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Judgment
K. Sreedharan, J.—Petitioner is the owner of the building "Hotel Original", Beach road, Quilon. That building was constructed in the year 1981. He was served with notice u/s 7(3) of the Kerala Building Tax Act, hereinafter referred to as "the Act", calling upon him to file the returns. He did not comply with that notice. Thereupon assessing authority, namely the second Respondent, passed Exhibit P-1 order of assessment fixing the value of the building at Rs. 8,10,000. Petitioner was then called upon to pay a sum of Rs. 54,750 as tax. That order was challenged in appeal as provided by Section 11 of the Act. Third Respondent, the appellate authority, dismissed that appeal by Exhibit P-3 order. Petitioner took up the matter in revision before the third Respondent, the District Collector, without success. Against the order of the District Collector, Exhibit P-5, Petitioner preferred an application before Government. Government, by Exhibit P-6 order, informed the Petitioner that it has no power to entertain his application under the Act against the order passed by the third Respondent. Hence this Original petition.
A detailed counter-affidavit has been filed on behalf of the Respondents. The contentions taken therein are to the following effect:- The building in question is a multi-storeyed building, having five storeys. The contention of the Petitioner that second Respondent passed the best judgment assessment under Rule 9(1) of the Building Tax Act without observing any statutory duty is denied. Notice u/s 7(3) was served on the Petitioner on 23rd June 1983. He failed to submit a return in Form II. The assessing authority, therefore, resorted to the best judgment provision under Section9(5) of the Building Tax Act. The assessment was done by the Assistant Collector, who was also in charge of the post of Tahsildar. He personally verified and prepared the valuation report, estimating the value and arrived at capitalised value at Rs. 8,10,000. The details of valuation were recorded by the verification officer. The basis adopted by him was that prescribed by the P.W.D. Petitioner did not produce any document or record to prove his contention. The capital value of the building was arrived at by the assessing authority as per Section 6(4)(a) and (h) of the Act. The assessing authority under the Act is not bound to accept the cost of construction adopted by the authority for assessing the income tax and wealth tax. In paragraph 9 of the counter affidavit, it is averred:
The contention of the Petitioner that the assessment order passed by the Tahsildar is against the provisions of the Kerala Building Tax Act as the Tahsildar who made the best judgment assessment has got a duty to serve on the Petitioner his proposal calling for objections is denied. The best judgment assessment is made under Sub-section (5) of Section 9 of the Kerala Building Tax Act. That Sub-section does not contemplate issue of such a pre-assessment notice to the Assessee. So this contention has no statutory backing.
The annual value fixed by the local authority comes only to Rs. 24,000 whereas the capital value fixed by the assessing authority is Rs. 8,10,000. This difference itself justifies the assessing authority in having differed from the assessment of the local authority. Petitioner has exhausted all the remedies envisaged in the Kerala Building Tax Act. Hence the Petitioner has no cause of action to file this petition and the same has to be dismissed with costs.
The building in question put up by the Petitioner has been assessed by the Kollam Municipality. The annual value fixed by Municipality is Rs. 24,000. This fact is admitted by the Respondents in paragraph 13 of the Counter-affidavit. On the basis of the annual value fixed by the local authority, the capital value of the building comes to Rs. 2,40,000.
Section 6 of the Act lays down the method for determination of the capital value of the building. As per Clause (1), for determining capital value for the purpose of the Act, the annual value of the building shall be the annual value fixed for that building in the assessment books of the local authority. So, as per this provision, the capital value of the building belonging to the Petitioner is to be found to be Rs. 2,40,000. The assessing authority has got an option to determine the capital value of the building ignoring the assessment made by the local authority. It is so provided by Clause (2) of Section 6. As per that clause, if the assessing authority is of opinion that the annual value fixed for a building in the assessment books of the local authority is too low, he may fix the annual value of the building. But, the said fixation must be after giving the person affected thereby an opportunity of being heard. Without issuing such a notice, the assessing authority has no right to fix the capital value ignoring the annual value of the building fixed by the local authority. In case the assessing authority resorts to the fixation of the capital value in terms of Clause (2) of Section 6, he must take into consideration the factors mentioned in Clause (4) of that section. Independent of the provisions contained in Clauses (2) and (4) of Section 6, the assessing authority has no right to determine the capital value of the building.
