submission of Mr. Nandrajog to the effect that the
lessee is liable to pay the tax in equity having regard to the
stipulation made in the conveyance deed in this behalf in Clause
10 thereof, cannot also be accepted.
38. A bare perusal of the aforementioned provisions would
clearly show that the covenant for payment of tax on the part of
the sub-lessee would not make any material difference
inasmuch as thereby only the Lesser has been assured to be
indemnified and thus the petitioner cannot take any benefit
there under.
39. Mr. Nandrajog has relied upon an unreported decision of
this Court in C.W.P. No. 633 of 1980 in Nehru Place Hotels Ltd
& Anr. v Municipal Corporation of Delhi & Anr disposed of on
30.09.1980. In the said decision, with utmost respect, the
learned Judge although held that the Lesser is primarily liable,
but erroneously proceeded to observe that the same would not
mean that the liability cannot be a subject matter of covenant
between the Lesser and the lessee. The said claim is as under:-
"The lessee shall from time to time and at all times pay
and discharge all rates taxes, charges and assessments of
every description which are assessed or may at any time
hereafter during the continuance of this lease be
assessed, charged or imposed upon the plot hereby
demised or on any buildings to be erected thereupon or
on the landlord or tenant in respect thereof."
40. By reason of a covenant, the person, who is not liable to
pay tax, under a legislative enactment cannot be made liable
therefore, particularly when the Corporation in relation to the
sub-lessee is a third party and cannot in law be permitted to
derive any benefit there from. The said finding also must be
held to be contrary to the scope and purport of Section 120(1)
of the DMC Act. We, therefore, are of the opinion that in a case
where no building has been constructed, the sub-lessee would
not be liable to pay the property tax.‖
10. The Full Bench ruling was affirmed by the Supreme Court, which held
as follows:
―16. Coming to the interpretation of the provisions of Section
120 (1) of the said 1957 Act, at the outset we may state that the
language of the said section suggests that the intention of the
Legislature in fixing primary liability of property tax upon the
owner of the land is to facilitate the collection of property tax. It
is not unreasonable for the Legislature to impose the primary
liability upon the lessor and to give him the right of
recoupment. In this case, we are concerned only with the
question as to whether the Corporation was right in imposing
primary liability to pay property tax on the sub-lessee
under Section 120 (1) (c) of the said 1957 Act. Whether the
liability was on Mohan Co- operative Industrial Estate Ltd., is
not required to be gone into by us because that is not the case of
the Corporation and also because the lease between the
President of India and Mohan Co-operative Industrial Estate
Ltd. dated 20.3.80 was not produced before us. We also do not
know the basis on which premium was payable by the lessee to
the lessor.
17. On a bare reading of Section 120 (1) (c), in the context of
the Deed dated 20.2.81, we find that the said Deed did not
operate as a conveyance and that the industrial plot was let out
to M/s. Shashnak Steel Industries Pvt. Ltd. Since there was
letting in favour of the said company, Section 120 (1) (c) of the
said 1957 Act did not apply.
18. For the aforestated reasons, we see no infirmity in the
impugned judgment of the Delhi High Court‖
11. The lease in the present case is for a one year tenure; the lease rent is a
token one rupee per annum. There are severe restrictions about what use the
property can be put to: the lessee is bound to at all times, keep it as a
playground; the lessor is entitled to enter the premises at any time. There
cannot be any mortgage or encumbrance on the playground; its intrinsic
character as such is to be maintained at all times. Given these terms, this
Court holds that the vacant land tax (for which annual value is fixed @ `
5,63,436/-) by the impugned order, is untenable and without authority of
law.
12. As regards the other contention that the assessment order impugned
should be quashed because it was finalized after an inordinate delay, this
Court notices that no facts or figures are forthcoming; the petitioner appears
to have rushed to this Court straightaway with an omnibus challenge. The
pleadings in the writ petition suggest that self-assessment was resorted to;
there are no particulars as to what was the declaration of annual value made
from time to time by the petitioner. The writ petition also states that the
society's representative was asked to respond to queries on 23.02.2011 after
which the impugned assessment order was issued. At the same time the
MCD does not dispute the essential fact that self-assessment returns were
filed and apparently accepted for the past periods. Such being the case,
whole-sale revision of annual value, in respect of the constructed portions
could not have been resorted to for past periods, to the extent of casting
additional liability for 7 years.
