Skip to content


M.G. Kulkarni Vs. State of Karnataka - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKarnataka High Court
Decided On
Case NumberW.P. No. 42106 of 1982 etc.
Judge
Reported inILR1985KAR2152; 1984(2)KarLJ341
ActsKarnataka Stamp Act, 1957 - Sections 45A(5); Constitution of India - Article 226
AppellantM.G. Kulkarni
RespondentState of Karnataka
Appellant AdvocateViswanath S. Shettar, S.R. Bhannurmath and ;Srinivasan, Advs.
Respondent AdvocateH.L. Dattu, HCGP
Excerpt:
(a) karnataka stamp act, 1957 (karnataka act no. 34 of 1957) - section 45a -- market value to be determined as per comparable sales method -- no general fixation for a city or locality on notional or hypothetical considerations -- market value set one in instrument not to be fanciful, notional or fictitious -- valuation of property is a question of fact -- consideration as specified in instrument, its passing etc hare no relevance to determination of market value and stamp duty.;notifications by the deputy commissioner stipulating site values and revising them purporting to be under section 45a of the karnataka stamp act, 1957 challenged on the ground they were without authority of law, opposed to section 45a and karnataka stamp (prevention of under valuation of instruments) rules, 1977.....orderputtaswamy, j.1. as the questions that arise for determination in these cases areinterconnected, i propose to dispose of them by a common order.2. as the petitioners, except those in writ petitions nos. 1838 of 1983 and 10061 to 10066 of 1984, have challenged one and the same notifications, i propose to deal them in one group first and then the other cases thereafter in one group. in the first batch reference to documents will be made to those produced by the petitioners in writ petitions nos. 14656 to 14661 of 1984 as if they are produced in all other cases also.3. the petitioners claim to have interest as owners, sellers or purchasers of different immovable properties situated in the city of davangere, chitradurga district. all of them claim to have executed or propose to execute.....
Judgment:
ORDER

Puttaswamy, J.

1. As the questions that arise for determination in these cases areinterconnected, I propose to dispose of them by a common order.

2. As the petitioners, except those in Writ Petitions Nos. 1838 of 1983 and 10061 to 10066 of 1984, have challenged one and the same notifications, I propose to deal them in one group first and then the other cases thereafter in one group. In the first batch reference to documents will be made to those produced by the petitioners in Writ Petitions Nos. 14656 to 14661 of 1984 as if they are produced in all other cases also.

3. The petitioners claim to have interest as owners, sellers or purchasers of different immovable properties situated in the City of Davangere, Chitradurga District. All of them claim to have executed or propose to execute instruments ofconveyance, exchange or gift as the case may be with reference to certain immovable properties situated in that city or its outskirts.

4. On 17-8-1981, the Deputy Commissioner, Chitradurga District, Chitradurga ('the DC') made an order (Annexure-D) stipulating the site values in the different localities of Davangere city to be effective for the years 1975-76 and 1976-77. Insuper session of the said order, the DC made another order or notification on 14-5-1982 (Annexure-E) purporting to be under Section 45A of the Karnataka Stamp Act of 1957(Karnataka Act 34 of 1957) ('the Act') stipulating the rates of sites as set out therein in the different localities of Davangere City. Insuper session of these two orders / notifications, the DC has finally issued Notification No. C.B.C.C.R. 11/82-83 dated 20 12-1982 (Annexure-F)purporting to be under Section 45A of the Act again revising the rates of sites value in Davangere city. In these Petitions under Article 226 of the Constitution, the petitioners have challenged the aforesaid notifications issued by the DC.

5. The petitioners have asserted that in their respective instruments they have specified the market value of the property covered by the instrument and had paid or propose to pay the requisite stamp duty under the Act. But, the Registering Officers ('Registrars') functioning under the Indian Registration Act, 1908 ('Registration Act') guided by the aforesaid notifications as binding on them, weredeclining to receive the instruments and register them in contravention of the provisions of the Registration Act and the Act. The petitioners have urged that the notifications and the one that is now in force was without the authority of law and opposed to Section 45A of the Act and the Karnataka Stamp (Prevention of Under Valuation of Instruments) Rules, 1977 ('the Rules') framed by Government to carry out the purposes and object of Section 45A of theAct. Lastly, the petitioners have urged that the power conferred on the Registrars by the Acts cannot be interfered by the DC.

