IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.J.CHELAMESWAR & THE HONOURABLE MR. JUSTICE P.N.RAVINDRAN FRIDAY, THE 23RD JULY 2010 / 1ST SRAVANA 1932 WA.No. 1570 of 2006(B) ---------------------- AGAINST THE JUDGEMENT/ORDER IN OP.18696/1998 Dated 29/05/2006 .................... APPELLANT(S): PETITIONER ------------------------ T.T.P.SHAMEEMA, W/O.DR.KUTTAYALI, V.V.HOSPITAL, THAMARASSERY. BY ADV. SRI.P.V.JYOTHI PRASAD RESPONDENT(S): RESPONDENTS -------------------------- 1. STATE OF KERALA, REP.BY CHIEF SECRETARY, THIRUVANANTHAPURAM. 2. DISTRICT COLLECTOR, WAYANAD DISTRICT, KALPETTA. 3. THE TAHSILDAR, MANANDAVADY, WAYANAD. GOVERNMENT PLEADER SRI.K.P.PRADEEP THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 15/06/2010, THE COURT ON 23/07/2010 DELIVERED THE FOLLOWING: J.CHELAMESWAR, C.J. & P.N.RAVINDRAN, J. ----------------------------------------- W.A.No.1570 of 2006 --------------------------------------- Dated this the 23rd day of July, 2010 JUDGMENT Ravindran, J. The appellant is the petitioner in O.P.No.18696 of 1998. In the writ petition, she challenged Ext.P5 order dated 20.8.1998 passed by the third respondent Tahsildar under section 15 of the Kerala Building Tax Act, 1975. Though the challenge to Ext.P5 was repelled, the learned single Judge afforded the petitioner an opportunity to establish her contention that the different floors of the building in question are distinct and separate apartments, that they are separately owned by the petitioner and her son and that the same calls for separate assessment. The brief facts of the case are as follows: 2. The petitioner and her son Sri.P.Mohamed Mansoor jointly constructed a building in a parcel of land situated in Re- survey No.464 of Mananthavady Village. After the building was constructed, they filed a return on 21.1.1986 as required under section 7 of the Kerala Building Tax Act, 1975 (hereinafter referred to as `the Act' for short). The third respondent Tahsildar after W.A.No.1570 of 2006 -:2:- enquiry passed an order on 25.3.1991, determining the tax payable in respect of the building as Rs.27,390/-. The said assessment order was passed on the basis of the capital value of the building determined in accordance with section 6 of the Act as it originally stood. The said order was challenged by the petitioner and her son in appeal before the Sub Collector, Mananthavady. By order passed on 25.7.1992, the appellate authority set aside the order of assessment and remitted the matter to the Tahsildar for fresh consideration. Though the petitioner filed a revision petition before the District Collector on 27.8.1992, by order passed on 8.8.1994, the revision petition was rejected. The District Collector however, directed the Tahsildar to afford the petitioner an opportunity of being heard before passing a fresh assessment order. 3. Pursuant to the order of remand passed by the appellate authority and the order passed by the revisional authority, the third respondent issued notice to the parties to appear on 1.2.1995. The parties appeared and they sought time to produce documents. The documents were produced on 15.3.1995. An enquiry was conducted and thereafter, the Tahsildar passed an order of assessment on 25.10.1995 assessing the ground floor of the W.A.No.1570 of 2006 -:3:- building standing in the name of the petitioner and the first floor standing in the name of her son separately. Both of them were directed to pay Rs.6,000/= each as building tax in respect of the building. After giving credit to the sum of Rs.6,848/- remitted by them, they were called upon to pay the balance amount of Rs.5,152/-. The petitioner and her son complied with the said order and remitted the tax assessed by the Tahsildar. 4. Pursuant to a direction issued by the Accountant General after audit, to re-assess the building tax, the Tahsildar issued a notice dated 24.7.1998 calling upon the petitioner and her son to appear before him on 12.8.1998. The petitioner and her son thereupon filed Ext.P4 petition before the Tahsildar stating that the ground floor and first floor of the building were constructed after obtaining separate permissions. It was also stated that all the records relating to the construction of the building have already been verified by the the assessing authority. They also sought an adjournment of hearing by two months to enable them to produce documents. The third respondent however passed Ext.P5 order dated 20.8.1998 assessing the building as a single unit and levying the sum of Rs.55,800/- as building tax. The petitioner and her son W.A.No.1570 of 2006 -:4:- were called upon to pay the sum of Rs.43,800/-, being the balance tax due after giving credit to the sum of Rs.12,000/- paid pursuant to the order of assessment dated 25.10.1995. Ext.P6 demand notice was also issued simultaneously. The instant writ petition was thereupon filed challenging Exts.P5 order and P6 demand notice. 