Absence of Formal Demand Notice for Property Tax Does not Let off Assessee's Obligation to Pay: Kerala HC [Read Order]

The Kerala High Court ruled that the assessee is still obligated to pay property taxes even if there isn't a formal demand notice for them while the case is pending.

The Division Bench, which consists of Justices A.K. Jayasankaran Nambiar and P.M. Manoj, stated that the assessee bears the responsibility for paying the tax after it is assessed. In the event that the assessee continues to pay the tax based on the assessment, the Corporation's failure to issue a demand notice during a period when the assessee chose not to pay the tax due to ongoing litigation between the parties, and the lack of an order halting the demand for such tax, cannot be a reason to stop the Corporation from collecting the tax amounts subsequently.

The issue in this case concerned Vinu Koshy Abraham, the appellant/assessee, and his obligation to pay property taxes for the unauthorized construction and use of areas designated as a parking lot and recreational area in the building's approved plan, which served as the foundation for the construction.

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VINU KOSHY ABRAHAMThe main complaint in the writ petition concerned the respondent/corporation's demand for property tax for the years 2009–10 through 2021–22. The assessee refused to pay the tax dues for the disputed areas, claiming that the main dispute between the parties was still pending litigation.

The assessee was released from the requirement to pay penal interest on the property tax debts after the Single Judge observed that the Corporation had failed to issue official demand notifications. In order to resolve the writ petition, the contested demand notices were quashed, and the assessee was instructed to pay the tax as requested—without penal interest, but with simple interest at the rate of 12% annually from the due dates of payment for each fiscal year.

The assessee's primary argument was that the Single Judge erred in approving the property tax demand made through notices that were sent out outside of the statutory timeframes specified in Section 539 of the Kerala Municipality Act.

The bench noted that it is also undeniable that the Corporation did not issue a formal demand notice for property tax in relation to the area in question—that is, the part of the building designated as a recreational area and parking lot under the approved plan—because of the ongoing legal dispute between the Corporation and the assessee.

According to the bench, the assessee will not be permitted to forego paying the property tax that was otherwise due for the building in line with the approved plan, for which he had already received an occupancy certificate, and for which he actually occupied the space.

The panel held that "the denial of penal interest, which is due from the assessee to the Corporation, can only result from the non-issuance of a formal demand notice seeking recovery of the property tax dues in respect of the disputed areas." The part of the single judge's ruling that ordered the assessee to pay interest at a rate of 12% annually was removed by the bench. The bench upheld the Single Judge's conclusions in light of the aforementioned.

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