Quashed

Chimes Educational Trust v. State of Karnataka

Karnataka HC5 Aug 2024WP/4664/2024

Case brief

AI extract

What is this about?

The Court quashed demand notices for deficit stamp duty issued without a mandatory show cause notice. The judgment held that the authorities violated natural justice by adjudicating liability before affording petitioners an opportunity to be heard under Section 46A.

What did the court decide?

The impugned demand notices dated 08.03.2022 were quashed. Liberty was granted to authorities to issue a fresh show cause notice and to the petitioners to claim refund of excess duty paid.

Chimes Educational Trust Vs State of… — Constitutional and Fundamental Rights | Karnataka HC (2024)

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NC: 2024:KHC:31204 WP No. 4664 of 2024

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 5^TH DAY OF AUGUST, 2024

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BEFORE

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THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR

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WRIT PETITION NO. 4664 OF 2024 (GM-ST/RN)

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BETWEEN:

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CHIMES EDUCATIONAL TRUST, A PUBLIC CHARITABLE TRUST, HAVING OFFICE AT NO 5, PATALAMMA TEMPLE STREET, BASAVANGUDI, BENGALURU – 560 004. REPRESENTED BY ITS MANAGING DIRECTOR MRS. BRINDA SRINIVAS.

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THE EAST WEST EDUCATIONAL TRUST, A PUBLIC CHARITABLE TRUST, HAVING OFFICE AT NO.1, "GITA" ARMUGAN CIRCLE, BANGALORE - 560 004.

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Digitally signed by R HEMALATHA Location: HIGH COURT OF KARNATAKA

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REPRESENTED BY ITS MANAGING TRUSTEE B.N.K. SARATHI.

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(BY SMT.RITHIKA P., ADVOCATE FOR SRI. P.CHINNAPPA, ADVOCATE)

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…PETITIONERS

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AND:

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STATE OF KARNATAKA, REPRESENTED BY ITS PRINCIPAL SECRETARY, DEPARTMENT OF REVENUE, VIDHANA SOUDHA, BENGALURU – 560 001.

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THE INSPECTOR GENERAL OF REGISTRATION AND COMMISSIONER OF STAMPS,

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NC: 2024:KHC:31204 WP No. 4664 of 2024

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8^TH FLOOR, KANDAYA BHAVAN, K.G. ROAD,

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BENGALURU – 560 009.

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SENIOR SUB-REGISTRAR, SUB-REGISTRAR OFFICE, NO. 172/1, 1^ST FLOOR, PRERANA COMPLEX, MIRZA ROAD, ANEKAL TOWN, BENGALURU – 562 106.

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DISTRICT REGISTRAR AND ASSISTANT COMMISSIONER, STAMPS, BASAVANAGUDI REGISTRATION DISTRICT, 2^ND FLOOR, 3^RD STAGE, B.M.T.C. BUILDING, SRI.VIDHYANAGARA, HOSAKERE HALLI, BANASHANKARI, BANGALORE – 560 085.

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…RESPONDENTS

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(BY SRI.N.B.PATIL, AGA FOR R1 TO R4)

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO A) QUASH THAT THE IMPUGNED FIRST DEMAND NOTICE DATED 08/03/2022 BEARING NO.79/21-22 (ANNEXURE - A) ISSUED BY THE R3 AS BEING ARBITRARY, ILLEGAL, AND ULTRA VIRES THE PROVISIONS OF THE STAMP ACT AND REGISTRATION ACT AND LIABLE TO BE QUASHED AND/OR SET ASIDE AND ETC.,

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THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR

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ORAL ORDER

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Petitioner No.1 asserts itself to be a public charitable trust, while Petitioner No.2 is duly registered under Section 80G and Section 12A, read with Section 12AA(1)(b)(i), of the Income Tax Act, 1961.

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3 - NC: 2024:KHC:31204 WP No. 4664 of 2024

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The petitioners entered into a lease deed, whereby Petitioner No.2 agreed to grant Petitioner No.1 the scheduled property. This deed was registered on 11.09.2019 before Respondent No.3, and the petitioners duly paid a stamp duty amounting to Rs.1,23,20,500/-, as well as Rs.2,20,655/- towards registration charges.

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In the present matter, Respondents Nos.3 and 4 issued the impugned demand notices, calling upon the petitioners to pay the deficit stamp duty payable on the lease deed, under the authority vested in them by Section 46A of the Karnataka Stamps Act (hereinafter referred to as ‘the Act’). In response, the petitioners promptly replied to the demand notices issued by Respondent No.3. Despite the representations submitted by the petitioners, Respondent No.4 issued the impugned demand notice, failing to consider the representation made by the petitioners.

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Section 46A of the Act concerns the recovery of stamp duty. It stipulates that, where an instrument chargeable with duty has not been duly stamped, the Chief Controlling Revenue Authority or any officer authorized by the State Government may, within five years from the date of commencement of the Karnataka Stamp (Amendment) Act, 1980, or the date on which the duty became payable, whichever is later, serve a notice on the person liable for payment of the duty, requiring them to show cause why

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NC: 2024:KHC:31204 WP No. 4664 of 2024

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the proper duty or any shortfall should not be recovered from them. Following this, the Chief Controlling Revenue Authority or the authorized officer, after duly considering any representation made by the person served with the notice, is required to determine the amount of duty due (not exceeding the amount specified in the notice). Thereafter, the person is liable to pay the determined amount.

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In this instance, Respondents Nos.3 and 4, without serving a show cause notice to the petitioners as required under Section 46A of the Act, directly adjudicated the liability for payment of the deficit stamp duty. This action by the respondents stands in contravention of the provisions stipulated in Section 46A of the Act, which mandates that the petitioners be provided an opportunity to present their case through a show cause notice before any determination of liability is made. Accordingly, the impugned demand notices issued by the respondents are legally unsustainable and violative of the principles of natural justice. Accordingly I pass the following:

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ORDER

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i. The impugned notices at Annexure-A to F dated 08.03.2022 issued by respondent No.3 are hereby quashed .

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ii. Respondent Nos.2, 3 and 4 are at liberty to issue show cause notice afresh in accordance with law, as stated under sub- section (1) of section 46 A of the Act and

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NC: 2024:KHC:31204 WP No. 4664 of 2024

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thereafter pass appropriate order in accordance with sub section (2) of the Act

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iii. Liberty is reserved with the petitioners to submit a representation with respondent Nos.3 and 4 for refund of excess stamp duty paid on the lease deed, if they are legally entitled to.

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iv. Respondent Nos.3 and 4 shall pass appropriate order in accordance with law within two months from the date of representation to be submitted by the Petitioners.

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All contentions of the parties are kept open.

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Sd/(HEMANT CHANDANGOUDAR) JUDGE

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RKA

Chimes Educational Trust v. State of Karnataka

Case brief

What is this about?

What did the court decide?

Chimes Educational Trust v. State of Karnataka

Case brief

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