Retrospective Tax Notices issued under KMC Act not Valid: Calcutta HC Upholds KMC Amendment on Property Tax Revaluation [Read Order]

The Calcutta High Court upheld the constitutional validity of Section 232B and the proviso to Section 180(2) of the Kolkata Municipal Corporation Act, 1980, while setting aside specific retrospective tax notices issued by the Kolkata Municipal Corporation(KMC) to a property owner.

The writ petition was filed by the owner of a commercial premises, Indian City Properties Ltd., at Brabourne Road, challenging a notice dated January 8, 2024, and thirteen other notices dated January 4, 2024. The KMC had issued these notices proposing to retrospectively revise the annual valuation of the property from 2005–2006 to 2022–2023.

The petitioner contended that the amendment acts, particularly Section 232B and the new proviso to Section 180(2), were ultra vires Articles 14, 19, and 300A of the Constitution as they purportedly empowered the authorities to impose indefinite retrospective liability and unguided revisionary powers, effectively nullifying the safeguards laid down by the Court in Sahujain Charitable Society v. KMC.

The Division Bench of Justice Gaurang Kanth examined the legislative history, noting the transition from the Annual Rateable Value (ARV) system to the Unit Area Assessment (UAA) system in 2017. The Court observed that Section 232B was inserted as a transitional and saving provision to ensure continuity for assessments relating to periods prior to the UAA regime.

It was held that the provision does not independently confer an unfettered power to reopen past assessments indefinitely and does not violate the principle established in Sahujain Charitable Society. The Court clarified that for the period prior to June 9, 2023, the law stood subject to the limitations interpreted in earlier judgments, and the extended six-year limitation introduced by the 2022 Amendment operates prospectively.

The issue regarding the proviso to Section 180(2), which mandates that revisions ordinarily be made within six years but excludes this limit in cases of non-filing of returns or suppression of facts, the Court held that the provision operates prospectively from June 9, 2023. It rejected the argument that the use of the word "ordinarily" made the provision vague, holding that the exception was clearly circumscribed by objectively verifiable conditions.

The Court concluded that the provisions did not amount to an unconstitutional legislative overruling of judicial decisions and were constitutionally valid. The Court found that the specific notices dated January 4 and 8, 2024, which sought to undertake retrospective revaluations for periods prior to the commencement of the new provisions and beyond the limitations previously recognized, were unsustainable.

While allowing the writ petition, the court set aside the thirteen notices dated 04.01.2024 issued in relation to the retrospective revaluation of Premises No. 25, Brabourne Road (Biplabi Trailokya Maharaj Sarani), Kolkata-700001 and it clarified that the KMC was at liberty to initiate fresh proceedings strictly in accordance with the law and the limitations affirmed in the judgment.

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