(Prayer: Second Appeal filed under Section 100 of Civil Procedure Code, against the judgment and decree of the learned First Additional Sub Court, Nagercoil dated 26.07.2001 and made in A.S.No.12 of 2000 confirmed the judgment and decree made by the learned Principal District Munsif, Nagercoil, dated 20.08.1998 in O.S.No.409 of 1996.)
1. The plaintiff in the suit in O.S.No.409 of 1996 before the Principal District Munsif Court, Nagercoil, is the appellant in the above Second Appeal.
2. The appellant / plaintiff is a Trust and filed the suit for declaration that the assessment of property tax from the assessment year 01.10.1988 and the notice dated 08.01.1990 sent by the respondent / defendant in respect of the plaintiff's building bearing Door No.33/2-66F of Kottar Ilangadai Muslim Samuthaya Trust, are illegal.
3. The case of the appellant is that the appellant trust constructed a Thirumanamandapam in a property belonged to the trust and that the defendant municipality assigned door number. It is the specific case of the appellant / plaintiff that the respondent / defendant municipality was levying tax for the building only at the rate of Rs.147/- per half year for the assessment year from 1986-1987. Though upto the second half year 1988-1989 the property tax was assessed at the rate of Rs.154.40, suddenly the respondent / defendant municipality levied tax at the rate of Rs.18,231.90 per half year from 01.10.1988 and sent a demand notice vide No.17840. The respondent / defendant also sent the notice dated 08.01.1990 to prosecute the appellant / plaintiff and demanded a sum of Rs.60,732/- for three half years of assessment. Since the respondent / defendant municipality did not issue any notice before the assessment and the notice of demand was bereft of particulars, the appellant / plaintiff filed the suit on the premise that the demand notice without assessment of property tax after due notice to the plaintiff trust, is illegal.
4. The suit was contested by the respondent / defendant municipality denying all the averments in the plaint. According to the respondent / defendant, the suit is not maintainable as the appellant / plaintiff has sufficient opportunity to file a revision and the appeal against the assessment made by the respondent / defendant. The respondent / defendant contended that they have followed the procedure prescribed in the provisions of Tamil Nadu District Municipalities Act, 1920, and that therefore, there is no illegality in the order of assessment or demand of property tax from the appellant / plaintiff. Since the appellant / plaintiff can only challenge the assessment before the Tax Appellate Committee, the respondent / defendant contended that the suit is not maintainable.
5. The trial Court after relying upon document Ex.A4 which is only a demand notice calling upon the appellant / plaintiff to pay a sum of Rs.18,231.80, found that the contentions of the plaintiff trust relating to the income from the Kalyanamandapam is not acceptable and that there is no illegality in enhancing the tax from Rs.145.50 per half year to Rs.18,231.90. The trial Court also relied upon the working sheet filed by the respondent / defendant and justified that the property tax has been determined only on the basis of working sheet and that there is no scope for reduction of tax. The trial Court also found that the appellant / plaintiff ought to have filed a revision or appeal as contemplated under the provisions of Tamil Nadu District Municipalities Act, 1920 and ultimately dismissed the suit also on the ground that the suit filed by the appellant / plaintiff for reduction of property tax is not maintainable without an appeal or revision as provided under the provisions of the Act. Aggrieved by the judgment and decree of the trial Court dismissing the appellant's / plaintiff's suit, the appellant / plaintiff filed an appeal in A.S.No.12 of 2000 on the file of the First Additional Sub Court, Nagercoil. The lower Appellate Court also was of the opinion that the contention of the appellant / plaintiff that he is liable to pay only a lesser amount as property tax mainly on the ground that the facts and figures found in the working sheet produced by the Revenue Officer of the Municipality cannot be challenged. The appellant / plaintiff went further that the value adopted by the respondent / defendant, as seen from the working sheet, is proper and that the representation of the appellant / plaintiff for revision of tax or for reduction of tax filed beyond the limitation cannot be considered. Since the suit was filed for declaration that the assessment is wholly illegal, the lower appellate Court also expressed its view that the quantum of property tax determined by the municipality cannot be reduced in the present case. Aggrieved by the concurrent judgment of the Courts below in dismissing the appellant's / plaintiff's suit, the appellant / plaintiff has preferred the above second appeal.
