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Introduction
In the previous article we witnessed how MCD can impose property tax or house tax on you and what is the procedure in that regard included calculation as per Unit Area System. We further saw that MCD have to give you an opportunity whereby you will be asked as to why your property tax should not be increased and only after giving you a personal hearing any increase in the property tax can be effected by MCD. Further we elaborated on the punishments, which included jail time and fine upto 50% of the property tax, , which MCD can inflict upon you in case of default in payment of property tax to it.
Now it’s time to give solutions to the honest and innocent property and house owners as to how they can counter the actions of MCD through taking assistance of law. One can save himself from illegal and excessive demand of MCD if he plays his cards right.
So, let’s see the options available to property owners.
Appeal before Municipal Taxation Tribunal
The first remedy is that of Appeal which is provided under Section 169 of DMC Act which can be filed before Municipal Taxation Tribunal (in short MTT). Here you can challenge the increase of your property tax by giving all the reasons which you think are required to be taken into account by MCD. For example MCD might contend that you have rented your property and hence your property tax should be higher. Your stance is that it’s not rented but given to your relative under permissive occupation. So if MCD did not pay heed to this submission of yours and increased your property tax on this ground then you must go to the Municipal Taxation Tribunal to challenge the said increase.
Let’s take another example. Many a times it happens that when a person purchases a property he believes that the previous owner or seller has paid all property tax dues before the date of purchase. But to the purchaser’s surprise after nearly 2 years of his purchase he gets a notice from MCD that he has to pay the property tax for the past 16 years as the previous owner failed to do so.
You can always challenge this type of assessment before Municipal Taxation Tribunal especially if you have informed the MCD about your purchase as soon as you occupied the property because under Sections 128 of the DMC Act if a vendee (purchaser) has purchased a property and within 3 months of it he intimated MCD about the purchase, then MCD cannot force him to pay the property tax dues of the previous owner/vendor/seller.
Filing Writ Petition in The High Court
The other remedy is approaching the High Court of the State. But this remedy can be availed on limited grounds.
One of the grounds is that the time to approach the Municipal Taxation Tribunal is 30 days. What if for some genuine reason you could not do so.
Moreover before your Appeal gets admitted before Municipal Taxation Tribunal you have to deposit full value of the property tax, otherwise you have no right to Appeal. Assume, if your tax demand is increased from Rs. 20,000/- to Rs. 2,00,000/- and you have to pay arrears of tax for the past 2 years then how will you manage to pay Rs. 48 Lacs ( 24 months x Rs. 2 Lacs)?
In such cases it is better to approach the High Court, as the High Court can not only give you a time extension for Appeal to MTT but also under Mandamus you can request High Court to levy tax at the previous rate and not the new increased rate.
Also let’s say you purchased a property in which you are not living and it’s vacant for 6 months. MCD served you notice but as you are living somewhere else you did not get it. Many a times it happens that the parties do not receive the notice of MCD and before they could do anything their property stands sold by MCD in a public auction. It is because, as I have explained earlier in this Article, MCD can draw presumption that if you have not replied to their notice you are a wilful defaulter.
In such situations it’s better to approach High Court because before you approach the Municipal Taxation Tribunal you have to protect your property from attachment or sale by MCD.
On What grounds High Court will entertain your Writ Petition
As I have mentioned earlier that MCD have to explain the basis of its calculation of property tax before forcing a property owner to pay increased property tax. What if MCD without making any calculation asked you to pay 10 times property tax than the previous value?
Moreover MCD have to give a reasonable hearing to a person before increasing his property tax in Municipal Assessment Book. Furthermore there are many safeguards in the DMC Act to protect the property owner from increased demand of property tax by MCD as this increased property tax has to be paid throughout his life. Hence there is a procedure prescribed under DMC Act to change (read increase as it seldom happens that MCD will decrease your property tax) your tax.
Further as explained earlier MCD have to explain why it is increasing your property tax. If it does not give any reason for that how are you going to prefer Appeal because without any grounds to challenge the assessment of property tax, Appeal is futile. So you can go the High Court on the ground that MCD must explain the metrics it used to reach at a particular value of property tax.
In these circumstances the High Court under Article 226 of the Constitution of India has the power to quash such a notice or action of MCD on the ground that it is absurd or without any application of mind.
Which is the better option- High Court or Municipal Taxation Tribunal?
If you have time on your side i.e. your property has not been attached or is not liable to sale by MCD then it’s better to approach the Municipal Taxation Tribunal under Section 169 of DMC Act because if you directly got to High Court it is going to reject your Writ Petition on the ground that a remedy is already available to you and you should first use that.
Also if you are financially capable and able to deposit full arrears of tax before filing an Appeal- then there is no problem in approaching the Municipal Taxation Tribunal.
But if there is patent error in the demand of MCD or MCD has attached your land, then it’s better to approach the High Court of your State in a Writ Petition and get a stay order till you file an appeal before Municipal Taxation Tribunal. Otherwise it may happen that by the time your Appeal gets admitted your property is sold. But what is this patent error?
Let’s say MCD increases your property tax on the ground that there have been alterations (like added floors on your property) without properly explaining as to what are those alterations. Further, if it says that you have changed the character of the property, MCD have to inspect the property and prepare an inspection report. If it is not done by MCD then you should approach High Court, as MCD had failed to follow the right procedure before raising your tax demand. This is exactly what happened in Savitri Devi V. MCD, where High Court of Delhi quashed the demand of the MCD on this ground.
Also if you are not capable of paying the absurd demand raised by MCD then it’s better to approach the High Court and get the whole demand notice quashed under Certiorari in which case you don’t have to pay any tax at the new rate.
Precautions A Property Owner Or Purchaser Should Take
When you purchase a property it’s better to inscribe on it the phrase that “the seller guarantees that he has paid all property tax on the property sold and there are no encumbrances on the property”. Having such phrases in your Sale Deed will protect you and make the Seller liable for any property tax demand raised at some future date.
Similarly whenever a notice of MCD reaches you, it is better to file a reply and keep its acknowledgment with yourself. Who knows in future the need to approach a court or tribunal never arises.
At the end of the day, it is the diligence of the property owner which will protect him from illegal and excess demand of property tax.
Conclusion
There is no doubt that property tax is the lifeline of any municipal body. But a property tax demand have to be as per the established rules and not arbitrary. I have come across cases in which house tax of previous 20 years have been demanded from a person. Of course such a demand cannot be made as the period to do so is only 3 years. Even when the tax liability is crystallized and tax becomes charge on a property the time period for which property tax can be claimed is 12 years. In such cases in is better to approach courts or tribunals, depending on the situation (as explained in the Article).
Parveen Semwal
Advocate, High Court of Delhi and Supreme Court of India