6. In resisting these Writ Petitions, regretfully without filing their returns, the Respondents have urged that the notifications which have not been published in the Gazette are not notifications within the meaning of that termoccurring in the Karnataka General Clauses Act, 1809 ('General Clauses Act') and are only intended to be guides to the Registrars in the discharge of their statutory duties under Section 45A of the Act. On this premise, the Respondents have urged that these Petitions were not maintainable.

7. Sri V.S. Shettar, Learned Counsel for the petitioners has strenuously contended that the impugned notifications issued by the DC were wholly unauthorised and even if authorised were in contravention of Section 45-A of the Act.

8. Sri H. L. Dattu, Learned High Court Government Pleader appearing for the Respondents, in justifying the impugned notifications, has urged that they were notnotifications within the meaning of that term occurring in the General Clauses Act that operate against the petitioners and were only guides to the Registrars and they cannot, therefore, be challenged under Article 226 of theConstitution. As this later contention urged by Sri Dattu, goes to the root of the matter, I propose to examine the same first.

9. I will assume that the notifications issued by the DC have not been published in the Gazette and examine the objection of the Respondents on that basis only.

10. The very last notification that is now in force omitting the details of rates and localities reads thus :

In the first order, the DC has not invoked Section 45A or any other provision of the Act. But, in the other two notifications, the DC has expressly invoked Section 45A of the Act to make thorn.

11. The object with which the notifications have been made and issued even according to the respondents was to furnish a basis or a guide to the Registrars to exercise their power of making a reference under Section 45A of the Act. The possibility of the Registrars being solely guided by the notifications and declining to receive the documents and register them and in any event initiate proceedings on their basis and not on an examination of the requirement of Section 45A of the Act and the Rules, cannot at all be ruled out. In these circumstances, it is futile to contend that the notifications issued by the DC do not operate against the petitioners. Even assuming that the notifications issued by the DC do not immediately operate against the petitioners, they are bound to operate against them at some point of time and in any event after registration of their instruments. In this view, and otherwise also, the petitioners who are aggrieved by thenotifications can undoubtedly challenge them and maintain their petitions under Article 226 of the Constitution. I see no merit in the preliminary objection of the respondents and I reject the same. With this it is new necessary to examine the merits.

12. In all the three notifications what the DC had done was to fix 'a general market value' of the sites or land for each locality of Davangere City.

13. Section 45A was introduced by the Karnataka Stamp (Amendment) Act, 1975 (Karnataka Act 12 of 1975) ('the Amending Act'). Section 45A came into force in the cities of Bangalore,Hubli Dharwad, Mysore, Mangalore, Belgaum, Gulbarga, Bellary, Davangere, Bijapur, Shimoga and Bhadravathi from 1-5-1975 and its application to other places was left to be decided to the State Government (vide Section 1 of the Amending Act). The Amending Act while inserting Section 45A also amended various other provisions of the Act to carry out the purposes and object of Section 45A of the Act.

14. Section 45A of the Act, the true construction of which calls for examination in all these cases reads thus :

'45A. Instrument of conveyance etc., undervalued how to be dealt with-(1) the registering officer appointed under the Registration Act, 1908 (Central Act XVI of 1908) while registering any instrument of conveyance, exchange or gift has reason to believe that the market value of the property which is the subject matter of conveyance, exchange or gift has not been truly set forth in the instrument, he may, after registering such instrument, refer the same to the Deputy Commissioner for determination of the market value of such property and the proper duty payable thereon.

(2) On receipt of a reference under sub-section (1), the DeputyCommissioner shall after giving the parties a reasonable opportunity of being heard and after holding an inquiry in such manner as the StateGovernment may by rules prescribe, determine by order the market value of the property which is the subject matter of conveyance, exchange or gift and the duty payable thereon. The difference, if any, in the amount of duty shall be payable by the person liable to pay the duty.

(3) The Deputy Commissioner may, suo motu within two years from the date of registration of any instrument of conveyance, exchange or gift not already referred to him under sub-section (1), call for and examine the instrument for the purpose of satisfying himself as to the correctness of the market value of the property which is the subject matter of conveyanceexchange or gift, and the duty payable thereon and if after such examination he has reason to believe that the market value of such property has not been truly set forth in the instrument, he may determine by order the market value of such property and the duty payable thereon in accordance with the procedure provided for in sub-section (2). The difference, if any, in the amount of duty, shall be payable by the persons liable to pay the duty:

Provided that nothing in this sub-section shall apply to any instrument registered before the commencement of the Karnataka Stamp (Amendment Act, 1975.