6. Though the appellant / plaintiff has raised few substantial questions of law in the memorandum of grounds, the learned Senior Counsel for the appellant / plaintiff framed additional questions of law and after serving to the learned counsel for the respondent municipality, the learned Senior Counsel for the appellant / plaintiff sought permission of this Court to argue the second appeal on the additional substantial questions of law. Since the respondent / defendant municipality had sufficient opportunity and the learned counsel for the respondent has no objection for addressing the additional substantial questions of law before this Court, I am inclined to hear the second appeal on the following questions of law:
1. Whether the revision of assessment of property tax under Exhibit A4 is valid in the absence of special notice as required to be issued under proviso to Rule 9 of Schedule IV of Taxation and Finance Rules framed under the Tamil Nadu District Municipalities Act, 1920?
2. Whether the revision of assessment of property tax issued under Exhibit A4 is in conformity with the procedure contemplated under Section 4 of the Tamil Nadu Building (Lease and Rent Control) Act, 1960?
3. Whether the calculation of property tax in respect of large extent of land in par with the building is in conformity with law?
4. Whether the judgment of the Lower Appellate Court is vitiated for not framing the point for determination as mandated under Order 41 Rule 31 of C.P.C.?
7. In this case, it is not in dispute that Ex.A4 is only a demand notice addressed to the appellant / plaintiff, demanding a sum of Rs.18,231.90 as property tax for the first half year of 1989-90. Before issuing the demand notice, there is not even an assessment of tax as required in law. D.W.1, who was examined on behalf of the defendant, has categorically admitted in his evidence that no notice was issued to the appellant / plaintiff before issuing the demand notice under Ex.A4. For the same building, the tax was only Rs.154.40 till the previous assessment year i.e., till the second half year of 1988-89 which is evident from document Ex.A3. Schedule IV of Tamil Nadu District Municipalities Act, 1920, gave as Taxation and Finance Rules prescribed specific procedure for the assessment of property tax. Rule 4 contemplates reasonable opportunity to the assessee before any change in the assessment is resorted to. Rule 6, provided for determination of the value of any land or building by the Executive Authority for the purpose of property tax. The revision of assessment once in five years by the Executive Authority is contemplated under Rule 6. Rule 9 reads as follows:
9. When assessment books have been prepared for the first time and whenever a general revision of such books has been completed, the [executive authority] shall give public notice stating that revision petitions will be considered if they reach the municipal office within a period of sixty days from the date of such notice in the case of the Government, a railway administration or a company, and of thirty days from the said date in other cases. The notice shall be affixed to the notice board of the municipal office and on the same day be published in the municipality by beat of drum:
Provided that in every case where there is an enhancement in the assessment, the executive authority shall also cause intimation thereof to be given by a special notice to be served on the owner or occupier of the property concerned:
Provided further that, in every case where a special notice is required to be served on the owner or occupier under the first proviso, the period of sixty days and thirty days referred to in this rule shall be calculated from the date of service of such special notice.
8. From the reading of the rules found in Schedule IV, it can be seen that an assessment should precede the demand for property tax. If there is any enhancement in the tax, the Executive Authority is required to give a special notice / show cause notice. Since rules 6 and 9 are only in compliance of principles of natural justice, it has to be held that in any case of revision or enhancement of property tax by the Executive Authority, it is necessary that the assessee is entitled to a show cause notice. Further, it is not possible to the assessee to submit his reply or objection unless the basic facts which are the foundation for the revision of tax is made known to the assessee. Hence, even the notice that is contemplated under Rule 9 should specify or contain the particulars which are the basis for the enhancement of property tax. From the reading of Rules 6 or 9, it is very clear that a revision of tax involving enhancement of tax cannot be done without issuing a notice informing the assessee about the facts and figures which are the basis for the proposed revision.
9. The learned Senior Counsel for the appellant / plaintiff relied upon the judgment of this Court in the case of Keelakarai Tax Payers Association v. Keelakarai Town Panchayat reported in (1990) 1 M.L.J., 384, following the judgment of a Division Bench of this Court in a Writ Appeal in W.A.No.222 of 1989, dated 15.03.1989.
