Stamp Duty | Collector's Spot Inspection Without Notice To Party Doesn't Invalidate Proceedings If No Prejudice Caused: Allahabad High Court
The Allahabad High Court has held that a spot inspection conducted by the District Magistrate in stamp duty deficiency proceedings without issuing notice to the party is an irregularity, and not an illegality, where no prejudice is caused to the party. The Court held that under Rule 7(3) of the U.P. Stamp (Valuation of Property) Rules, 1997, it is not mandatory for the Collector to conduct...
The Allahabad High Court has held that a spot inspection conducted by the District Magistrate in stamp duty deficiency proceedings without issuing notice to the party is an irregularity, and not an illegality, where no prejudice is caused to the party.
The Court held that under Rule 7(3) of the U.P. Stamp (Valuation of Property) Rules, 1997, it is not mandatory for the Collector to conduct an inspection, but where one is conducted, notice ought to be given to the parties to the instrument.
Justice Saurabh Shyam Shamshery held,
“…Rule 7 (3) of said rules provides that Collector may inspect the property after due notice to the parties to the instrument, therefore, it is not mandatory for the District Magistrate to conduct an inspection. However, if an inspection is conducted, notice ought to have been given to the petitioners, but nothing has been recorded in the inspection report therefore, there is an irregularity.”
Holding that the specific findings in the inspection report had gone undenied, the Court observed,
“It is also not denied that petitioner has already purchased other parts of same Gata and within a few period, it was sold to other persons in form of small lands as residential plots and this specific finding is not being denied either in writ petition or during arguments, therefore, Court finds that no prejudice is caused to petitioner, therefore, only on basis that petitioner was not issued notice before conducting inspection, it may be an irregularity but not an illegality.”
The writ petitions were filed against stamp duty deficiency pointed out by the District Magistrate in respect of three sale deeds purchased by the petitioner for different areas of a single arazi. In the sale deeds, the lands were shown as agricultural land and stamp duty and registration fee were paid accordingly.
On inspection under Section 47A(3) of the Indian Stamp Act, the Additional District Magistrate reported that stamp duty was to be determined treating the lands as non-agricultural, being situated at Link Marg, Vista Farmhouse Colony. It was found that the lands were not used for agricultural purpose and the surrounding lands had been sold as small residential plots and more than 60,000 bricks had been used in constructing the boundary wall.
During the proceedings, the District Magistrate himself conducted a spot inspection on 23.07.2025. The inspection reports did not record that any notice was issued to the petitioner to remain present. In his reply, the petitioner stated that the lands were used for agriculture, were not part of any colony, were surrounded by other agricultural land, and that the boundary wall was constructed to protect the land. The sale deeds had been executed by the petitioner as Director of Contour Buildcon Private Ltd.
By orders dated 30.07.2025, the District Magistrate held that there was a deficiency of stamp duty, recording that the lands were situated at Link Marg of Vista Farmhouse Colony, were not used for agriculture and were surrounded by lands used for residential purpose. In one of the orders, the deed was impounded under Section 33/40(b) of the Stamp Act and a deficiency of Rs. 20,19,440/- in stamp duty and Rs. 2,88,560/- in registration fee was imposed on the purchaser, along with a penalty of Rs. 5,00,000/- and simple interest at 1.5% per month.
The petitioner's appeals were dismissed by separate orders, whereafter he approached the High Court.
The Court observed that the petitioner had only vaguely denied the inspection report and had not come up with any specific evidence that the lands were used for agricultural purpose. It noted that it was not disputed that the lands were purchased by Contour Buildcon Private Ltd. and were surrounded on at least three sides by lands already purchased by the company.
“Learned counsel for the petitioner has failed to show any basis to deny the aforesaid facts that Modus Operandi of petitioner was that he purchased various parts of single Gata allegedly for the purpose of agriculture, but within a very short period it was sold to various vendors in small area of plots for residential purpose, therefore, it is very possible that same Modus Operandi would be followed for the lands in question,” held the Court.
On the question whether deficiency of stamp duty could still be computed where the land was utilised for agriculture at the time of execution of the sale deeds, the Court relied on the Full Bench decision of the Allahabad High Court in Smt. Pushpa Sareen v. State of U.P., which held that,
“The market value of the property has to be determined with reference to the use to which the land is capable reasonably of being put to immediately or in the proximate future. The possibility of the land becoming available in the immediate or near future for better use and enjoyment reflects upon the potentiality of the land. This potential has to be assessed with reference to the date of the execution of the instrument. In other words, the power of the Collector cannot be unduly circumscribed by ruling out the potential to which the land can be advantageously deployed at the time of the execution of the instrument or a period reasonably proximate thereto.”
Holding that there was no denial about commercial activities surrounding the plot, the Court dismissed the writ petitions.
Case Title: Rohtash Singh @ Rohtash v. State of U.P. and 3 others