Partly allowed

Sri. Laxmi Venkateshwara Industries v. the State of Karnataka

Karnataka HC1 Dec 2022WP/107372/2018

Case brief

AI extract

What is this about?

Petitioners challenged property tax notices demanding payment from 2005-06 to 2017-18. The Court held that under Section 115 of the Karnataka Municipalities Act, 1964, the limitation for escaped assessment is six years. The notices demanding tax beyond this period were unsustainable and quashed.

What did the court decide?

The impugned notices were quashed insofar as they relate to the period exceeding six years prior to 04.12.2017. Fresh modified demands were directed to be issued.

Sri. Laxmi Venkateshwara Industries Vs the State of… — Property and Title | Karnataka HC (2022)

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WP No. 107372 of 2018

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C/W WP No. 107448 of 2018

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IN THE HIGH COURT OF KARNATAKA,

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DHARWAD BENCH

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DATED THIS THE 1^ST DAY OF DECEMBER, 2022

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BEFORE

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THE HON'BLE MR JUSTICE N.S.SANJAY GOWDA WRIT PETITION NO. 107372 OF 2018 (LB-TAX)

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C/W

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WRIT PETITION NO. 107448 OF 2018

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IN WRIT PETITION NO. 107372 OF 2018 : BETWEEN:

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SRI. LAXMI VENKATESHWARA INDUSTRIES, REP/BY K.NAGESHWAR RAO S/O LATE VENKAT NARAYANA, AGE: 64 YEARS,OCC: BUSINESS, R/O: JANGAMARA KALGUDI, TQ: GANGAVATHI-583227,DIST: KOPPAL.

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SARASWATHI INDUSTRIES, SOHAN RAJ MOOTHA, S/O LATE JEEVANTH RAJ MOOTHA, AGE: 82 YEARS,OCC: BUSINESS, R/O: PAMAPA NAGAR,GANGAVATHI, TQ: GANGAVATHI-583227,DIST: KOPPAL.

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N.R.INDUSTRIES, REP/BY CHILUKURI KRISHNAMURTHY, R/O: PAMAPA NAGAR,GANGAVATHI, TQ: GANGAVATHI-583227,DIST: KOPPAL.

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BHANTIA INDUSTRIES, REP/BY LAL CHAND BHANTIA

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WP No. 107372 of 2018

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C/W WP No. 107448 of 2018

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S/O LATE: ABHAYA RAJ BHANTIA, AGE: 72 YEARS,OCC: BUSINESS, R/O: KAMPLI ROAD GANGAVATHI, TQ: GANGAVATHI-583227,DIST: KOPPAL.

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SRI.LAXMI NARAYANA INDUSTRIES REP. BY N.SRINIVASS/O LATE N. RAMARAO, AGE: 50 YEARS,OCC: BUSINESS, R/O: R.G. ROAD,GANGAVATHI, TQ: GANGAVATHI-583227,DIST: KOPPAL.

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…PETITIONERS

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(BY SRI. GANGADHAR J M, ADV.)

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AND:

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THE STATE OF KARNATAKA, REPRESENTED BY UNDER SECRETARY, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT,VIKASA SOUDHA, BENGALURU-01.

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THE COMMISSIONER, CITY MUNICIPAL COUNCIL, GANGAVATHI-583227,DIST: KOPPAL.

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…RESPONDENTS

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(BY SRI.VINAYAK S KULKARNI, AGA FOR R1; SRI.B.SHARANABASAWA, ADV. FOR R2)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF CERTIORARI OR ANY OTHER APPROPRIATE WRIT OR QUASHING THE ORDER ISSUED BY THE RESPONDENT NO.2 ANNEXURE-C DATED 04.12.2017 AND ANNEXURE-C1 DATED:03.11.2018 ANNEXURE-E DATED 04.12.2017 AND ANNEXURE-E1 DATED 03.11.2018 ANNEXURE-F DATED04.12.2017 AND ANNEXURE-F1 DATED03.11.2017 ANNEXURE-G DATED04.12.2017 AND ANNEXURE-G1

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WP No. 107372 of 2018

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C/W WP No. 107448 of 2018

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DATED03.11.2018 ANNEXURE-H DATED:12.07.2017 AND ANNEXURE-H1 DATED03.11.2018 IN SO FOR AS PETITIONERS ARE CONCERNED AND ETC.,

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IN WRIT PETITION NO. 107448 OF 2018 :

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BETWEEN:

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SRI. SHARANABASAVESHWARA RICE MILL, R/BY CHANNAPPA MASKI, S/O LATE SIDDARAMAPPA MASKI, AGE: 62 YEARS,OCC: BUSINESS, R/O: WARD NIO.10, GANGAVATHI, TQ: GANGAVATHI-583227,DIST: KOPPAL.

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SRI.V.DURGAPPAS/O LATE HANUMANTHAPPA, AGE: 80 YEARS,OCC: BUSINESS, R/O: WARD NO.19, GANGAVATHI, TQ: GANGAVATHI-583227,DIST: KOPPAL.

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MANJUNATH RICE MILL R/P BY M MALLIKARJUONAPPA S/O LATE SIDDARAMAPPA, AGE: 79 YEARS,OCC: BUSINESS, R/O: GUNDAMMA CAMP GANGAVATHI, TQ: GANGAVATHI-583227,DIST :KOPPAL.

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S G BROTHERS RICE MILL R/BY GURUBASANAGOUDA S/O LATE SHIVANAGOUDA, AGE: 55 YEARS,OCC: BUSINESS, R/O: RAICHUR ROAD,GANGAVATHI, TQ: GANGAVATHI-583227,DIST: KOPPAL.

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MALLESHWARA INSUTRIES R/BY RAVINDRANATH S/O LATE M. NAGAPPA, AGE: 48 YEARS,OCC: BUSINESS, R/O: KAMPLI ROAD,GANGAVATHI,

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WP No. 107372 of 2018

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C/W WP No. 107448 of 2018

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TQ: GANGAVATHI-583227,DIST: KOPPAL.

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SRI.VEERBHADRESHWARA RICE MILL R/BY K. SRINIVASS/O VENKATESHWARA RAO, AGE: 52 YEARS,OCC: BUSINESS, R/O: R.G. ROAD,GANGAVATHI, TQ: GANGAVATHI-583227,DIST: KOPPAL.

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SANGAM INDUSTRIES R/BY K R VENKATESH S/O LATE K.S. RAMRAO, AGE: 47 YEARS,OCC: BUSINESS, R/BY KANAKAGIRI ROAD, GANGAVATHI,TQ: GANGAVATHI-583227, DIST: KOPPAL.

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RADHA KRISHNA INDUSTRIES R/BY M MALLIKARJUNA S/O LATE M. NAGAPPA, AGE: 60 YEARS,OCC: BUSINESS, R/O: KOPPALA ROAD,GANGAVATHI, TQ: GANGAVATHI-583227,DIST: KOPPAL.

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MAHESHWARA RICE INDUSTRIES R/BY M. VIJAYAKUMAR, AGE: 33 YEARS,OCC: BUSINESS, R/O: WARD NO.9, KANAKAGIRI ROAD, GANGAVATHI,TQ: GANGAVATHI-583227, DIST: KOPPAL.

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…PETITIONERS

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(BY SRI. A M MALIPATIL ADV FOR P9; SRI.B.S.KAMATE, ADV. FOR P1 TO P8) AND:

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THE STATE OF KARNATAKA, REPRESENTED BY ITS SECRETARY, DEPARTMENT OF HOUSING AND

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WP No. 107372 of 2018

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C/W WP No. 107448 of 2018

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URBAN DEVELOPMENT,VIKASA SOUDHA, BENGLAURU-01.

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THE COMMISSIONER, CITY MUNICIPAL COUNCIL, GANGAVATHI-583227,DIST: KOPPAL.