5. The petitioner contended that the third respondent had no jurisdiction or authority to re-open the assessment that was concluded on 25.10.1995 when Ext.P1 order was passed and that the Accountant General had no authority to direct the Tahsildar to re-open the assessment. It was also contended that the third respondent failed to take note of the fact that the ground floor and first floor have separate door numbers and that they were separately assessed to tax by the local authority. Reliance was also placed on the decision of a Division Bench of this Court in Kurian George v. Tahsildar (1995 (2) KLT 457) in support of the said contentions. 6. The respondents resisted the writ petition by filing a counter affidavit. It was contended that by order passed on 25.3.1991 the building was initially assessed to tax based on the capital value of the building, that the said order was set aside by the W.A.No.1570 of 2006 -:5:- appellate authority and that after the order of remand passed by the appellate authority, the ground floor and first floor of the building were assessed as separate units based on an unregistered agreement entered into between the petitioner and her son. It was stated that later, the Accountant General opined that the ground floor and first floor were treated as separate units erroneously and therefore the order of assessment was rectified applying section 15 of the Act, after issuing notice to the parties. Referring to the agreement dated 2.12.1985 entered into between the petitioner and her son as per which, the ground floor of the building would belong to the petitioner and the first floor to her son, it was contended that the said agreement was executed with a view to evade assessment of the building as a single unit. It was also contended that the petitioner has failed to prove that the cost of construction was met by her and her son jointly and therefore the building could not have been assessed as separate units. Reliance was also placed on the circular dated 27.3.1987 issued by the Board of Revenue to contend that a building consisting of more than one flat or apartment owned by a firm should be considered as a single unit in the name of the Managing Partner of the firm. W.A.No.1570 of 2006 -:6:- 7. By the judgment under challenge, the learned single Judge held that if the different floors of the building are distinct and separate apartments and are separately owned by the petitioner and her son, then it calls for separate assessment. The learned single Judge however observed that it is for the petitioner to furnish details in that regard including the plan of the building before the Tahsildar and that if the petitioner establishes with documents, separate existence and separate ownership of the different apartments by her and her son, then the Tahsildar should inspect the building and on being satisfied about the claim made by the petitioner make separate assessments. Subject to the said observation, Ext.P5 was confirmed. Hence this writ appeal. 8. We heard Sri.P.V.Jyothi Prasad, learned counsel appearing for the appellant and Sri.K.P.Pradeep, learned Government Pleader appearing for the respondents. We have also gone through the pleadings and the materials on record. The petitioner's building was initially assessed to building tax by treating it as a single unit based on the capital value determined in accordance with section 6 of the Act. That order was set aside on appeal and the matter was remanded to the Tahsildar for de novo W.A.No.1570 of 2006 -:7:- consideration. The Tahsildar thereupon passed an assessment order on 25.10.1995 treating the ground floor and first floor of the building as separate units. The said order has attained finality and the tax demanded therein was paid by the petitioner and her son separately. The assessment order dated 25-10-1995 was passed having regard to the plinth area of the building in terms of section 5 (1) of the Act as amended with effect from 10.2.1992. 9. Sections 5(1) and (2) of the Kerala Building Tax Act, 1975 as they originally stood were as follows: “5. Charge of building tax.