13. In Springdales (supra), this Court had considered the provisions of the
Act, after amendments were made in 2004, especially on two aspects: first,
the power to re-open settled assessments in the context of period of
limitation (since the statute imposes none) and two, the mandatory
requirement of pre-deposit of amounts, as a precondition for hearing the
appeal. The Court held inter alia, as follows:
―14. Section 123D constitutes an exception insofar as it arms
the Commissioner with the power to reopen completed
assessments. It reads as follows:
"123D. Power of Commissioner regarding assessment.-
The Commissioner may, at any time-
(a) make suo-motu, an assessment in any case where a
return on the basis of self-assessment has not been filed;
(b) revise any assessment where the information
furnished in the return of self-assessment is found to be
incorrect;
(c) reopen any assessment even after the period of one
year in any case where it has been detected that there is
wilful suppression of information; and
(d) impose a penalty not exceeding thirty per cent of the
difference in tax arising from non-filing of a return in
time, giving wrong information or wilful suppression of
facts."
15. In the present case, not only is the impugned notice
(dated 23.01.2013) silent as to which period it relates to or for
which assessment year the Commissioner proposes to revisit
completed assessments [i.e. completed in respect of 123B(10)]
but also is utterly vague as to how there was any "wilful
suppression" practiced by the assessee. This Court, in K.L.
Rathee v Municipal Corporation of Delhi AIR 1995 Del 226
and Savitri Devi v MCD 1994 (55) DLT 391, while considering
the pre-amended proviso to Section 126 which contained an
obligation on the part of the Commissioner to indicate reasons
for proposing change in the rateable value, has held that the
notice should be effective.
16. The expression "willful suppression" of information has
to necessarily relate to rateable or conscious omission on the
part of the assessee. In case where the Commissioner proposes
to proceed under Section 123D (b) and (c), as a precondition
the notice has to necessarily specify what is the incorrect
information provided as well as the barest reasons for such
opinion and specific grounds for stating "willful suppression" of
information The use of the expression "willful suppression", in
our opinion, raises the bar and discloses a primary intention to
give effective notice as to what is to be answered by the
assessee. It is not mere omission or mistake that attracts
issuance of a notice under Section 123D which confers
exceptional and even draconian powers. The lack of any
particulars of the kind enshrined in either 123D(b) or 123D(c)
in the facts itself vitiates the notice. On similar lines, while
interpreting the words "wilful" and "suppression" in Section
11A of the Central Excise Act, 1994, the Supreme Court in
Continental Foundation, Joint Venture Holding v Commissioner
of Central Excise, Chandigarh I 2007 (10) SCC 337, held:
"10. The expression "suppression" has been used in the
proviso to Section 11A of the Act accompanied by very
strong words as ―fraud‖ or „collusion‟ and, therefore,
has to be construed strictly. Mere omission to give
correct information is not suppression of facts unless it
was deliberate to stop the payment of duty. Suppression
means failure to disclose full information with the intent
to evade payment of duty. When the facts are known to
both the parties, omission by one party to do what he
might have done would not render it suppression. When
the Revenue invokes the extended period of limitation
under Section 11A the burden is cast upon it to prove
suppression of fact. An incorrect statement cannot be
equated with a willful misstatement. The latter implies
making of an incorrect statement with the knowledge that
the statement was not correct."
17. More fundamentally, the power under Section 123D is
unconstrained at any point of time when recourse is made, such
as in the present case, seeking to go back almost a decade,
which subjects the assessee/property owner to unrealistic
burdens. In a previous instance where such open ended power
was conferred upon a statutory authority, i.e. a sales tax
authority official in Punjab, the Supreme Court had outlined in
State of Punjab & Ors v Bhatinda District Co-op Milk P. Union
Ltd 2007 (11) SCC 363 the limitations to exercise of such
power.
18. In the context of Section 21 (dealing with revisional
powers) which armed the Commissioner with untrammeled
power to revise orders suo motu the Court held that the
statutory grant cannot be given its full effect. The provision
concerned with Section 21 of the Punjab General Sales Tax Act,
1948. The Court observed as follows:
"5. In respect of the assessment for the year ending
31.3.2000, the assessment proceedings were 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.
(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."
19. The court held that such power, even though widely
couched, has to be exercised within reasonable period:
"15. Sub-section (1) of Section 11 empowers the
Commissioner to extend the period of three years for
passing the order of assessment wherefor 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.
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."
20. The above decision has been noticed and followed
subsequently in DDA v Ram Prakash AIR 2011 SC 1399.
21. Following Bhatinda (supra) in the present case Section
123B (10) statutorily finalizes, as it were, the assessment
unless the return is scrutinized and notice issued for the
purposes of proceedings by the Commissioner one year after the
completion of the concerned assessment year. Section
123D constitutes an exception to Section 123B (1) inasmuch
as it empowers the Commissioner to revisit the issue even after
the expiry of period stipulated under Section 123D (b) .