(4) The order of the Deputy Commissioner under sub-section (2) or(3) shall be communicated to the person liable to pay the duty. A copyof every such order shall be sent to the registering officer concerned.

(5) Any person aggrieved by an order of the Deputy Commissioner under sub-section (2) or sub-section (3), may, prefer an appeal before the District Judge and all such appeals shall be preferred within such time and be heard and disposed of in such manner as the State Government may, by rules prescribe.

Explanation-For the purposes of this Act, market value of any property shall be estimated to be the price which in the opinion of the Deputy Commissioner or the appellate authority as the case may be, such property would have fetched or fetch, if sold in the open market on the date of execution of the instrument of conveyance, exchange or gift.'

The statement of objects and reasons appended to the bill that ultimately became the Amending Act reads thus :

'STATEMENT OF OBJECTS AND REASONS

It has been observed that there is wide spread under valuation of properties by persons who buy and sell properties in urban areas. A pilot study of 1052 cases carried out in Bangalore City showed that in nearly 70 per cent of thecases the valuation mentioned in the sale deed was less than half the market value computed objectively by the survey authorities. This means evasion of stamp duty as well as avoidance of registration charges. There is consequent loss of revenue to the State under both counts. The object of the Bill is to enable the Government to recover the right amount of stamp duty whereverunder valuation of property is noticed at the time of registration of the properties. Some consequentialamendments are also being made. For example, the present schedule of stamp duty rates is based upon the amount of consideration mentioned in thedocument. This basis is being changed to the market value. Likewise some other consequential changes havealso been proposed in the Bill.

To begin with the new measure will be given, effect to in the Cities having a population of more than oneLakh and the Government is taking the power to extend it to other urban areas in due course.'

The object of these amendments is to provide for a true statement of the market value of the property, payment of the requisite stamp duty, preventunder valuation of property and the consequent under payment of stamp duty under the Act.

15. The Act as amended and the Rules made thereunder, provide for stipulation of market value as on the date of the instrument is drawn and registered before the Registrar and the payment of proper stamp duty thereon to the State.

16. Section 45A applies to instruments of 'conveyance exchanges or gifts'. The term 'conveyance' has been defined in the Act (vide Section 2(l)(d)). But, the other two terms viz., 'exchange' and 'gifts' are not defined in the Act.

17. Whenever an instrument of conveyance, exchange or gift is presented for registration, the Registrar under the Registration Act and Section 45A of the Act, is first required to register the same in accordance with the formerenactment. If on such registration, such Registrar has reason to believe that the market value of the property of thatinstrument has not been truly set forth in that instrument and the consequent stamp duty has not been paid thereon, he is empowered to report the same to the Deputy Commissioner of the District. The Registrar is required to examine each instrument registered by him and then make his reference to the DC of the District in the form provided by the Rules. On receipt of reference the DC is empowered to initiate action in conformity with the Act and the Rules.

18. Section 45A(3) also empowers the DC to suo moto call for the instrument of conveyance exchange or gift registeredand satisfy himself with the correctness of the market value of the property and the stamp duty paid thereon and on such examination, if he is satisfied that there has been anunder valuation and consequent under payment of stamp duty, initiate further action thereon under the Act.

19. The term market value of the property has not been defined in the Act. But, the explanation to sub-section (5) of Section 45A of the Act really achieves or provides for that. This explanation declares that the market value of the property that is covered by the instrument shall be the price that would have fetched or fetch if sold in the open market as on the date of execution of that instrument. In reality and substance, this explanation brings in the concept of a willing purchaser and a willing buyer of that and that very property with all the advantages and disadvantages that very property possesses or enjoys on the date of the instrument. This is analogous to what is called as the comparable sales method in ascertaining the market value of a property acquired in Land Acquisition cases, which is considered as the best method to ascertain the market value of the acquired property. The Rules and in particular Rule 5 makes this position crystal clear. What emerges from this is that the market value that has to be stipulated in an instrument or to be determined must necessarily relate to that very property and there is nothing like a general or universal market value in the city or a part of the city that can bepredetermined by the DC. On this analysis itself, the notifications issued by the DC cannot be upheld.