-(1) Subject to the other provisions contained in this Act, there shall be charged a tax (hereinafter referred to as “building tax”) at the rate specified in the Schedule in respect of every building the construction of which is completed on or after the 1 st day of April, 1973, and the capital value of which exceeds twenty thousand rupees. (2) Every major repair of, or improvement to, a building constructed before the 1 st day of April, 1973, made on or after that date shall be liable to the building tax at the rate referred to in sub-section (1) on the difference between the capital value of the building before effecting the major repair or improvement, as the case may be, and the capital value of the building after effecting the major repair or improvement.” The schedule to the Kerala Building Tax Act, 1975, as it originally stood was as follows: W.A.No.1570 of 2006 -:8:- THE SCHEDULE (See section 5) Rate of Building tax Capital value Rate of tax 1. Where the Capital value of a building is Rs.20,000 or less Nil 2. Where the capital value of a building exceeds Rs.20,000/- (a) on the first Rs.5,000 of such excess 1 per cent (b) on the next Rs.25,000 of such excess 2 per cent (c) on the next Rs.50,000 of such excess 5 per cent (d) on the next Rs.50,000 of such excess 8 per cent (e) on the next Rs.50,000 of such excess 10 per cent (f) on the balance 15 per cent” 10. The Kerala Building Tax Act, 1975 was amended by the Kerala Building Tax (Amendment) Act 1981, Act 6 of 1981, by substituting the figure “75,000” in the place of “20,000” wherever the said figure occurred in section 5 of the Act. The schedule to the Act was also substituted and the amended schedule read as follows: THE SCHEDULE (See section 5) Rate of Building tax Capital value Rate of tax 1. Where the Capital value of a building is Rs.75,000 or less Nil 2. Where the capital value of a building exceeds Rs.75,000/- (a) on the first Rs.25,000 of such excess 1 per cent (b) on the next Rs.25,000 of such excess 2 per cent (c) on the next Rs.50,000 of such excess 3 per cent (d) on the next Rs.50,000 of such excess 4 per cent (e) on the next Rs.1,00,000 of such excess 5 per cent (f) on the next Rs.1,00,000 of such excess 7 per cent (g) on the balance 10 per cent” W.A.No.1570 of 2006 -:9:- 11. Sections 5(1) and 5(2) of the Kerala Building Tax Act, 1975 were substituted by Act 3 of 1992 with effect from 10.2.1992. Sections 5(1) and 5(2) of the Act as it stood in force with effect from 10.2.1992 read as follows: “5. Charge of building tax.-(1) Subject to the other provisions contained in this Act, there shall be charged a tax (hereinafter referred to as “building tax”) based on the plinth area at the rate specified in the Schedule on every building the construction of which is completed on or after the appointed day.” “5.(2) In the case of any building the construction of which is completed prior to the appointed day, the assessee shall be liable to pay the building tax as if the Kerala Building Tax (Amendment) Act, 1992 has not come into force, provided, however, that if the assessment is not initiated or completed in such cases before the appointed day, the assessee may by application in writing addressed to the assessing authority opt to be governed by the provisions in sub-section (1) within such period as the Government may specify in this behalf and thereupon the assessee shall be liable to pay the building tax as if the construction of the building is completed on or after the appointed day.” (emphasis supplied) By the said amendment, the schedule to the Kerala Building Tax Act, 1975 was also substituted and the amended schedule reads as follows: THE SCHEDULE (See section 5) W.A.No.1570 of 2006 -:10:- Rate of Building tax ------------------------------------------------------------- - Plinth Area Panchayat Spl.Grade Corporation (Rupees) Panchayat/ (Rupees) Municipalities (Rupees) ------------------------------------------------------------- - (1) (2) (3) (4) ------------------------------------------------------------- -Residential Building On the first 75 square metres Nil Nil Nil Above 75 square metres but not exceeding 100 square metres- (i) In the case of buildings thatched by grass or leaves Nil Nil Nil (ii) In other cases 250 450 675 Above 100 square metres but not exceeding 150 square metres 500 900 1,350 Above 150 square metres but not exceeding 200 square metres 1,000 1,800 2,700 Above 200 square metres but not exceeding 250 square metres 2,000 3,600 5,400 Exceeding 250 square metres 2,000 plus 3,600 plus 5,400 plus Rs.400 Rs.800 Rs.1000 for every for every for every additional additional additional 10 square 10 square 10 square metres metres metres Other Buildings: On the first 50 square metres 250 500 1,000 About 50 square metres but not exceeding 75 square metres 500 1,000 2,000 About 75 square metres but not exceeding 100 square metres 750 1,500 3,000 About 100 square metres but not exceeding 150 square metres 1,500 3,000 6,000 About 150 square metres but not exceeding 200 square metres 3,000 6,000 12,000 About 200 square metres but not W.A.No.1570 of 2006 -:11:- exceeding 250 square metres 6,000 12,000 18,000 Exceeding 250 square metres 6,000 12,000 18,000 plus plus plus Rs.600 Rs.1200 Rs.1500 for every for every for every additional additional additional 10 square 10 square 10 square metres metres metres Note:-(1) In the case of buildings referred to in the Explanation 2 to clause (c) of section 2, the rate of building tax shall be increased by 10%. (2) In the case of buildings certified by a competent authority such as Nirmithi Kendras and the like as may be specified by Governemnt in this behalf to be low cost residential building, the rate of building tax shall be reduced by 25%.” 