Jagdish Arora and another vs Board of Revenue and another

V.K. Shukla, J.—Petitioners have filed present writ petition questioning the validity of the order dated 29.6.2005 passed by the Additional District Magistrate, (F&R) Agra and order dated 5.9.2006 passed by Chief Controlling Authority affirming the aforesaid order in revision holding that there is deficiency in stamp duty on two instruments of petitioner.

Brief background of the case as mentioned in the writ petition is that petitioners purchased land bearing Khasra No. 1235 area 0.386 hectare (3860 Sqm) from one Smt. Manju Agarwal vide registered sale deed bearing No. 731/2005 and the sale deed bearing No. 732/2005 from M/s. Setwell Associate through its partner Sri Rajeev Agarwal of Khasra No. 1236, area 0.794 hectare situated in Mauja Baipur, Tehsil and District Agra through registered sale deed dated 17.2.2005. After the sale deed in question was registered SubDivisional Officer carried inspection of the property in question and thereafter notices were issued to the petitioners for filing of reply. Petitioners'' claim to have filed reply alongwith documentary evidence and taking stand that there is no deficiency of stamp duty. Objections filed on behalf of the petitioners did not find favour with the authority concerned and order dated 29.6.2005 has been passed by the Additional District Magistrate, (F&R) Agra finding deficiency in stamp duty and imposing penalty also. Against the said order petitioners preferred Revision No. 152 of 2005 and said revision has also been dismissed. At this juncture present writ petition has been filed. After pleadings inter se parties have been exchanged, present writ petition has been taken up for final hearing and disposal with the consent of the parties. Sri Pankaj Mishra, learned Counsel for the petitioner contended with vehemence that in the present case spot inspection which has been carried out, same was exparte to the petitioners and coupled with this precise objection which has been raised by the petitioners though same has been referred to in impugned order but same has not at all been dealt with and coupled with this market value has not at all been determined as it ought to have been done and on mere surmises and conjecture market value has been fixed and in most illegal manner deficiency has been pointed out and recovery has been directed to be made, as such writ petition deserves to be allowed. Learned Standing Counsel on the other hand contended that valid reasons have been assigned in passing the impugned order and petitioners have deliberately given wrong particulars of property in question as such orders passed warrants no interference.

After respective arguments have been advanced relevant provision which covers the field namely section 47A of the Indian Stamp Act as applicable in the State of U.P. and relevant provision of U.P. Stamp (Valuation of Property) Rules, 1997 are being quoted below:

"Section 47A: Undervaluation of instrument.[(1)(a) If the market value of any property, which is the subject of any instrument, on which duty is chargeable on market value of the property as set forth in such instrument is less than even the minimum value determined in accordance with the rules made under this Act, the registering officer appointed under the Registration Act, 1908 shall, notwithstanding anything contained in the said Act, immediately after presentation of such instrument, and before accepting it for registration and taking any action under section 52 of the said Act, require the person liable to pay stamp duty under section 29, to pay the deficit stamp duty as computed on the basis of the minimum value determined in accordance with the said rules and return the instrument for presenting again in accordance with section 23 of the Registration Act, 1908. (b) When the deficit stamp duty required to be paid under clause (a), is paid in respect of any instrument and the instrument is presented again for registration, the registering officer shall certify by endorsement thereon, that the deficit stamp duty has been paid in respect thereof and the name and the residence of the person pay them and register the same, (c) Notwithstanding anything contained in any other provisions of this Act, the deficit stamp duty may be paid under clause (a) in the form of impressed stamps containing such declaration as may be prescribed, (d) If any person does not make the payment of deficit stamp duty after receiving the order referred to in clause (a) and presents the instrument again for registration, the registering officer shall, before registering the instrument refer the same to the Collector for determination of market value of the property and the proper duty payable thereon.]

(2) On receipt of a reference under subsection (1), the Collector shall, after giving the parties a reasonable opportunity of being heard, and after holding an inquiry in such manner as may be prescribed by rules made under this Act, determine the market value of the property which is the subject of such instrument, and the proper duty payable thereon.

