Stamp-duty law on property undervaluation referred to larger bench as Supreme Court questions need for fraudulent intent under Section 47-A

Bharat Petroleum Corporation Limited purchased land from the Government of India for a fixed consideration, which was fully paid through cheques in 2014; possession was delivered on 21 January 2014.

A transfer deed was executed on 24 June 2016, and the appellant paid stamp duty and registration charges on the consideration stated in the deed.

The registering authority nevertheless referred the instrument to the District Revenue Officer under Section 47-A of the Indian Stamp Act, 1899, alleging undervaluation because the guideline value was ₹500 per square foot whereas the instrument reflected ₹168.30 per square foot.

A show-cause notice was issued demanding alleged deficit stamp duty.

The Single Judge quashed the notice, holding that Section 47-A required material indicating deliberate undervaluation with fraudulent intent to evade stamp duty, relying on V.N. Devadoss v. Chief Revenue Control Officer-cum-Inspector of Stamps.

The Division Bench reversed that order, restored the proceedings, and held that the appellant should first participate in the statutory adjudication and pursue the available appellate remedies.

Whether the statutory machinery under Section 47-A of the Indian Stamp Act could validly be invoked on the basis of the registering authority’s belief that the market value or consideration had not been truly set forth, without material establishing wilful undervaluation or fraudulent intention to evade stamp duty?

Whether “wilful undervaluation” and “fraudulent intention” constitute additional jurisdictional preconditions for initiating proceedings under Section 47-A, as held in V.N. Devadoss and followed in Registrar of Assurances v. ASL Vyapar (P) Ltd.?

Whether the High Court could quash the show-cause notice at the threshold, or whether the appellant was required to pursue the statutory adjudicatory and appellate remedies under Section 47-A?

Section 47-A(1) of the Indian Stamp Act authorises the registering officer to refer an instrument to the Collector where he has reason to believe that the market value or consideration has not been truly set forth; the Collector must then determine the market value and proper duty after hearing the parties, with a statutory right of appeal against the Collector’s order.

A writ challenge to a show-cause notice is ordinarily premature, subject to the narrow exceptions of complete want of jurisdiction or mala fide/abuse of jurisdiction.

In V.N. Devadoss, a three-Judge Bench held that the power under Section 47-A required wilful undervaluation with fraudulent intent to evade stamp duty; that approach was later noticed in ASL Vyapar.

Ramesh Chand Bansal v. District Magistrate/Collector explained that guideline or circle values are only prima facie indicators supporting valuation scrutiny, while Shanti Bhushan v. State of U.P. reaffirmed that a taxing statute must be interpreted according to its plain language and that courts cannot imply requirements not expressed in the statute.

Judicial discipline requires a coordinate Bench to follow a binding decision of a larger Bench, but permits reference where serious doubts arise regarding its correctness.

The Court held that the District Revenue Officer possessed statutory authority over the subject matter; therefore, the case was not one of total lack of jurisdiction.

The appellant was challenging the manner in which an existing jurisdiction had been invoked, rather than the authority’s legal competence to act.

The Court observed that Section 47-A expressly requires only a “reason to believe” that the market value or consideration was not truly set forth and does not expressly require proof of fraudulent intent or a culpable mindset.

Reading fraud into the provision could improperly convert a valuation inquiry into a quasi-criminal inquiry: an honest purchaser of property sold below the guideline value would have to disprove fraud, while concealed cash consideration might remain beyond detection at the initiation stage.

Nevertheless, because V.N. Devadoss was a binding three-Judge Bench decision, the Court could not overrule it directly.

It therefore referred the correctness of that precedent, and the connected decisions in ASL Vyapar, Ramesh Chand Bansal, and Shanti Bhushan, to a larger Bench.

It held that the principal controversy concerned the legal threshold for invoking Section 47-A and the effect of the alleged absence of fraudulent intent.

Finding serious doubts about the correctness of V.N. Devadoss, the Court referred the following questions to a Bench larger than three Judges: whether Section 47-A requires wilful undervaluation with fraudulent intent, and whether Ramesh Chand Bansal and Shanti Bhushan correctly state the applicable principles.

The papers were directed to be placed before the Chief Justice of India for appropriate orders.

The final validity of the notice and the Single Judge’s quashing order was left to depend on the outcome of that reference.