12. Section 5(2) was again amended with effect from 1.4.1993 by the Kerala Building Tax (Amendment) Act, 1993 (Act 13 of 1993) and section 5(2) as amended reads as follows: “5.(2) In the case of any building, the construction of which is completed prior to the appointed day but the assessment of which has not been initiated or completed or against which appeal or revision has been filed, building tax shall be assessed on the basis of the plinth area at the rate specified in the Schedule.” (emphasis supplied) 13. A Division Bench of this Court in Shirly v. State of Kerala (2006 (2) KLT 306) considered the impact of the amendments noticed above and held that the law prevailing on the date of completion of the construction of the building has to be W.A.No.1570 of 2006 -:12:- applied to determine the tax payable under the Act. The petitioner in that case had not opted to be governed by sub-section (2) of section 5 of the Act as amended with effect from 10.2.1992. The Division Bench of this Court, therefore, held that even after the 1992 amendment her building ought to have been assessed applying by the unamended provisions of section 5 of the Act. The Division Bench held that though the construction of the building was completed in the year 1981 no assessment order had been passed till 20.8.1993 due to the inaction on the part of the assessing authority and therefore, the petitioner cannot be held liable to pay tax as per the amended provisions. The Division Bench also noticed that though under sub-section (2) of section 5 as amended with effect from 10.2.1992, the assessee had an option to be governed by the plinth area of the building for the purpose of assessment of building tax, by Act 13 of 1993 the opportunity of exercising such an option was taken away and therefore sub-section (2) of section 5 of the Kerala Building Tax Act, 1975, as amended with effect from 1.4.1993, which obliges the owner of a building, the construction of which is completed prior to the appointed day (10-2-1992), to pay building tax assessed on plinth area basis instead of the building tax W.A.No.1570 of 2006 -:13:- determined in accordance with the capital value of the building is arbitrary and unconstitutional. The Division Bench held that the assessee cannot be penalised by levying tax on the basis of plinth area, if the building is one constructed prior to 1.4.1993. It is brought to our notice that the said judgment has become final. However, Sub-section (2) of Section 5 as amended with effect from 10.2.1992 enabled the assessee to opt to be governed by the plinth area of the building. 14. Though in the case on hand, the original assessment order passed on 25.3.1991 was based on the capital value determined in accordance with section 6 of the Act, the revised assessment order passed on 25.10.1995 was under section 5(1) read with section 5(2) of the Act. The building in question is situated within the local limits of Mananthavady Grama Panchayat. As per section 5(2) of the Kerala Building Tax Act as amended with effect from 10-2-1992, the building being one situated in a grama panchayat, the maximum amount of building tax that could have been levied on the building, each floor of which has an area of only 178.75 sq. metres, was only Rs.6,000/-. The parties have no case that the petitioner or her son had not opted to be governed by the W.A.No.1570 of 2006 -:14:- plinth area of the building and therefore notwithstanding the declaration of law by this Court in Shirly v. State of Kerala (supra) the assessment made on plinth area basis cannot be said to be illegal. The respondents have also no case that the building tax was wrongly computed even going by the plinth area of the respective floors of the building. Then the only question is whether Ext.P5 order issued by the Tahsildar pursuant to the directions issued by the Accountant General is sustainable in law having regard to the provisions contained in Section 15 of the Act. 15. Section 15 of the Kerala Building Tax Act, 1975 reads as follows: “15. Rectification of mistakes:- (1) The appellate authority or the revisional authority may, at any time within three years from the date of an order passed by it on appeal or revision, as the case may be, and the assessing authority