20. In Raja Vyricherla Narayana Gajapatiraju - v. - The Revenue Divisional Officer, Vizagapatam, the Judicial Committee of the Privy Council dealing with a case of award of compensation to a land acquired under the Land Acquisition Act of 1894, the concept of market value thereto1. 66 Indian Appeals 104under Section 23 of that Act, in very felicitous language explained whether there is anything like a general market value for immovable properties in these words :

'It is perhaps desirable in this connection to say something about this expression 'the market price.' There is not in general any market for land in the sense in which one speaks of a market for shares or a market for sugar or any like commodity. The value of any such article at any particular time can readily be ascertained by the prices being obtained for similar articles in the market. In the case of land, its value in general can also be measured by a consideration of the prices that have been obtained in the pastfor land of similar quality and in similar positions, and this is what must be meant in general by 'the market value' in Section 23. But sometimes it happens that the land to be valued possesses some unusual, and it may be, unique features as regards its position or its potentialities. In such a case the arbitrator in determining its value will have no market value to guide him, and he will have to ascertain as best he may from the materials before him, what a willing vendor might reasonably expect to obtain from a willing purchaser, for the land in that particular position and with those particular potentialities. For it has been established by numerous authorities that the land is not to be valued merely by reference to the use to which it is being put at the time at which its value has to be determined (that time under the Indian Act being the date of the notification under Section 4, sub-section 1), but also by reference to the uses to which it is reasonably capable of being put in the future. No authority indeed is required for this proposition. It is a self evident one. No one can suppose in the case of land which is certain, or even likely, to be used in the immediate or reasonably near future for building purposes, but which at the valuation date is waste land or is being used for agricultural purposes, that the owner, however, willing a vendor, will be content to sell the land for its value as waste or agricultural land as the case may be. It is plain that, in ascertaining its value, the possibility of its being used for building purposes would have to be taken into account. It is equally plain, however, that the land must not be valued as though it had already been built upon, a proposition that is embodied in Section 24, sub-section 5, of the Act and is sometimes expressed by saying that it is the possibilities of the land and not its realised possibilities that must be taken into consideration.'

In The Special Land Acquisition Officer - v. - P. Veerabhadrappa, the Supreme Court again dealing with a case of determination of compensation under the Act or the analogous Act, approving the principles stated in Raja Vyricherla Narayana Gajapatiraju's case expressed thus :

'It is axiomatic that the best evidence to prove what a willing purchaser would pay for the land under acquisition would be the evidence of sales of comparable properties, proximate in time to the date of acquisition, similarly situate, and possessing the same or similar advantages and subject to the same or similar disadvantages. Market value is the price the property may fetch in the open market if sold by a willing seller unaffected by the special needs of a particular purchase.''

What emerges from these cases is that there is nothing like a general market value of immovable properties in a city or a locality and the same cannot be predetermined on any notional or hypothetical considerations and the market value of the particular property has necessarily to be fixed on a particular date with due regard to the factors enumerated in the statute. From this it follows that the general market value fixed by the DC which is not authorised by Section 45A of the Act or the Rules and in derogation of them, unnecessarily restricting the power of the Registering Officers as also his own determination to be made as and when a case arises before him, is without jurisdiction and illegal.

21. On the above discussion, it necessarily follows that the impugned notification of the DC is liable to be quashed. But, the quashing of the notification cannot be understood as in any way fettering the discretion of the registering officer or the DC to exercise their powers under the Act, which has necessarily to be examined and decided with due regard to the factors enumerated in the Act and the Rules.

22. With this, I now turn to Writ Petitions Nos. 1838 of 1983 and 10061 to 10066 of 1984 for which, it is necessary to notice the facts in these cases first.