(3) The Collector may, suo motu, on a reference from any Court or from the Commissioner of Stamps, or an Additional Commissioner of Stamps or a Deputy Commissioner of Stamps or an Assistant Commissioner of Stamps or any officer authorized by the State Government in that behalf, within four years from the date of registration of any instrument, on which duty is chargeable on the market value of the property not already referred to him under subsection (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 of such instrument, 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 such instrument, he may determine the market value of such property and the duty payable thereon:

Provided that, with the prior permission of the State Government an action under this subsection may betaken after a period of four years but before a period of eight years from the date of registration of the instrument on which duty is chargeable on the market value of the property. [Explanation.The payment of deficit stamp duty by any person under any order of the registering officer under subsection (1) shall not prevent the Collector from initiating proceedings on any instrument under sub"... section(3)].

(4) If on enquiry under subsection (2) and examination under subsection (3), the Collector finds the market value of the property (i) truly set forth and the instrument duly stamped, he shall certify by. endorsement that it is duly stamped and returned it to the person who made the reference; (ii) not tally set forth and the instrument not duly stamped, he shall require the payment of proper duty or the amount required to make up the deficiency in the same, together with a penalty of an amount not exceeding four times the amount of the proper duty or the deficient portion thereof. Subsections 4A to 6 are not relevant. Relevant portions of Rules 4, 5 and Rule 7 of U.P. Stamp (Valuation of Property) Rules, 1997 are quoted below:

Rule4. Fixation of minimum rate for valuation of land construction value of non commercial building and minimum rate of rent of commercial building.

(1) The Collector of me district shall biennially, as far as possible, in the month of August, fix the minimum value per acre/per square meter of land, the minimum value per square meter of construction of noncommercial building and the minimum monthly rent per square meter of commercial building situated in different parts of the district taking into consideration the following facts:

(a) in case of land

(i) classification of soil,

(ii) availability of irrigation facility,

(iii) proximity to road, market, bus, station, railway station, railway station factories, hospitals and Government offices, and

(iv) location with reference to its situation in urban area, semiurban area or country side,

(b) In case of noncommercial building:

(i) cost of material used in the construction of building,

(ii) labour charges,

(iii) type of construction, age, and depreciation of building.

(c) In case of commercial building

(i) prevailing rent in locality, and

(ii) nature of economic activity in the locality.

(2) The Collector of the district may suo motu or on an application made to him in this behalf, on being satisfied about the incorrectness of the minimum value of land or of the construction of noncommercial building, or the minimum rent of a commercial building fixed by him under subrule (1), for reasons recorded in writing, revise the same within a period of two years from the date of fixation of minimum value or rent, as the case may be.

(3) The Collector of the district shall after fixing the minimum value per acre/per square meter of land, and of the construction" of noncommercial building and the minimum rent per square meter of commercial building under subrule (1), send a statement in three part to the Registrar, the first part of such statement shall contain the division of the district under his jurisdiction, into urban area, semiurban area and the country side, second part shall specify the minimum value of land situated in different parts of the subdistrict and the third part shall contains, in the case of noncommercial building the minimum value of construction and in the case of commercial building the minimum rent fixed under subrule (1).

(4) The Registrar shall supply copies of statement mentioned in subrule (3) to the SubRegistrars under his control and shall also forward a copy of the same to the Inspector General of Registration, Uttar Pradesh.

(5) Every Registering Officer shall cause a copy of the above'' statement to be affixed on the notice board outside the registering offices.

Rule5 : Calculation of minimum value of land, grove, garden and building. For the purposes of payment of stamp duty, the minimum value of immovable property forming the subject of an instrument shall be deemed to be such as may be arrived at as follows;

(a) In case of land minimum value. Whether agriculture or nonagriculture Area of land multiplied by minimum value fixed by Collector of the district under Rule 4 :

(b) in case of grove of garden

(i)

(ii)

(iii)

(iv)

(c) in case of building :

(i) Noncommercial building minimum value of land whether covered by the construction or not, which is subjectmatter of instrument, as worked out under Clause (a) building arrived at by multiplying the construction area of each floor of the building by the minimum value fixed by the Collector of the district under Rule 4.

