Monday 18 October 2021

Under which circumstances can the court determine the correct rateable value of the property for assessing property tax?

  But, where the principle of waiver does not apply and a notice under Rule 15(2) is not issued and an assessment is made, then after coming to the conclusion that the assessment is a nullity, can the Small Cause Court quash the assessment simpliciter or does it have a duty or jurisdiction to take further action in the matter. {Para 68}

69. The provisions of Rule 20 clearly show that the power of the Commissioner to make changes in the entry can be exercised only during the official year itself. Once this official year is over, the Commissioner will have no jurisdiction to make any alteration. In Anant Mills Co. Ltd. v. Municipal Corporation, Ahmedabad, 1993(2) G. L. H. 897, it was held by a Division Bench of this Court, after examining the scheme of the Act, that the assessment must be completed before the close of the relevant official year and once the official year has expired, the Commissioner cannot assess and levy property tax and, therefore, the Court also cannot issue direction to the Commissioner to do something which was not permissible under the Act. The quashing of the assessment would mean that the Commissioner would not be in a position to reassess and levy property taxes and the taxes for those official years would be totally lost to the Corporation. This being the position, the appellate court cannot and should not set aside the assessment and remand the case for de novo assessment by the Commissioner. Any remand would, obviously, serve no useful purpose.

70. In view of the aforesaid position in law, it was submitted by the learned counsel for the Corporation that in such cases, the Chief Judge or the Judges of the Small Cause Court themselves should determine the rateable value in accordance with law. The counsel for the respondents, however, contended that if the assessment is a nullity, because of non-compliance with the provisions of Rule 15(2), or otherwise, then the Small Cause Court has no option but to quash the assessment, in toto.

71. The principle underlying the judgment in Anant Mill's case clearly answers the aforesaid question in favour of the Corporation. In that case, it had been contended that the Chief Judge has no jurisdiction to entertain the grounds affecting legality of the assessment. It was also submitted in that case, on behalf of the assessee, that if the Chief Judge came to the conclusion that the method of assessment was illogical or irrelevant and the assessment, therefore, invalid, then it would not be competent for the Chief Judge to determine the rateable value afresh by applying the appropriate method in a correct manner. Elaborating further, it was submitted that all that the Chief Judge would be able to do would be to declare the assessment invalid and leave it to the Commissioner to make a fresh assessment according to the correct method and this would, again, result in the Corporation losing the tax altogether. Similar is the contention raised before us, namely, that the assessment is bad as proper procedure is not followed. Rejecting the submission, the Division Bench, in Anant Mills' case, at page 922, observed as follows :--

".....This contention is also, in our opinion, without substance. It ignores the scheme of the provisions in regard to appeals contained in the Act. We have already pointed out that an appeal may be preferred against the rateable value and in this appeal the assessee would challenge the determination of the rateable value made by the Commissioner. He may challenge it on any ground available to him and such ground may well relate to the method of valuation adopted for the purpose of determining the rateable value. It is apparent from the provision in Section 409 Sub-section (1) and particularly the words "before evidence as to value has been adduced" that the appeal against rateable value is in the nature of an original proceeding where evidence as to value may be led by both parties. The Chief Judge may on the application of a party to the appeal appoint a competent person to make the valuation and such person may be called as a witness and if he is so-called, he may be cross-examined by the other side. The evidence as to value which may be adduced before the Chief Judge in the appeal may be based on any method which is regarded by the party or his witness as appropriate. It cannot be restricted to the method of valuation adopted by the Commissioner. So also when a competent person is directed to make a valuation, he may value it according to the method which he regards as proper there is no requirement in the statute that his, valuation must be based on the method adopted by the Commissioner. The entire question as to retable value would be open before the Chief Judge and as contemplated under Section 411 Clause (a), it would be for the Chief Judge to fix the ratable value and the decision of the Chief Judge fixing the ratable value would be final, subject to appeal to the High Court and the Commissioner would be bound to give effect to such decision as provided in Section 413. The whole scheme of the provisions clearly contemplates that in the appeal against the ratable value, the Chief Judge would have to fix the ratable value after considering the evidence as to value which may be adduced before him and it is implicit in this process that he would also have to decide which method of valuation should be adopted. If, therefore, the Chief Judge takes the view that the contractor's test method is inappropriate or inapplicable, he can decide which other method should be adopted and fix the rateable value by applying such method on the basis of the evidence before him."

