Municipality cannot retain excess tax without the authority of law: Calcutta HC Quashes Retrospective Property Tax Enhancement [Read Order]
The Court ruled that municipal authorities cannot impose fiscal liabilities based on undisclosed administrative policies or "system errors" without following the statutory assessment procedure under the KMC Act
The Calcutta High Court has set aside the enhancement of Annual Valuation of a property by the Kolkata Municipal Corporation (KMC), holding that the revision was illegal, arbitrary, and violative of the Constitution. The Court ruled that the KMC acted without the authority of law by retrospectively enhancing valuation based on an undisclosed "city-wide policy" rather than following the individual assessment procedure mandated by the Kolkata Municipal Corporation Act, 1980.
Popat and Kotecha Property, the petitioner, a lessee of a commercialproperty, approached the Court challenging the enhancement of the property's Annual Valuation from Rs. 20,13,900/- to Rs. 22,15,290/- with retrospective effect from the 4th quarter of 2016-17. The petitioner discovered this enhancement only upon checking the KMC website in October 2022. The KMC admitted that the enhancement was carried out through a centralised computer system pursuant to an administrative decision to grant standardised increases (10% to 30%) to properties based on the age of their last assessment.
Justice Rai Chattopadhyay observed that the KMC failed to produce any resolution, circular, or statutory instrument authorising this "city-wide policy." The Court emphasised that under Article 265 of the Constitution, no tax can be levied or collected except by authority of law. It held that an administrative decision or internal policy cannot create a tax burden or alter the taxable base without a clear statutory source.
The judgment highlighted that the respondent's stance was riddled with inconsistencies. The KMC initially cancelled the bills citing a "system error" but later attempted to justify the enhancement in their affidavit as part of a policy decision. The Court noted that the KMC could not explain the basis for the classification of properties or the percentages chosen for enhancement, rendering the action arbitrary under Article 14 of the Constitution.
Furthermore, the Court found a blatant violation of the principles of natural justice. The petitioner was not served any notice, granted an opportunity to file objections, or given a hearing before the valuation was enhanced. The Court reiterated that the statutory safeguards under the KMC Act are mandatory and cannot be bypassed by computer-generated demands.
The Court quashed the enhanced valuation and the supplementary bills. It directed the KMC to refund the excess amount of Rs. 1,97,092/- retained in the suspense account along with interest at 18% per annum, applying the principle that the Municipality cannot retain excess tax without the authority of law.
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