23. Under a registered sale deed dated 13-10-1981, the petitioner in Writ Petition No. 1838 of 1983, a registered partnership firm, has purchased a building bearing Municipal Nos. 231 to 251 situated on Mysore Road in the City of Bangalore for a consideration of Rs. 8,25,116/- from its previous owner Smt. Indu Sindia. On the registration of the said document, the Registrar has made a reference to the Special Deputy Commissioner for Prevention of Under Valuation of Stamps, in Bangalore ('the DC, Bangalore') in aproforma prescribed by the Rules inter alia stating that the value of the property purchased by the petitioner was Rs.16,17,000/- as against the value of Rs. 8,25,116/-stipulated in the instrument and there wasunder valuation of market value of property to the extent of Rs. 9,91,884/-. On receipt of that reference the DC, Bangalore has issued a notice under Rule 4 of the Rules annexing a copy of that reference to the petitioner which is challenged principally on the ground that the Registrar in his reference to the DC, Bangalore, who also in his notice, had not even alleged that anything in excess of the stated consideration had been paid by the petitioner to its vendor and in the absence of such a statement, they were wholly unauthorised and illegal, which justify an interference at the very threshold by this Court.

24. Petitioners in Writ Petitions Nos. 10061 to 10066 of 1984 have purchased vacant sites in Bangalore City under different salt deeds in the year 1983 from aCooperative Society and on registering them the Registrar has made reference to the DC, Bangalore under Section 45A of the Act. On receipt of those references, the DC, Bangalore has issued the petitioners separate show cause notices in accordance with the Rules, which have been objected to by them before that authority, on diverse grounds. On a consideration of the objections filed by the petitioners in Writ Petitions Nos. 10061 and 10062 of 1984 the DC, Bangalore has made his provisional orders and not againstothers. But, all these petitioners without waiting for the passing of the respective provisional and final orders against them and challenging them in appeals under the Act and the Rules, have approached this Court challenging the show cause notices and provisional orders on the very ground noticed in Writ Petition No. 1838 of 1983.

25. Sri K. Srinivasan, Learned Counsel for the petitioners has contended that the references made by the Registrar and the show cause notices issued by the DC, Bangalore which did not even state that anything in excess of the stated consideration in the instruments had passed and thus there was a deliberateunder valuation of market value under Section 45A of the Act, that was analogous or in pari materia with Section 52(2) of the Indian Income Tax Act of 1961 ('IT Act') were without jurisdiction and illegal. In support of his contention, Sri Srinivasan has strongly relied on the ruling of the Supreme Court in K. P. Varghese - v. -Income Tax Officer, Ernakulam and another.

26. Sri Dattu, refuting the contention of Sri Srinivasan has urged that Section 52(2) of the IT Act and the principles underlying the same had no application.

27. The Act is really a taxation measure. The scheme and object of the Act is to collect proper stamp duty on instruments and other documents and in construing the provisions of the Act, this aspect should never be lost sight of by the Court.

28. The Act as amended by the Amending Act provides for a true statement of the market value of the property dealt in the instrument and payment of proper stamp duty thereon to the State. The market value to be stated in the instrument cannot be fanciful, notional or fictitious. The market value of the property to be specified must be the real market value as on the date of the instrument. When the3. : [1981]131ITR597(SC) parties to the instrument have properly stated the real mark et value of the property in the instrument, the stamp duty payable thereon is comparatively a simple affair and is merely arithmetical.

29. Whether there has been a proper valuation of a property and if so, whether the same has been properly set out in the instrument with reference to that very property which is the subject matter of the instrument presented for registration is essentially a question of fact. When there is a proper valuation, a correct statement thereto and payment of correct stamp duty thereon, no other question arises under the Act. But, when there isunder valuation which necessarily results in under payment of stamp duty, Section 45A empowers the Registrar to make a reference to the DC who is empowered to initiate proceedings, determine the proper valuation and recover the difference of stamp duty payable thereon under the Act.

30. The specification of proper stamp duty in the instrument and payment of proper stamp duty thereon, with which alone the Act is concerned, has no concern with the consideration specified in the instrument their payment ornonpayment between the parties to the instrument. The Act does not concern itself with the consideration paid or payable between the parties to the instrument. The source from which the consideration is paid or the source to which the consideration is paid or the person to whom it is paid, the object with which it is paid have no relevance to the determination of market value of the property and the stamp duty payable thereon under the Act. In the case of a gift of immovable property made out of love and affection only and not for any monetary consideration, the above position can hardly be doubted.

31. The scheme and object of the IT Act and the provisions made thereto are not analogous to the Act. Hence, there is no warrant to apply the provisions of that Act, the principles underlying them and the ruling of the Supreme Court in Varghese's case relied on by Sri Srinivasan. But, out of deference to Sri Srinivasan, his standing at the bar and his profound knowledge of tax laws, who went so far as to contend that the question was concluded by Varghese's case, I propose to examine the same in full.