(ii) Commercial building minimum value of land whether covered by the construction or not, which is subjectmatter of instrument as worked out under Clause (a) plus three hundred times the minimum monthly rent of the building arrived at by multiplying the constructed area of each floor of the building with the minimum rent fixed by the Collector of the district under Rule 4.

Rule7 : Procedure on receipt of a reference or when suo motu action is proposed under section 47A.

(1) On receipt of a reference or where action is proposed to be taken suo motu under section 47A, the Collector shall issue notice to parties to the instrument to show cause within thirty days of the receipt of such notice as to why the market value of the property set forth in the instrument and the dutypayable thereon be not determined by him.

(2) The Collector may admit oral or documentary evidence, if any, produced by the parties to the instrument and call for and examine the original instrument to satisfy himself as to the correctness of the market value of the subjectmatter of the instrument and for determining the duty payable thereon.

(3) The Collector may :

(a) call for any information or record from any public office, officer or authority under the Government or local authority;

(b) examine and record the statement of any public officer or authority under the Government or local authority;

(c) inspect the property after due notice to the parties to the instrument.

(4) After considering the representation of the parties, if any, and examining the records and other evidence, the Collector shall determine the market value of the subject matter of the instrument and the duty payable thereon.

(5) If, as a result of such inquiry, the market value is found to be fully and truly set forth and the instrument duly stamped according to such value, it shall be returned to the person who made the reference with a certificate to that effect. A copy of such certificate shall also be sent to the Registering Officer concerned.

(6) If as a result of such inquiry, the market value is found to be undervalued and not duly stamped, necessary action shall be taken in respect of it according to relevant provision of the Act.

The provisions quoted above has been subjectmatter of interpretation before this Court in the case of Ram Khelawan v. State of U.P., 2005 (98) RD 511 as follows. Relevant paragraphs 15 to 25 is being extracted below.

"15. It is quite possible that even in the first instance the instrument/deed may show the valuation of the property to be less than the minimum value determined in accordance with Rules of 1997 (popularly known as circle rate) still purchaser or seller may not be required to pay more stamp duty. The only purpose of the minimum market value fixed and circulated under Rule 4 of the Rules of 1997 is that in case on the face of it the market value of the property set forth in the sale deed is less than minimum market value fixed under the said Rules then Registering Officer cannot register foe deed and it will have to refer the same to the Collector unless on being asked by him to make good the deficiency in stamp duty, parties to the sale deed make good the requisite deficiency. In case deficiency is not made good then matter will have to be referred by Registering Officer to the Collector. However, thereafter it is quite possible that Collector may hold that even though market value of the property set forth in the deed is less than minimum market value fixed 4 under the Rules of 1997 still the market value set forth in the sale deed is correct and proper stamp has been paid. It is quite clear from section 47A(4)(i) and Rule 7(5).

However, if deed has been registered then action may be taken only under section 47A (3) of the Stamp Act. Rule 7 of the Rules of 1997 prescribes the procedure for determining market value of the subjectmatter of the instrument. This Rule nowhere refers to the minimum value of the property fixed in accordance with Rule 4 of the said Rules. Subsection (2) of section 47A of Stamp Act obliges the Collector for the purpose of determining of the market value of the property which is the subject of instrument presented for registration after holding inquiry in such manner as may be prescribed by Rules made under the said Act. This clearly refers to Rule 7 of Rules of 1997. However, subsection 3 of the said section only says that Collector may examine the instrument for the purpose of satisfying himself as to the correctness of the market value of the property, which is subject of such instrument. Manner of examination has not been mentioned and the said subsection (3) also does not refer to any Rules. However, Rule 7 makes itself applicable to both situations; preregistration inquiry as well as post registration examination regarding market value of the property. It is interesting to note that Rule 7 no where prescribes the basis, formula or principle for determining market value. It only prescribes procedure like notice, admission of oral or documentary evidence, calling for information or record from any public office and inspection of property. The result is that, whether Rule 7 of Rules of 1997 applies or not market value has to be determined on the same principle on which market value in land acquisition cases is determined. Minimum market value fixed in accordance with Rules of 1997 is relevant only and only for the purposes of referring the document by Registering Officer to the Collector before registration. Even after such reference market value is to be determined not in accordance with the minimum value fixed under Rule 4 of the Rules of 1997 but in accordance with general principles of determination of market value as applicable in land acquisition cases. Simultaneously when proceedings are initiated after registration of the document under section 47A (3) of the Act market value has to be determined in accordance with general principles applicable for the said purpose like principles of determination of market value in land acquisition cases without taking recourse to minimum market value of the property fixed in accordance with Rule 4 of the Rules of 1997.