10. Following the judgment reported in (1990) 1 MLJ 384, another Division Bench of this Court in the case of Dindigul Anna District Tax Payers Sangam represented by its President, M.V.R.A.Soundararajan v. Government of Tamil Nadu represented by its Secretary to Government, Municipal Administration and Water Supply Department and another, reported in 1995 II M.L.J. 43, has held as follows:
The ratio of the decisions of this Court referred above is directly applicable to the facts of the present cases. Rule 9 deals with general revision or preparation of assessment books for the first time. The first proviso to Rule 9 applies to a case, where there is an enhancement in the assessment. Even in the case of general revision if there is no enhancement of assessment, there is no necessity to invoke the proviso. However, whenever there is an enhancement in the assessment pursuant to a general revision, it is the duty of the executive authority to issue a special notice to the taxpayer as provided under the proviso. As already pointed out in W.A. No. 222 of 1989, judgment dated 15.3.1989 the Division Bench of this Court has held that notice informing the assessee of the enhancement of tax shall contain reasons for increase and unless the reasons are set out in the notice, it cannot be said that proper opportunity is given to the assessee to state his objections against the enhancement of assessment. In view of the above legal position, we are of the view that the special notices issued by the executive authorities under Rule 9 informing the assessees about the enhancement in the assessment shall contain reasons for the increase and if the reasons for the increase in the assessment are not given in the special notice, the assessee may not know on what ground the enhancement has been made and consequently he cannot be able to put forward his objections specifically and effectively.
11. The learned Senior Counsel for the appellant / plaintiff further relied upon another judgment of this Court in the case of Shanmuga Nadar v. The Corporation of Madurai by its Commissioner reported in 1980 (2) MLJ 140 wherein it has been held that a suit to set aside the assessment cannot be dismissed merely on the ground that alternative remedy is available, if the assessment of property tax does not in substance and in effect comply with the provisions of the Act. The learned Senior Counsel then relied upon another judgment of this Court in the case of Sanjai Gupta v. The Commissioner, Corporation of Chennai, Ripon Buildings, Chennai 600 003 reported in 2009 (2) CTC 465 wherein a Division Bench of this Court has held that the assessment without considering the objection of the assessee before revision of tax is illegal. A learned Single Judge of this Court in the judgment in Mangayarkarasi v. The Kumbakonam Municipality, rep. by its Executive Authority, The Commissioner, Dr.Murthy Salai, Kumbakonam Munsif, Kumbakonam Town reported in 2009 (5) CTC 220 has followed the judgment cited above and held as follows:
14. In the instant case the following vital points have been raised on the side of the appellant / plaintiff. The first and foremost vital point is that the revised tax has not been made in accordance with the provision of Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. It is an everlasting principle of law that tax has to be revised only as per the provision of Section 4 of the said Act and further as per D.O. Lr.No.60572/R1/98, dated 3.9.1998, the Government of Tamil Nadu has categorically stated that working sheet contain details of property and calculation should also be sent along with special notice. In the instant case as rightly pointed out on the side of the appellant / plaintiff, no working sheet has been annexed with Exs.A4 to A6. In fact this Court has closely perused Exs.A4 to A6, wherein it has been simply stated that the plaintiff should pay the revised tax. Therefore, the mode of calculation of revised tax has not at all been stated in Exs.A4 to A6 and in short working sheet as per the said D.O. letter, has not been annexed with. Therefore, the first contention urged on the side of the appellant / plaintiff is really tenable.