32. In Varghese's case the facts in brief were these : Varghese an assessee under the IT Act purchased a house situated in Ernakulam in 1958 for a sum of Rs. 16,500/-. He sold the same on 25-12-1965 for the very sum purchased by him in 1938 to his daughter-in-law and his 5 children. For the relevant assessment year under the IT Act, Varghese did not include that amount as capital gains which was accepted by the ITO in completing his assessment against Varghese. But, later the ITOreopened that assessment fixed the fair market value of the property sold by Varghese at Rs.65,000/-and brought the difference of Rs. 48,500/- to capital gains under the IT Act, without disputing the truth and correctness of the said transaction, which was challenged by Varghese before the Kerala High Court in a Writ Petition, which was allowed by Isaacs, J.

33. But, in an appeal filed by the Revenue against the order of Isaacs, J., ultimately heard by a Full Bench of three Learned Judges, the majority did not agree with the view expressed by Isaacs, J and reversed that order which was challenged by the assessee before the Supreme Court, which reversed the decision of the Appellate Bench and restored the decision of Isaacs, J.

34. The decision of the Supreme Court in Varghese's case turned on the true scope and ambit of Section 52 of the IT Act and in particular sub-section (2) of that section introduced by the Amendment made by the Finance Act of 1964, which reads thus:

'(1) Where the person who acquires a capital asset from an assessee is directly or indirectly connected with the assessee and the Income Tax Officer has reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under Section 45, the full value of the consideration for the transfer shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be the fair market value of the capital asset on the date of the transfer.

(2) Without prejudice to the provisions of sup-section (1), if in the opinion of the Income-tax Officer the fair market value of a capital asset transferred by an assessee as on the date of the transfer exceeds the full value of the consideration declared by the assessee in respect of thetransfer of such capital asset by an amount of not less than fifteen per cent of the value declared, the full value of the consideration for such capital asset shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be its fair market value on the date of its transfer.'

On the construction of this Section, the Court expressed thus:

'13. Thus, it is not enough to attract the applicability of sub-section (2) that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the consideration declared in respect of the transfer by not less than 15% of the value so declared, but it is furthermore necessary that the full value of the consideration in respect of the transfer is understated or in other words, shown at a lesser figure than that actually received by the assessee. Sub-section (2) has no application in case of an honest and bona fide transaction where the consideration in respect of the transfer has been correctly declared or disclosed by the assessee, even if the condition of 15% difference between the fair market value of the capital asset as on the date of the transfer and the full value of the consideration declared by the assessee is satisfied. If therefore, the Revenue seeks to bring a case within sub-section (2), it must show not only that the fair market value of the capital asset as on the date of the transfer exceeds the full value of the consideration declared by the assessee by not less than 15% of the value so declared, but also that the consideration has been understated and the assessee has actually received more than what is declared by him. There are two distinct conditions which have to be satisfied before sub-section (2) can be invoked by the Revenue and the burden of showing that these two conditions aresatisfied rests on the revenue. It is for the Revenue to show that each of these two conditions is satisfied and the revenue cannot claim to have discharged this burden which lies upon it, by merely establishing that the fair market value of the capital asset as on the date of the transfer exceeds by 15% or more the full value of the consideration declared in respect of the transfer and the first condition is, therefore satisfied. The Revenue must go further and prove that the second condition is also satisfied. Merely by showing that the first condition is satisfied, the Revenue cannot ask the Court to presume that the second condition too is fulfilled, because even in a case where the first condition of 15% difference is satisfied, the transaction may be a perfectly honest and bona fide transaction and there may be nounderstatement of the consideration. Thefulfillment of the second condition has therefore to be established independently of the first condition and merely because the first condition is satisfied, no inference can necessarily follow that the second condition is also fulfilled. Each condition has got to be viewed and established independently before sub-section (2) can be invoked and the burden of doing so is clearly on the Revenue. It is a well settled , rule of law that the onus of establishing that the conditions of taxability arc fulfilled is always on the Revenue and the second condition being as much a condition of taxability as the first, the burden lies on the Revenue to show that there is understatement of the consideration and the second condition is fulfilled. Moreover, to throw the burden of showing that there is no understatement of the consideration on the assessee would be to cast an almost impossible burden upon him to establish a negative, namely, that he did not receive any consideration beyond that declared by him.'