It has been held by a Division Bench of this Court in Kaka Singh v. Addl. Collector & Dist. Magistrate (F&R), 1987 (13) ALR 80 (R) = AIR 1986 Alld. 107 that treating method of calculation of market value given under Rule 341 (since repealed and substituted by Rule 4. of the Rules of 1997) as conclusive and final is erroneous, in law. It has further been held that the purpose of entire exercise under section 47A as supplemented by the relevant rules is to see as to whether the parties to the conveyance or instrument have deliberately under valued it for the purpose of deceitful gain. In a case where it is found that the value of the conveyance was fraudulently made although more has passed on it, section 47A would come into play (para10). In the said authority the following observation of A.I.R. 1974 Madras 117 was quoted :

"We are inclined to think that the object of the Amending Act being to avoid large scale evasion of stamp duty, it is not meant to be applied in a matter of fact fashion and in a haphazard way. Market value itself as we already mentioned, as a changing factor and will depend on various circumstances and matters relevant to the consideration. No exactitude is in the nature of things possible. In working the Act, great caution should be taken in order that it may not work as an engine of oppression. Having regard to the object of the Act, we are inclined to think that normally the consideration stated as the market value in a given instrument brought for registration should be taken to be correct unless circumstances exist which suggest fraudulent evasion."

The Supreme Court in R.C. Bansal v. D.M., AIR 1999 SC 2126. has held that circle rates under Rule 340A (since repealed and substituted by Rule 4 of Rules of 1997) is merely a guideline and at best prima facie rate of the area concerned and on the one hand parties to the deed are entitled to say that actual valuation is less than the circle rate and on the other hand Collector is also empowered to decide that actual market value is more than the circle rates.

In State of Punjab v. Mahabir Singh; AIR 1996 SC 2994 which was a case from Punjab it has been held that circle rate is merely a guideline provided by the State which would only serve as prima facie material and that no absolute higher or minimum value can be predetermined (para5). The Supreme Court approved the judgment of Punjab & Haryana High Court reported in AIR 1991 Punjab & Haryana 26 which held that the guidelines cannot control the quasi judicial discretion to determine the correct valuation of the property.

In M/s. Maya Food v. C.C.R.A, 1999 (90) RD 57 (HC) a Single Judge of this Court has held that market value of the land cannot be determined with reference to the use of the land to which buyer intends to put it and that in determining the market value the potential of the land as on the date of the, sale alone can be taken into account and not the potential it may have in the distant future.

In R.K. Agarwal v. C.C.R.A., 1997 RD 383 a Single Judge of this Court has held that assumed rental value without any basis cannot form the basis for determining market value and that the proper course is to decide the market value on the basis of some exemplars of other land in the vicinity which had been sold at the relevant time (para4).

In Smt. Pmbhawati v. C.C.R.A., 1996 RD 419 (SC) held that mere smallness of the area would not suggest the same by itself to be a costly property and that merely because property situated in an area which is close to a decent colony where people of high income group reside does not by itself make it a part thereof.

The view that Rules of 1997 (which have been framed at the place of old Rules 340, 340A and 341) cannot be taken into consideration at the time of determination of market value which I have taken is squarely covered by the authority of a Single Judge of this Court in Animddha Kumar v. C.C.R.A. 2000 RD 566. In the said authority it has also been held that agricultural land cannot be treated as residential plot unless declaration under section 143 of U.P.Z.A. and L.R. Act is made and that market value of land is to be determined on the basis of the character of the land and its user. In para21 of the said authority it has also been held that valuation cannot be determined on the basis of its future potential.

In H.L Sahu v. State of U.P., 2004 (96) RD 368 (HC) a Single Judge of this Court struck down Note2 of order dated 3.8.1997 prescribing circle rate of District Kaushambi under Rule 4 of the Rules of 1997 which provided that in case agricultural land is not transferred in favour of a cotenure holder or a person having adjoining agricultural plot then the same shall be valued on the basis of per Sq. Meter in case area of the land sold is less than 1500 Sq. Meter.