Exercise of Section 123D per se is not conditioned or
constrained by any time limit. Following the logic in Bhatinda
(supra) and DDA (supra), the Court is of the opinion that a
harmonious construction of the two provisions would mean that
even the power under Section 123D is to be exercised for a
maximum period of one year after the lapse of the
period indicated in Section 123B (10) . There is, furthermore, a
need to clarify that in the event of exercise of the suo motu
powers under Section 123D , by the Commissioner, which leads
to any reassessment for the permissible years (say 2-3 previous
years), it would be sufficient compliance with Section 170(b) if
the assessee deposits the demand relatable to one year, in the
light of the changed circumstances, because that will operate
less onerously, and facilitate meaningful exercise of the right of
appeal available. This logic had prevailed and persuaded the
Court to hold that the "base year" rateable value related tax
alone could be deposited in compliance with the pre-deposit
condition in Sunil Raj (supra) although that is per se not the
mandate of Section 170(b). As far as the issue of use factor is
concerned, this Court notices that the question is covered by
V.K. Kaul v Union of India 192 (2012) DLT 241 (DB). In that
judgment, the Court had held that the basis for determining the
rateable value by deploying Use Factor 3, i.e. the nature of fees
charged by the institution, is untenable. The court in V.K. Kaul
(supra) stated as follows:
"59. While we have no difficulty in agreeing with the
respondents that there exists an intelligible differentia
between government / government-aided schools on the
one hand and private un-aided schools on the other, the
question that needs examination is whether this
differentia has a nexus with the object of such
classification. The apparent and ostensible object is that
schools which are not running as profit earning
businesses ought to be treated at par with government /
government-aided schools. That is apparent from the fact
that government / government aided schools have a use
factor of 1 and so do private unaided schools, which
charge fees upto Rs. 600/- per month. The foundation on
which the Use Factors of 2 and 3 are assigned to schools
charging fees between Rs.601/- and Rs.1200/- per month
and those charging fees in excess of Rs. 1200/- per
month, respectively, appears to be the reasoning or, shall
we say, assumption that these schools are profit making
enterprises. But, what if that were not true? What if the
schools charging higher fees were imparting a better
quality of education with a better infrastructure without
any individual or group of individuals profiteering from
the enterprise? In such a situation, the nexus between the
intelligible differentia and the object would disappear
rendering the classification to be violative of Article 14 of
the Constitution. Therefore, a classification based merely
on the fee structure would not be a satisfactory means of
achieving the object. Perhaps, one Use Factor could be
assigned to all schools which are not profit making
bodies / entities, irrespective of the fee structure. And, a
higher Use Factor could be assigned to schools which
are being run on a profit-making basis. We have no
means to ascertain as to whether the petitioners before us
fall into one or the other category. While we agree with
the petitioners that the fee structure cannot be the sole
determinative factor for ascribing a particular Use
Factor, we are also clear that it is not for us to do this
exercise. Consequently, we direct that this grievance of
the petitioners with regard to the Use Factor assigned to
school buildings be considered by the Corporation and
the MVC in the light of observations made above. In the
meanwhile, however, as we have found the classification
based on fee structure alone to be violative of Article
14 of the Constitution and beyond the mandate of the
amended Act of 1957, all schools, irrespective of the fee
structure, would have to be assigned a single Use Factor.
And, since government / government aided schools have
been assigned a UF of one (1), that would be applicable
for all schools till the exercise is completed by the MVC
and the Corporation in the light of the discussion above."
14. As regards the Use Factor (3) applied in this case, this Court notices
that the issue has been concluded by the judgment in V.K. Kaul v Union of
India 192 (2012) DLT 241 (DB). In that judgment, the Court had held that
the basis for determining the rateable value by deploying Use Factor 3, i.e.
the nature of fees charged by the institution, is untenable.
15. In the light of the above decision, it is held that the assessing officer
could not have invoked the power to revise the rateable value, in respect of
the constructed portion of the petitioner's school, with effect from 2004, in
2011. In the circumstances, the rateable value fixed and the demand made
cannot be sustained. They are hereby quashed. It is, however, open to the
respondent's assessing officers to re-examine the issue, and issue fresh
demands, if necessary, for the 3 years preceding 2011. The three-year period
would be worked out, having regard to the date on which the show cause
notice was issued, leading to the impugned demand; the relevant Use Factor
to be applied would be Use Factor 1. In case of any further grievance on the
petitioner's part, it is open to it to seek recourse to the appellate procedure.
Furthermore, the demand for vacant land tax, for 5861.39 square metres of
playground, is unsustainable. It is hereby quashed. The writ petition is
allowed in these terms; there shall be no order on costs.
S. RAVINDRA BHAT
(JUDGE)
A.K. CHAWLA
(JUDGE)
MARCH 22, 2018