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…RESPONDENTS

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(BY SRI.VINAYAK S KULKARNI, AGA FOR R1; SRI.B.SHARANABASAWA, ADV. FOR R2)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TOA) ISSUE A WRIT OF CERTIORARI OR ANY OTHER APPROPRIATE WRIT OR ORDER ISSUED BY THE RESPONDENT NO.2 ANNEXURE-C DATED 04.12.2017, BEARING NO.Sum:nsagam/Kandaya/2017-18/ 1152 AND ANNEXURE-C1 DATED03.11.2018 BEARING NO.Sum:nsagam/kumvi/wana/2016 -17,ANNEXURE-D DATED04.12.2017 BEARING NO.Sum:nsagam/Kandaya/201718/1154 AND ANNEXURE-D1 DATED03.11.2018 BEARING NO.Sum:nsagam/Kumvi/wana/2016-17, ANNEXURE-E DATED04.12.2018,BEARING NO. nsagam/Kandaya/201718/1155 DATED 03.11.2018 AND E1 DATED 03.11.2018 BEARING NO.Sum:nsagam/kumvi/wana/2016-17 ANNEXURE-F DATED04.12.2017 sumnsagam/Kandaya/2017-18/1164 AND ANNEXURE-F1 DATED03.11.2018, BEARING NO.Sum:nsagam/kumvi/wana/2016-17 ANNEXURE-G DATED 04.12.2017 sumnsagam/ kandya/2017-18/1156 AND ANNEXURE-G1 DATED03.11.2018 BEARING NO.Sum:nsagam/ kumvi/wana/2016-17 ANNEXURE-H DATED04.12.2017 Sum:nsagam/ kumvi/ wana/2017-18/1157 ANNEXURE-H1 DATED:03.11.2018 BEARING NO.Sum:nsagam/ kumvi/wana/2016-17 ANNEXURE-J DATED:04.12.2017,BEARING NO.sumnsagam/ kandya/201718/1160 AND ANNEXURE-J1 DATED 03.11.2018 BEARING NO.Sum:nsagam/ kumvi/wana/2016-17, ANNEXURE-K DATED 04.12.2017, BEARING NO.sumnsagam/ kandya/2017-18/1161 AND ANNEXURE-K1 DATED 03.11.2018 BEARING NO.Sum:nsagam/ kumvi/wana/2016-17, ANNEXURE-L

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WP No. 107372 of 2018

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C/W WP No. 107448 of 2018

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DATED04.12.2017, BEARING NO.Sum: nsagam/Kandaya/201718/1165 AND IN SO FOR AS PETITIONERS ARE CONCERED.

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THESE PETITIONS COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioners are before this Court

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questioning the notices issued to them by the Municipality, by which, the petitioners have been called upon to pay the difference in the property tax for the period 2005-06 to 2017-18.

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It is the case of the petitioners that they have been filing their returns by way of self assessment and these returns have been accepted by the Municipality and therefore it was impermissible for the Municipality to demand tax retrospectively.

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It is contended that since returns were filed by the petitioners regularly and the Corporation had not exercised its power to initiate proceedings to assess under Section 105(4) on the ground that an incomplete or incorrect return was filed, it will have to be assumed that

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WP No. 107372 of 2018

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C/W WP No. 107448 of 2018

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the tax payable to the Municipality had escaped assessment, as contemplated under Section 115 of the Municipality Act. It is therefore contended that the Municipality could, at best, seek for tax which had escaped assessment only for the preceding period of 6 years prior to 04.12.2017, the date of the notice.

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Learned counsel for the Municipality, on the other hand, contended that, there was no time limit for assessing the return and demanding tax from the property owners. Learned counsel submits that under Section 105(3), a time limit of 1 year is prescribed, if the returns are correct and complete, whereas, under sub-section (4), no time limit was stipulated and therefore it was open for the Municipality to undertake the task of assessment at any point of time.

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The notices, which are impugned in these writ petitions, state that the Municipality was making the demand pursuant to an audit enquiry of the Accountant General dated 27.06.2017. The notices state that the

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WP No. 107372 of 2018

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C/W WP No. 107448 of 2018

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owner was under arrears of property tax from 2005-06 up

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to 2017-18 and they were also liable to pay penalty for the non payment of tax within the prescribed time.

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It is thus clear that notices emanated from Municipality only because of an audit enquiry and not because of any proceedings initiated by the Municipality on the ground that payment of taxes had escaped its assessment.