The language of Section 52(2) of the IT Act, the scheme and object for which it is enacted, is totally different to Section 45A of the Act. The receipt of consideration that is very relevant to bring to tax under the IT Act, has no relevance to Section 45A of the Act. On this ground, as also other grounds noticed by me earlier, the principles enunciated in Varghese's case cannot be applied in construing Section 45A of the Act. In my considered opinion, the ratio in Varghese's case does not bear on the construction of Section 45A of the Act. If I were to apply the principles in Varghese's case, the result will be what I deprecated in Visvarama Hotels Limited and Others - v. - Anjuman-e- Imamia and Others in these words :

'13. A sentence in a ruling cannot be read in isolation and out of context. The principles of contextual interpretation familiar to every lawyer and Judge is applicable to understanding a principle or ratiodecidendi, if any enunciated in a ruling by the Supreme Court. As pointed out by Hegde, J. in H.H. MAHARAJADHIRAJA MADHAV RAO JIVAJI RAO SCINDIA BHADUR AND OTHERS ETC. - v. - UNION OF INDIA : [1971]3SCR9 'Judges are not oracles'. Everystatement in a case should be understood with due regard to the facts of the case, the true question that arose for determination and the answer furnished to that question or the ratiodecidendi or the principles enunciated, which alone will be the declaration of law or the statement of law of the ruling. A contention can neither he based or accepted solely on the basis of one sentence ; that too, out of context. Any such attempt may render the law of precedents to a mere syllogism in logic and may even yield astonishing results.'

On these principles also, I will not be justified in applying the ratio in Varghese's case.

35. In Varghese's case itself, the Court on some of the rules of construction of statutes that should guide a court has cautioned thus :

'The task of interpretation of a statutory enactment is not amechanical task. It is more than a mere reading of mathematical formula because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument for the expression of human thought and as pointed out by Lord Denning, it would be idle to expect every statutory provision to be 'drafted with divine prescience and perfect clarity.' We can do no better than repeat the famous words of Judge Learned Hand when he said ;'' it is true that the words used, even in their literal sense, are the primary and ordinarily the most reliable, source of interpreting the meaning of any writing; be it a statute, a contract or anything else. But, it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary ; but to remember that statutes always have some purpose on object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning.' We must not adopt a strictly literalinterpretation of Section 52 sub-section (2) but we must construe its language having regard to the object and purpose which the legislature had in view in enacting that provision and in the context of the setting in which it occurs. We cannot ignore the context and the collocation of the provisions in which Section 52 sub-section (2) appears, because, as pointed out by Judge Learned Hand in mostfelicitous language: '....the meaning of a sentence may be more than that of separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create.' Keeping these observations in mind we may now approach the construction of Section 52 sub-section (2).'

On these very principles, it would be wrong to apply the principles enunciated in Varghese's case to Section 45A of the Act.

36. On the foregoing discussion, I have no hesitation in holding that the principles enunciated in Varghese's case does not bear on the construction of Section 45A of the Act. For all these reasons, I see no merit in this contention of Sri Srinivasan and I reject the same.

37. As the only contention urged by Sri Srinivasan fails, these writ petitions are liable to be dismissed.

38. In the light of my above discussion, I make the following orders and directions :

(a) I quash the notification No. C.B.C.C.R. 11/82-83 dated 14-5-1982 (Annexure-F) issued by the Special Deputy Commissioner,Chitradurga.

(b) I declare that all other earlier notifications issued by the DC on the very subject cannot also be acted upon either by the DC or by any of his subordinates.

(c) But, notwithstanding the above declarations, the Registering Officers of instruments under the Indian Registration Act of 1908 and the DC are free to exercise their powers under and inaccordance with Section 45A of the Act and the Rules made for that purpose.

(d) I dismiss Writ Petitions Nos. 1838 of 1983, 10061 to 10066 of 1984 With the dismissal of these Writ Petitions and the termination of the interim orders, the Special Deputy Commissioner forDetection of Under valuation of Stamps, Bangalore is free to complete the proceedings against the petitioners from the stage they were interrupted by the interim orders made by this Court, inaccordance with law.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //