New Constructions Cannot Be Taxed In Appeals Against Earlier Property Assessments: Kerala High Court

The Kerala High Court on 22 January held that new constructions cannot be brought to tax while deciding statutory appeals filed against earlier property tax assessments. It clarified that the scope of such appeals is confined to examining the validity of the existing demand and cannot be expanded to assess buildings constructed subsequently.

A Bench of Justice Harisankar V. Menon observed:

“The assessment as regards new constructions, if any, requires to be carried out with reference to the statutory provisions by the original authority and cannot be carried out in an appeal filed against an earlier assessment.”

The dispute arose after M/s Synthite Industries Ltd. was assessed for property tax by the Panchayat for certain buildings under the Kerala Panchayat Raj Act, 1994. Aggrieved, the company filed statutory appeals under the Kerala Panchayat Raj (Property Tax, Service Cess, and Surcharge) Rules, 2011, after making the mandatory pre-deposit.

Earlier, in 2023, the High Court disposed of a writ petition filed by the company and directed the Panchayat to reconsider the assessment in light of certain Government Orders relied upon by the assessee. Since the Panchayat had not been heard, that judgment was recalled on review and the writ petition was restored.

Subsequently, a Single Judge directed the Panchayat to dispose of the statutory appeals while also taking into account new constructions, relying on certain Government Orders.

Challenging this direction, the assessee contended that new constructions could not be brought to tax in appeals filed against earlier assessments, and that such an approach would enable the Panchayat to bypass the statutory limitation prescribed under Section 243 of the Kerala Panchayat Raj Act which governs recovery of dues and “escaped assessments”.

The Panchayat relied on the proviso to Rule 9(4D) of the 2011 Rules, arguing that additional constructions were not protected by limitation.

Rejecting this contention, the Court clarified that while the proviso to Rule 9(4D) excludes limitation in cases of additional constructions, it cannot be invoked while deciding appeals against earlier assessments, as the appellate authority's jurisdiction is limited to examining the sustainability of the assessments already made.

The Bench noted that the statutory appeals before the authority related only to buildings that had been assessed earlier, and therefore the appellate authority could not travel beyond that subject matter.

“While considering appeals filed against such assessments, the scope of applying the proviso noticed above does not arise with reference to the additional constructions,” the Court held.

The Court further clarified that if the Panchayat chooses to initiate separate proceedings to assess new constructions, the assessee would be entitled to raise the defence of limitation, which would have to be adjudicated independently in accordance with law.

For Petitioner: M. Gopikrishnan Nambiar, K. John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C. Abraham, E.K. Nandakumar

For Respondent: Aikaranad Grama Panchayat, Abraham P. Meachinkara and Advocates Blaze K. Jose, Gayathri A.L., Afrus Shahana, Aparna S.