Retrospective property-tax notices must issue within one year of municipal knowledge of the relevant development.

The original petitioner purchased the property in 2008. The respondent approved a residential building plan in 2009 and, in 2013, approved an additional plan changing the use to commercial.

The petitioner alleged that the respondent inspected and assessed the property on 22 November 2017, recording its area as approximately 557.69 sq. m.

The respondent later issued bills dated 1 April 2018 and 3 December 2019, including a retrospective tax demand; the petitioner challenged the bills and a special notice dated 27 March 2019, alleging that the notice had not been served as required by the Taxation Rules. The petitioner had paid Rs. 3,50,000 under protest. During the proceedings, the original petitioner died and her son was substituted.

Whether the retrospective property-tax bills and the special notice dated 27 March 2019 could stand, given the petitioner’s challenge to the notice and the claimed prior municipal knowledge of the redevelopment.

Whether the respondent could be permitted to determine the petitioner’s tax liability afresh after hearing her and considering when it acquired knowledge of the relevant development.

The Court considered Rules 15(2), 20(2) and 21A of Chapter VIII of the Taxation Rules under the Gujarat Provincial Municipal Corporations Act, 1949.

Relying on Tokle Timber Mart v. State of Gujarat & Anr., Special Civil Application No. 16400 of 2015, decided 21 July 2016, it noted that where Rule 21A applies, the Commissioner’s notice for retrospective tax must be issued within one year of learning of the relevant development; absent a pleading that the development came to the authority’s knowledge only recently, tax could not be collected for periods long before the special notice.

The Court applied the related judgment in Special Civil Application No. 12304 of 2019 and allied matters, which required the authority, when reconsidering retrospective tax, to assess the matter in light of the date of its knowledge and the applicable statutory provisions.

The Court treated the reasoning on retrospective taxation in the related proceedings as applicable to this case.

It did not decide the disputed factual question of when the respondent learned of the redevelopment. Instead, it set aside the challenged bills and notice and directed that any fresh determination be made after hearing the petitioner.

In particular, if the petitioner could establish that the respondent inspected the property on 22 November 2017 and knew of the redevelopment and its area, the authority was to issue an appropriate bill only after giving specific notice.

Any amount already paid was to be adjusted against the outstanding tax liability. If an adverse order or bill were issued, the petitioner could challenge it before the appropriate forum; any such order was not to be implemented for 15 days.