12. When we consider the facts of the present case in the light of the relevant rules found in Schedule IV of the Tamil Nadu District Municipalities Act, 1920 and the precedents above referred to, the demand notice under Ex.A4 is illegal. The demand notice was issued under Ex.A4 even before an assessment and this fact is admitted. From the reading of the relevant rules, I am of the view that whenever the Municipality wants to enhance the tax either on account of the general revision or on account of alteration of existing building, a show cause notice is required to be issued informing the assessee without any ambiguity about the basic facts and figures which are proposed to be taken for the proposed revision or enhancement. Only thereafter, there can be an assessment of property tax. It is only after an assessment of property tax following the principles of natural justice, a demand notice can be issued. In the present case, the demand notice under Ex.A4 has been issued even before an assessment or a show cause notice to the appellant. In such circumstances, I have no hesitation to hold that the demand notice under Ex.A4 is liable to be set aside. Hence, I have no hesitation to answer the first question of law framed in this second appeal in favour of the appellant by stating that revision of assessment of property tax involving enhancement of tax cannot be valid, in the absence of any show cause notice to the assessee, as per proviso to Rule 9 of Schedule IV of Taxation and Finance Rules framed under the Tamil Nadu District Municipalities Act, 1920. Before considering the second question of law, it is necessary to refer to the document filed by the respondent municipality as Ex.B1 before the trial Court. Ex.B1 is the register containing the list of property by which the tax requires revision. On the defendant side, this document was marked to show that the working sheet attached to this document gives the particulars and details which form the basis for revision of tax. Even this working sheet was not served on the assessee. The working sheet found in Ex.B1 shows that the municipality has fixed the cost of construction at Rs.11,38,655.20. Apart from the cost of building, a sum of Rs.24,04,900/- has been added towards the value of the land for an extent of 2 acre 49 cents. It is to be seen that the total constructed area is less than 1/6th of the vacant land. However, for the entire vacant land, the value for the land is taken. It is conceded that for the purpose of arriving at the annual rental value, the municipality is required to follow Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. Under Section 4 of Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, a procedure and a formula is prescribed for the purpose of calculating the annual rental value and fair rent for any building. Depending upon the nature of enjoyment whether a building is commercial or residential, 12% or 9% of the cost of the land and building is taken as annual rental value. In addition to the total cost of the actual building and cost of land in which the building is constructed, a further extent of land upto 50% of the constructed area is also taken into account for the purpose of arriving at total value of the building. However, in the present case, the plinth area of construction is only 1421.92 square meter. However, the value of land has been arrived at by taking into account an extent of 9730.52 square meter approximately 2.40 acres. Hence, this calculation for arriving at the total cost of land and building is unacceptable, having regard to the specific formula that is prescribed. Hence, the second substantial question of law is answered to the effect that the demand notice for the property tax issued under Ex.A4 is not in conformity with the procedure contemplated under Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960.
13. As pointed out earlier, the calculation of property tax by taking into account the whole extent of land appurtenant to the building and owned by the landlord is not proper. When Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 is made applicable, the municipality is entitled to take into account only the land value of an extent upto 50% of the constructed area appurtenant to the building apart from the actual extent of land in which the building is located. Quiet contrary to the well known principle, the working sheet filed under Ex.B1 clearly reveals that the property tax calculated on the facts and figures found in the document under Ex.B1 is contrary to law and cannot be sustained. For the reasons above stated, the questions of law 2 and 3 are answered in favour of the appellants / plaintiffs by holding that the demand for property tax under Ex.A4 is not in conformity with the procedure contemplated under Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 and that the calculation of property tax by taking into account the entire land surrounding the building for the purpose of arriving at the annual rent value is not in conformity with the law or procedure. Since the appellate Court has failed to frame proper issues, the fourth question of law also is answered in favour of the appellant / plaintiff.
14. For all the reasons stated above, the judgment and decree of the Courts below in A.S.No.12 of 2000 on the file of the First Additional Sub Court, Nagercoil, confirming the judgment and decree of the Principal District Munsif Court, Nagercoil in O.S.No.409 of 1996 is set aside and the suit in O.S.No.409 of 1996 on the file of the Principal District Munsif Court, Nagercoil, is decreed as prayed for. Since the demand notice under Ex.A4 has been specifically held as illegal as the same is issued before an assessment of property tax after giving sufficient opportunity to the assessee, this Court is inclined to permit the respondent municipality to initiate proceedings for fresh assessment of property tax in respect of the building belonging to the appellant commencing from the first half year of 1989-90 after issuing a show cause notice and following the procedure as indicated above.
15. In the result, the second appeal is allowed in the above terms. However, there is no order as to costs.