Respondents have no case that the capital value of the building was fixed on the basis of the annual value of the building fixed by the local authority. They have no case that the assessing authority fixed the annual value of the building after giving the Petitioner an opportunity of being heard as contemplated by Section 6(2) of the Act either. Their only contention is that the assessing authority took note of the factors made mention of in Section 6(4) of the Act. He might have taken note of those factors, but it was done behind the back of the Petitioner. It was in flagrant violation of the principles of natural justice, which is statutorily recognised in Clause (2) of Section 6.
The learned Government pleader tried to support the order passed by the assessing authority on the basis of Section 9(5) of the Act. For a proper understanding of that provision, I read the same:
If any person fails to make a return in response to any notice under Sub-section (3) of Section 7, or fails to comply with the terms of any notice issued under Sub-section (2) or Sub-section (4) of this section, the assessing authority shall assess the amount payable by the person as building tax to the best of its judgment.
According to me, this provision authorises the assessing authority to assess the amount payable by the Assessee as building tax to the best of his judgment. This best of judgment can never be an arbitrary exercise of power. The assessment to the best of judgment must be based on the capital value of the building as fixed by him in compliance with the provisions contained in Section 6 of the Act. If the assessing authority is not determining the capital value of the building on the basis of the annual value of the building fixed by the local authority, then he has to issue notice to the owner of the building and fix the annual value after taking note of the factors mentioned in Clause (4) of Section 6 of the Act. Independent of the above provisions the assessing authority has no power to determine the capital value of a building. Without determining annual value of the building in conformity with Section 6(2) of the Act, the assessing authority cannot determine the capital value. In other words, de hors the provisions contained in Section 6 of the Act, the capital value of a building cannot be determined. Without such a determination of the capital value, no assessment of building tax can be made even by best of judgment. If it is held that the assessing authority can ignore the provisions of Section 6 for determining the capital value when he purports to exercise power u/s 9(5), it will lead to arbitrariness. Respondents have no case that the annual value of the building was fixed in the instant case after affording the Petitioner an opportunity of being heard in the matter.
In the counter-affidavit, it is averred:
The assessment was done by the Assistant Collector, who was also in charge of the post of Tahsildar, has personally verified and prepared the valuation report estimating the value and arrived at a capitalised value at Rs. 8,10,000 on the basis of the cost of construction and other factors. The details of valuation were recorded by the verification officer.
This exercise made by the Assistant Collector in the files relating to the assessment will not go to satisfy the requirement of Section 6(2) of the Act. In Karunakaran v. Tahsildar 1990 (1) KLT 869 this Court observed:
The mere fact that certain exercises had been made in the files kept in the office would be no consolation for the affected person. On the one hand, a citizen is certainly bound to discharge his liability cast under a valid assessment order. However, he must know the details on which an assessment has been made and the liability imposed. An assessment without the authority of law is unconstitutional. Article 265 of the Constitution explicitly declares it to be so.
This observation applies on all fours to the facts before me. The assessing authority fixed the annual value of the building in flagrant violation of the principles of natural justice embodied in Section 6(2) of the Act. That illegal order is now sought to be supported by him u/s 9(5) of the Act. This is clear misunderstanding of the provisions of the law. The attempt made by the Respondents to support the illegal order, on the basis of Section 9(5), is to be condemned. The Respondents appear to take the view that if the Assessee fails to comply with notice u/s 7(3), the assessing officer can make the assessment arbitrarily ignoring the provision contained in Section 6(2) of the Act. Such an arbitrary power cannot be exercised by the assessing authority, who is to act in conformity with the provisions of the Act. Since the order of assessment, Exhibit P-1, was passed in flagrant violation of the provisions contained in Section 6(2) of the Act, I have no hesitation in quashing the same. Respondents 3 and 4 have upheld the void order of assessment by issuing Exhibits P-3 and P-5 orders. Those orders are also quashed.
The Original Petition is allowed in the above terms. But, I make it clear that the assessing authority will be entitled to assess the building belonging to the Petitioner to tax under the Act, in accordance with law afresh. In the counter-affidavit and at the time of argument, the Respondents advanced a cantankerous contention that the assessing authority, while exercising power u/s 9(5) of the Act, can pass order of assessment ignoring the requirements of Section 6 for determining the capital value of the building. The State should not have advanced such a peevish and ill-natured argument. So, I order the State to pay costs to the Petitioner, including advocates fee of rupees one thousand.