Case Note & Summary
The petitioner, M/S. H. R. Educational Trust, a trust registered under the Indian Trust Act, 1881, challenged a demand notice dated 18.02.2025 issued by the Sulikere Grama Panchayat (respondent No.2) demanding property tax arrears totaling Rs.51,39,626/- for the period from 2006-07 to 2024-25. The petitioner contended that no prior inspection of the property was conducted in their presence, nor was any notice served before the demand was raised. They also claimed entitlement to exemption from property tax as an educational trust under the applicable rules. The respondent's counsel submitted that the liability to pay tax arose under the Karnataka Gram Swaraj and Panchayat Raj Act, 1993. The court observed that the demand notice was issued without any prior notice or opportunity of hearing to the petitioner, which violated principles of natural justice. Consequently, the court set aside the demand notice and directed the respondent to issue a fresh notice after providing the petitioner an opportunity of hearing. The court clarified that it had not expressed any opinion on the merits of the exemption claim and left all contentions open for the petitioner to raise before the respondent. The writ petition was disposed of accordingly.
Headnote
A) Constitutional Law - Principles of Natural Justice - Tax Assessment - Demand Notice - The Gram Panchayat issued a demand notice for property tax arrears spanning from 2006-07 to 2024-25 without any prior inspection or notice to the petitioner. The court held that such a demand without affording an opportunity of hearing violates principles of natural justice and set aside the notice, granting liberty to the respondent to issue a fresh notice after hearing the petitioner. (Paras 1-5)
B) Local Government - Karnataka Gram Swaraj and Panchayat Raj Act, 1993 - Property Tax - Exemption - The petitioner claimed exemption from property tax as an educational trust under the applicable rules. The court did not decide on the exemption claim but directed the respondent to consider the same after providing an opportunity of hearing. (Paras 3-5)
Issue of Consideration
Whether the demand notice issued by the Gram Panchayat for property tax arrears from 2006-07 to 2024-25 is sustainable when no prior notice or opportunity of hearing was afforded to the petitioner.
Final Decision
The demand notice dated 18.02.2025 is set aside. The respondent No.2 is directed to issue a fresh notice after providing an opportunity of hearing to the petitioner. All contentions of the petitioner are left open to be raised before the respondent. The writ petition is disposed of.
Law Points
- Principles of natural justice
- Tax assessment
- Gram Panchayat tax
- Demand notice
- Opportunity of hearing
Case Details
2025 LawText (KAR) (04) 35
WP No. 5695 of 2025 (LB-TAX)
S Kalyan Basavaraj (for petitioner), Bopanna (AGA for R1), M.S. Devaraj (for R2)
M/S. H. R. Educational Trust
State of Karnataka, The Panchayat Development Officer
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Nature of Litigation
Writ petition challenging a demand notice for property tax arrears issued by a Gram Panchayat.
Remedy Sought
Quashing of demand notice dated 18.02.2025 bearing No. 03/2024-25 issued by respondent No.2.
Filing Reason
The petitioner claimed the demand notice was issued without prior inspection or notice, violating principles of natural justice, and that they were entitled to tax exemption as an educational trust.
Issues
Whether the demand notice for property tax arrears from 2006-07 to 2024-25 is valid when issued without prior notice or opportunity of hearing.
Whether the petitioner is entitled to exemption from property tax as an educational trust.
Submissions/Arguments
Petitioner submitted that no inspection of property was conducted in their presence nor any notice served before the demand.
Petitioner claimed exemption under applicable rules as an educational trust.
Respondent No.2 submitted that liability to pay tax arose under the Karnataka Gram Swaraj and Panchayat Raj Act, 1993.
Ratio Decidendi
A demand notice for tax arrears issued without prior notice or opportunity of hearing violates principles of natural justice and is liable to be set aside, with liberty to the authority to issue a fresh notice after hearing the assessee.
Judgment Excerpts
Petitioners have called in question the correctness of the demand notice at Annexure-A issued by the Sulikere Grama Panchayat dated 18.02.2025.
In terms of the demand at Annexure-A, the arrears of tax for the year 2006-07 to 2013-14 has been calculated as Rs.26,01,840/- and for the further period of 2014-15 to 2024-25, the demand notice stipulates the arrears of tax. The total demand of Rs.51,39,626/- has been raised.
The petitioners have raised various contentions and submit that before such demand was raised, there was no inspection of the property in their presence nor any notice served.
However, for the relevant period, Sri. M. S. Devaraj, learned counsel appearing for respondent No.2 submits that insofar as the liability to pay tax, at an earlier point of time, under the Karnataka Gram Swaraj and Panchayat Raj Act, 1993, the demand is made.
Keeping in mind the fact that the demand notice has been issued without any prior notice or opportunity of hearing, the demand notice at Annexure-A is set aside.
Procedural History
The writ petition was filed under Articles 226 and 227 of the Constitution of India challenging a demand notice dated 18.02.2025. The petition came up for preliminary hearing and was disposed of on the same day.
Acts & Sections
- Indian Trust Act, 1881:
- Karnataka Gram Swaraj and Panchayat Raj Act, 1993:
- Constitution of India: Articles 226, 227