It was contended by Shri Modi that such a course would be clearly contrary to the judgment of the Supreme Court in the case of Martin Burn Limited v. Calcutta Municipal Corproation, AIR 1966 SC 529 and that if the order of assessment is not valid, because of non-compliance with Rule 15(2), or any other Rule, then the Court would have no jurisdiction to undertake the exercise of fixing the ratable value itself. Similar contention was also raised in Anant Mills case. The Court examined the relevant provisions of the Calcutta Municipal Act, 1928, and compared the same with the provisions of the Bombay Provisional Municipal Corporation Act, and then observed as follows:--

".... This decision given on the basis of a scheme of taxation contained in the Calcutta Act can hardly be of any relevance when we are considering a question arising under a totally different scheme of taxation contained in the Corporation Act. The power of the Court of Small Cause under the Calcutta Act was to cancel the assessment or to revise or alter the valuation and the Supreme Court held that since the method on the basis of which the valuation was made by the Corporation was illegal, the Court of Small Cause could not do anything except cancel the assessment; it would not make an independent valuation itself by adopting the correct method, for that would not be revision or alteration of the valuation. But here under the Corporations Act the power of the Chief Judge in appeal against rateable value is not restricted merely to revision or alteration of the valuation. On the contrary it is a wide power conferred in general terms without any words of limitation. It says that an appeal against the rateable value shall be heard and determined by the Chief Judge. The Chief Judge is empowered to fix the rateable value after considering the evidence a to value adduced before him and the Commissioner is enjoined to give effect to the decision of the Chief Judge. The principles of the decision in Martin Burn's case can, therefore, have no application under the Corporation Act.

30. The result of this discussion is that if we quash and set aside the assessment made by the Deputy Municipal Commissioner on any of these grounds urged on behalf of the petitioners, the tax for the official years 1967-68 and 1968-69 would be lost to the Corporation whereas no such drastic consequence would ensue if these grounds are left to be decided by the Chief Judge in the appeals preferred by the petitioners. The Chief Judge can entertain these grounds and if he is of the view that the contractors method adopted by the Deputy Municipal Commissioner is not proper or relevant to the determination of the annual rental value, he can determine the annual rental value of the premises by applying the appropriate method and the tax can be levied on the petitioners on the basis of such ratable value. The latter alternative would do full justice to the peitioners without causing grave and undue hardship which would inevitably result to the Corporation if the former alternative were adopted. We, therefore, refuse to entertain these grounds in the exercise of our jurisdiction under Article 226 of the Constitution. They can be decided by the Chief Judge in the appeals preferred by the petitiones...."

We are in respectful agreement with the aforesaid observations in Anant Mill's case. Following the said ratio, it would mean that even if the assessment is held to be not in accordance with law, whether because of the wrong method followed with regard to determining the rateable value or because of any irregularity or illegality in procedure or because of violaton of the principles of natural justice or because notice under Rule 15(2) had not been issued, then the Small Cause Court would itself have the jurisdiction to examine evidence and determine the correct rateable value. It would be wholly inappropriate for the Small Cause Court to merely quash the assessment, which would have the effect that for the official years in question, the entire tax would be lost to the Corporation. In effect, the ratio decidendi of the decision in Anant Mills' case is that the Small Cause Court exercises the same power and will have the same jurisdiction, which is exercised by the Commissioner for the purposes of determining what should be the correct rateable value.

Gujarat High Court
Municipal Corporation Of The City ... vs Oriental Fire & General Insurance ... on 8 September, 1994
Equivalent citations: AIR 1994 Guj 167, (1994) 2 GLR 1498
Author: B Kirpal

Bench: B Kirpal, R Abichandani
Read full Judgment here: Click here
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