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Be that as it may, it cannot be in dispute that Section 115 of the Karnataka Municipalities Act, 1964¹ , permits the Municipality to initiate proceedings for assessment, only if the tax had escaped assessment, at any time prior to 6 years from the date on which the tax

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was required to be assessed.

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1[115. Power to assess in case of escaped from assessment.-Notwithstanding anything contrary contained in this Act or the rules made thereunder if for any reason, any person liable to pay any of the taxes, cess, rates, fees or charges leviable under this chapter has escaped assessment in any year, the Municipal Commissioner or the Chief Officer as the case may be, or the authorised officer may at any time within six years from the date on which such person should have been assessed, serve on such person a notice assessing him to the tax, rate, cess, charges or fees due and demanding payment thereof within fifteendays from the date of such service; and the provisions of this Act and rules made thereunder shall so far as may be, apply as if the assessment was made in the year to which tax, rate, cess, charges or fee relates.]

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WP No. 107372 of 2018 C/W WP No. 107448 of 2018

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It cannot also be in dispute that the only

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method of assessment of property tax provided under the Act is as laid down in Section 105 of the Municipalities Act. Section 105 requires every owner of a property to submit, every year, a return in a prescribed form and before filing such returns, he is also required to pay in advance the full amount of the property tax payable by him.

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On filing of the returns, the Municipality is required to pass an order of assessment, if it finds that return filed was correct and complete. This assessment is required to be made within one year from the date of submission of the returns.

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However, if no returns is filed or if the tax was not paid in advance and in full or if an incomplete or incorrect return were filed, the Municipality is empowered to cause an inspection of property and assess the property tax and thereafter furnish a copy of the order of assessment to the owner. In such an event, the Municipality is also authorized to impose penalty.

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It is therefore essential that on an incomplete

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or incorrect return being filed, the Municipality is required to pass an order, as contemplated under Section 105(4)² . If this assessment is not so made under Section 105(4), it is obvious that it would amount to a tax, which has escaped assessment. This position becomes clear by virtue of the fact that in Section 115, the word used is “assessed”.

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It is admittedly the case of the parties that returns were filed every year but no assessment as contemplated under Section 105 was made by the Municipality. Since it is the case of the Municipality that the proper amount of tax had not been paid by the petitioner, it would mean that the petitioners had filed an

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2[105(4) If any owner or occupier fails to submit a return as required under sub-section (1) 1[or fails to pay in advance full amount of property tax as required under sub-section (2)]1 submits an incomplete or incorrect return, the Municipal Commissioner or the Chief Officer, as the case may be or the authorised officer, shall cause an inspection of the 2[vacant land and building]2 and may also cause such local enquiry as may be considered necessary, and based on such inspection and information collected, he shall assess the property tax and send a copy of the order of assessment to the owner or occupier concerned. 1. Inserted by Act 31 of 2003 w.e.f. 16.6.2003. 2. Substituted by Act 31 of 2003 w.e.f. 16.6.2003.]

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incorrect return. As a consequence, it will have to be held that if incomplete or incorrect return had been filed, the Municipality had a right to assess property only for a period of 6 years prior to the date on which the property was required to be assessed.

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Since in the instant case, the notice was issued only on 04.12.2017, it is obvious that Municipality could at best claim tax which escaped assessment for a period of 6 years preceding 04.12.2017.

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Since the impugned notice demands tax from 2005-06, it will have to be held that the demand made therein for a period in excess of 6 years prior to 04.12.2017 would be unsustainable.

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The impugned notices are accordingly quashed insofar as it relates to the period of 6 years prior to 04.12.2017. The Municipality shall accordingly issue fresh modified demand in accordance with law with this judgment.

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Writ petitions are accordingly allowed in part.

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sd JUDGE

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KGK List No.: 1 Sl No.: 59

Sri. Laxmi Venkateshwara Industries v. the State of Karnataka

Case brief

What is this about?

What did the court decide?

Sri. Laxmi Venkateshwara Industries v. the State of Karnataka

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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Statutes considered

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