It has been found in several cases like the present one that the entire basis of determination of market value for the purpose of stamp duty is exparte report of Tehsildar or other officer. Exparte inspection report may be relevant for initiating the proceedings under section 47A of Stamp Act. However, for deciding the case no reliance can be placed upon the said report. After initiation of the case inspection is to be made by the Collector or authority hearing the case after due notice to the parties to the instrument as provided under Rule7(3) (c) of the Rules of 1997. Moreover in the inspection report distance of the property from other residential or commercial properties and road must be shown and wherever possible sketch map must also be annexed alongwith the report so that correct valuation may be ascertained with reasonable certainty."

On the touch stone of the provisions and the judgment of Hon''ble Apex Court as well as of this Court noted above the facts of the present case are being adverted to. Sale deed in question was executed on 17.2.2005 and on 7.4.2005 inspection was made and thereafter notices were issued to which petitioners filed detailed reply. Petitioners took specific stand that on the date of execution of sale deed in question on 17.2.2005. Collector Agra had not earmarked the industrial area nor fixed any rate for the same rather he defined agriculture/residential/commercial lands and there circle rates and as per letter dated 10.1.2003 sent by Chief Controlling Authority rates of industrial area would be less than commercial and residential rates but more then agriculture land. Petitioners took specific stand that report dated 7.4.2005 was exparte report and at no point of time petitioners were ever associated in the inspection which has been carried out. Petitioners also gave exemplar and also relied on the order passed on 6.7.2004 and the order dated 10.04.2004 passed by Board of Revenue in Revision No. 63 of 2003 (Smt. Santosh Kumar Nirhara v. State of U.P.) where land upto 30 meters of depth on AgraMathura National Highway was considered at the rate of Rs. 6000/ per square meter and thereafter rates were fixed as Abadi village. In the present case impugned order in questions refers to the objection moved on behalf of the petitioners but at the point of time of when assessment proceedings for evaluating the market value of property started then said objection has not at all been taken into consideration. The A.D.M. (F&R) has uniformly applied the rate of Rs. 6000/ per square meter and based on same has computed the market value but no reason whatsoever has been given by the Stamp Authority as to how almost similar set of circumstances qua land upto 30 meters from National Highway different rate was fixed and beyond 30 meters different rate was fixed and why same parameters were not applied while dealing with, the case of the petitioner. Market value has been based on circle rate of Rs. 6000/ whereas once market value of property has to be determined, then circle rates are merely guidelines and the Stamp Authority has to adjudicate the market value of the property independently on the basis of oral or documentary evidence adduced before him by the parties concerned. Stamp Authority is also entitled to make spot inspection of the property under Rule 7(3)(c) of 1997 Rules, after giving notice to concerned parties. In the present case admittedly no spot inspection has been made by A.D.M (F&R) and reliance has been placed on the report of SubDivisional Magistrate, qua which petitioners have taken specific stand that same was exparte to them, and this position has not been disputed. Stamp Authority has mentioned that incorrect declaration was made in the instruments qua the distance of property. In case wrong declaration has been made, qua the same action can always be taken for violating section 27 of Stamp Act but to the extent of determining on market value, independent exercise will have to be undertaken, on the basis of oral and documentary evidence and after taking into account the evidence led by petitioner also. In fact independent assessment was to be made by the Stamp Authority in determining the market value of the property on the basis of evidence adduced and not on the basis of merely circle rate fixed. In the present case as no such exercise has been undertaken spot inspection and precise objection raised by the petitioners has not at all been adverted to. Consequently order dated 29.6.2005 passed by the Additional District Magistrate, (F&R) Agra and order dated 5.9.2006 passed by Chief Controlling Authority affirming" the aforesaid order in Annpai are hereby quashed. Matter is remitted back to be decided afresh by the Additional District Magistrate, (F&R), Agra preferably within three months from the date of presentation of certified copy of this order. In term of above observations and'' direction, present writ petition is allowed. No orders as to cost.