"Proceedings for Recovery of Shortfall in Stamp Duty Cannot Be Initiated After Five Years," : Karnataka High Court Quashes Demand Notice Issued After 15 Years
Safiya Malik
The Karnataka High Court has quashed a demand notice issued by the District Registrar and Deputy Commissioner of Stamps, observing that proceedings for the recovery of stamp duty not levied or short levied cannot be initiated after the statutory period of five years, except in cases of fraud, collusion, or willful misstatement, where the limit is ten years. Justice Suraj Govindaraj adjudicated the matter and held that the notice issued in 2010, demanding an alleged shortfall in stamp duty for a General Power of Attorney (GPA) executed in 1995, was legally unsustainable due to the lapse of the prescribed limitation period.
The Court observed, "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 the 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 30.12.2010 after a period of nearly 15 years is clearly and hopelessly barred by Section 46A."
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The petitioners, B.C. Prasad and Guru Prasad, were appointed as lawful attorneys by the owners of three parcels of land in Survey Nos. 75/1A, 75/1B, and 75/2, measuring a total of approximately 11 acres and 15 guntas. The GPA was executed on November 23, 1995, and registered before the Sub-Registrar, Yelahanka. At the time of registration, the prescribed registration fee and stamp duty were paid, and the document was duly recorded as Document No. 725/1995-96.
On December 30, 2010, the District Registrar and Deputy Commissioner of Stamps issued a notice to the petitioners, demanding a shortfall in stamp duty amounting to ₹98,500. The notice was issued based on an Official Memorandum dated December 16, 2010, allegedly containing directions from the Inspector General of Stamps & Registration. The petitioners appeared before the authority on January 15, 2011, requesting a copy of the Official Memorandum, but their request was not granted. Subsequently, an order was passed on November 8, 2013, directing them to remit the amount within 60 days.
Challenging this order, the petitioners filed an appeal before the Karnataka Appellate Tribunal (KAT) in Appeal No. 141/2014. The Tribunal, by its order dated February 28, 2017, dismissed the appeal and upheld the demand. Aggrieved by this decision, the petitioners approached the Karnataka High Court, seeking a writ of certiorari to quash both the Tribunal's order and the demand notice.
The petitioners contended that the demand was time-barred under Section 46A of the Karnataka Stamp Act, 1957. They argued that the demand should have been raised within five years from the date of registration, i.e., by November 22, 2000, and that the delay of over 15 years rendered the notice invalid. They further submitted that the demand was wrongly issued to the attorneys instead of the executants of the GPA, contrary to law.
The respondents defended the notice, arguing that while the notice was issued on December 30, 2010, the delay was due to administrative processes following the issuance of the Official Memorandum on December 16, 2010. It was also submitted that the amendment to Section 46A had increased the limitation period to ten years, making the demand valid.
The Court examined Section 46A of the Karnataka Stamp Act, 1957, which prescribes the time limit for recovering unpaid stamp duty. The provision states that the competent authority may initiate recovery proceedings within five years from the date on which the duty became payable. The limitation extends to ten years only in cases involving fraud, collusion, or willful misstatement. The Court noted that the present case did not involve any such allegations and stated:
"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."
The Court further clarified that under normal circumstances, the demand should have been raised within five years from November 23, 1995. Since no notice was issued by November 22, 2000, and the proceedings were initiated only in December 2010, the demand was barred by law. The Court stated:
"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 proceeding having been initiated only on 30.12.2010 after a period of nearly 15 years is clearly and hopelessly barred even in terms of the amendment to Section 46A."
The Court also recorded that the demand notice had been issued to the attorneys rather than to the executants of the GPA, which was legally untenable.
The Court allowed the writ petition and quashed both the Karnataka Appellate Tribunal’s order dated February 28, 2017, and the demand notice issued by the District Registrar and Deputy Commissioner of Stamps dated November 8, 2013. The Court held that proceedings for the recovery of shortfall in stamp duty beyond the prescribed limitation period were not legally permissible. The judgment concluded:
"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."
Advocates Representing the Parties
For the Petitioners: Sri. K.N. Phanindra, Senior Advocate, for Smt. Vaishali Hegde.
For the Respondents: Sri. Mahantesh Shettar, Additional Government Advocate for Respondents 1 and 2.
Case Title: B.C. Prasad & Anr v. The District Registrar and Deputy Commissioner of Stamps & Ors
Neutral Citation: 2025:KHC:9154
Case Number: WP No. 41844 of 2017
Bench: Justice Suraj Govindaraj
[Read/Download order]
