The Karnataka High Court has held that proceedings by way of show cause notice under Section 46A of Karnataka Stamp Act for recovery of stamp duty not levied or short levied cannot be initiated five years after the registration of the document.

The Court was considering a Writ-Petition against an order passed by the Karnataka Appellate Tribunal.

The single-bench of Justice Suraj Govindaraj observed, "Hence, I answer the point raised by holding that proceedings by way of show cause notice under Section 46A for recovery of stamp duty not levied or short levied cannot be initiated five years after the registration of the document, being the date on which the stamp duty fell due. The exception being a case where it is contended that the short payment of the Stamp Duty is on account of fraud, collusion or willful misstatement, in such a situation the proceedings by way of show cause notice under Section 46A for recovery of stamp duty not levied or short levied cannot be initiated after 10 years after the registration of the document, being the date on which the stamp duty fell due."

The Petitioners were represented by Senior Advocate K.N. Phanindra while the Respondents were represented by Additional Advocate General Mahantesh Shettar.

Facts of the Case

The landowners of the land in question had appointed the Petitioners as their lawful attorneys which was presented before the Sub-Registrar, for registration. Respondent No.2 called upon the Petitioner to make payment of registration fee, which was so paid and thereafter the document came to be registered. Subsequently, the Respondent No.1 issued a Notice, calling upon the Petitioner to remit a shortfall in the stamp duty of Rs.98,500/- on the GPA which is stated to have been issued on the basis of instructions and directions of the Inspector General of Stamps & Registration as per the Official Memorandum (OM). Following this, the Petitioner appeared before Respondent No.1 and sought for a copy of the OM, which was not so provided. The Respondent No.1 passed an order without providing the said document, calling upon the Petitioner to make payment of sum Rs.98,500/- within 60 days. The Petitioner challenged said order before the Karnataka Appellate Tribunal which came to be dismissed by the impugned order.

Senior Counsel for the Petitioner contended that the action taken by the Respondents is contrary to the applicable law on two main grounds, firstly that the Notice was issued to the Power of Attorney and not to the person who executed it. Secondly, he submitted that any action under Section 46A of the Karnataka Stamp Act, 1957 was required to be taken within five years from the date of execution of the document.

Contrarily, the AGA submitted that the period of five years has been substituted by a period of ten years in Section 46A and therefore, the Notice which has been issued is proper and correct.

Reasoning By Court

The Court read into sub-section (1) of Section 46A to state that under the statute, the controlling revenue authority or any other officer authorized in that regards may within five years from the date of commencement of the Karnataka Stamp (Amendment) Act, 1980 or the date on which the duty became payable whichever is later, serve a notice on the person by whom the duty was payable requiring the show-cause why the proper duty or the amount required to make up the same should not be collected from.

"Thus, under normal circumstances, an action for payment of proper duty can only be made by issuance of a show cause notice from the date on which the stamp duty fell due, in this case from the date on which the document was registered," the Court observed.

It clarified that the proviso provides that when due to reason of fraud, collusion or any willful misstatement, the due payment of stamp duty is not made then such a show cause notice could be issued within ten years from the date on which the stamp duty was due in terms of the amendment which has been carried out in the year 1983.

"In the present case, there is no allegation of fraud, collusion or willful misstatement which has been made. What has been stated is that the adequate stamp duty has not been paid on the GPA......In that view of the matter, it is only five years which would be applicable in terms of the provisio to Subsection (1) of Section 46A. As such, any proceedings which could have been initiated by issuance of a show cause notice by the controlling revenue authority or any other authorized officer on behalf of State ought to have been done within five years from 23.11.1995. The same not having been done by 22.11.2000 and the proceeding having been initiated only on 30.2.2010 after a period of nearly 15 years is clearly and hopelessly barred by Section 46A," the Court observed.

It stressed that even if it were to be contended that the short payment of the Stamp Duty is on account of fraud collusion or willful misstatement, making the amendment applicable the show cause notice ought to have been issued within 10 years from 23.11.1995, i.e., on or before 22.11.2005.

The Petition was accordingly allowed.

Cause Title: B C Prasad vs. The District Registrar And Deputy Commissioner Of Stamp (2025:KHC:9154)

Appearances:

Petitioners- Senior Advocate K.N. Phanindra, Advocate Vaishali Hegde

Respondents- Additional Advocate General Mahantesh Shettar,

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Karnataka High CourtJustice Suraj Govindaraj

Sheetal Joon