may, at any time within three years from the date of any assessment or order passed by it, on its own motion, rectify any mistake apparent from the record of the appeal, revision, assessment or order, as the case may be, and shall, within the like period, rectify any such mistake which has been brought to its notice by an assessee. Provided that no such rectification shall be made which has the effect of enhancing an assessment or reducing a refund unless the assessee has been given a reasonable opportunity of being heard in the matter. W.A.No.1570 of 2006 -:15:- (2) Where any such rectification has the effect of reducing the assessment, the assessing authority shall make any refund which may be due to such assessee. (3) Where any such rectification has the effect of enhancing the assessment or reducing a refund, the assessing authority shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable; and such notice of demand shall be deemed to be issued under Section 10 and the provisions of this Act shall apply accordingly.” 16. The scope and content of Section 15 of the Act was considered by a Division Bench of this Court in Kurian George v. Tahsildar (supra). After a survey of the case law on the point, the Division Bench held as follows: “17. The following propositions of law emerge out of the above decisions: (1) Subject to the provision of period of limitation prescribed by the relevant statute, a mistake apparent from the record can be rectified by the competent authority named therein; (2) Usually, the following mistakes are considered to be “mistakes apparent from the record”: (a) Arithmetical error (b) Clerical error (c) Slip or inadvertent omission in an order or judgment; W.A.No.1570 of 2006 -:16:- (d) If the later enactment having retrospective operation enables an authority to modify or alter the original assessment order; and (e) Where in the earlier assessment order no valid principle of law was applied. (3) An authority has no jurisdiction to rectify a mistake, if- (a) the authority has passed orders by taking one of the alternative views, when two views are possible; (b) the authority has adopted one of the alternative methods available for assessment of tax according to law and later finds that more amount of tax could be obtained by adopting the alternative method; (c) a mistake has to be discovered by a long drawn process of reasoning or examining arguments on points of law and on facts or when further evidence is required to be adduced to rectify the mistake; (4) Re-opening or review of an assessment order is not permissible if the relevant statute does not confer such powers on an authority; (5) Taxing authority is a quasi-judicial authority. Hence no higher administrative authority or even appellate authority without hearing the affected party or in the absence of an appeal can give direction to the assessing authority to pass orders in one way or the other. (6) A writ is maintainable even at the notice stage, where threat of prejudicial action is wholly without jurisdiction. W.A.No.1570 of 2006 -:17:- (7) An order or direction under Art.226 of the Constitution of India can be issued by the High Court prohibiting an authority acting without jurisdiction from continuing such action in spite of existence of such alternative remedies as appeals and revisions.” (emphasis supplied) The Division Bench thereafter proceeded to examine the facts of that case and noticed that in that case the assessment order was sought to be rectified on the basis of the report of the auditor who had opined that an alternative method should have been adopted instead of the one adopted by the assessing authority in levying tax. The Division Bench held that the advice of the auditor cannot be a ground to re-open the assessment. The relevant portion of the judgment dealing with that aspect of the matter is extracted below: “18. In the light of the aforesaid principles of law, it is found that the notices issued under S.15 of the Act in O.P.No.10901 of 1990 suffer the following vices: The original assessment was made in accordance with the provisions in sub-section (1) of S.6 of the Act. By a later notice, the assessing authority turned round and sought to assess tax by adopting the method prescribed in sub-section (2) of S.6 of the Act on the ground that the latter method would yield more tax and the earlier method adopted was a mistake. What is more, the mistake was not found by the assessing authority. It was sought to be rectified on the basis of a report of the auditor who found that the alternative method W.A.No.1570 of 2006 -:18:- should have been adopted instead of the one adopted by the assessing authority in levying the tax. That cannot be permitted. The mistake pointed out by the auditor