1996 (4) TMI 512 - SC - Wealth-tax

Summary

Issues Involved:
1. Assessment of property tax.
2. Validity of assessment without notice under Section 126 of the Delhi Municipal Corporation Act, 1957.
3. Liability of the transferee for property tax.
4. Impact of non-intimation of transfer to the Municipal Corporation.

Issue-wise Detailed Analysis:

1. Assessment of Property Tax:
The Municipal Corporation of Delhi (Corporation) assessed property tax on flats owned by the respondent. The assessment was based on the possession of the flats by the respondent from April 1, 1985, although the possession was actually taken on February 23, 1987. The assessment order dated August 30, 1990, was made ex-parte due to non-attendance and lack of document submission by the respondent.

2. Validity of Assessment without Notice under Section 126:
The respondent argued that no notice under Section 126 of the Delhi Municipal Corporation Act, 1957, was served upon them, which is a pre-condition for a valid assessment. The Additional District Judge and the High Court both quashed the assessment on this basis, stating that the notice served on the builder/promoter was insufficient and that the respondent, as a transferee, must be served directly.

3. Liability of the Transferee for Property Tax:
The Supreme Court analyzed the relevant provisions of the Act, particularly Sections 120, 126, and 128. It emphasized that property taxes are levied on lands and buildings and constitute a first charge upon them. The liability to pay taxes is primarily on the lessor or the person entitled to let the property. Section 128(4) specifies that the transferor remains liable for the taxes until they notify the Corporation of the transfer, but this does not absolve the transferee of their liability. The Court clarified that the transferee is liable for taxes even for the period before the transfer, as the tax liability travels with the property.

4. Impact of Non-Intimation of Transfer to the Municipal Corporation:
The Act requires the transferor to notify the Corporation of any transfer. Failure to do so keeps the transferor liable for taxes and penalties. However, this does not relieve the transferee of their liability. The Supreme Court emphasized that the Corporation is not required to investigate transfers independently and can validly issue notices to the transferor until notified otherwise. The substantive liability to pay taxes cannot be defeated by non-intimation under Section 128 or by the transferee's failure to update the municipal records.

Conclusion:
The Supreme Court set aside the orders of the High Court and the Additional District Judge, remitting the matter to the Additional District Judge for re-evaluation in light of the legal position clarified. The Court instructed that both parties could present additional documentary evidence but no oral evidence. The appeal was allowed, and the case was to be disposed of within four months from the date of the order, with no order as to costs.