An audit by the office of the Principal Accountant General has uncovered widespread undervaluation of properties registered with the Ernakulam sub-registrar office over the past two years. The audit identified undervaluation in 112 cases, resulting in a revenue deficit of stamp duty amounting to Rs 1.26 crore and registration fees of Rs 33 lakh. The sub-registrar has forwarded details of the undervalued properties to the district registrar for review and potential revision. The audit also revealed issues with valuation certificates issued by approved valuers and called for comprehensive reforms to address undervaluation and revenue loss in property transactions.
The office of the Principal Accountant General has unearthed a widespread undervaluation of properties registered with the Ernakulam sub-registrar office. In a recently released audit report for this month, it was revealed that many properties registered with the office in the past two years had been undervalued. This discovery occurred during the inspection of documents and registers carried out in June this year.
The comprehensive audit covered property registrations from January 2020 to December 2022. The audit team identified undervaluation in as many as 112 cases, leading to a revenue deficit of stamp duty amounting to Rs 1.26 crore and registration fees of Rs 33 lakh. Currently, these cases are awaiting revision at the district registrar office.
In response to the audit findings, the sub-registrar explained that the details of the undervalued properties had been forwarded to the district registrar, and final decisions regarding them are still pending. To recover the lost revenue, the district registrar will be required to initiate proceedings under Section 458 of the Kerala Stamp Act of 1959.
Furthermore, the audit report uncovered additional issues contributing to revenue loss, including the absence of fixed fair values for certain lands and deficiencies in the valuation certificates issued by approved valuers for buildings.
Spot checks of conveyance deeds (sale deeds) at the Ernakulam sub-registrar office revealed instances of non-compliance with government stipulations in the valuation of buildings (excluding apartment complexes) by valuers. This non-compliance resulted in a reduction in stamp duty and registration fees.
As per the rules, approved valuers, who are typically private agencies, are required to adhere to criteria approved by the Central Public Works Department for determining a building's value. They are also expected to apply the cost inflation index under Section 48 of the Income Tax Act of 1961 to calculate the current value of the building at the time of transfer. However, the audit report cited six property registrations in 2022 where valuers failed to apply the cost inflation index, leading to the undervaluation of the properties.
The report emphasizes that the undervaluation of buildings primarily lies with the approved valuers and not the registration officials. Sub-registrars are responsible for verifying the documents presented to them during registration, while the valuation process is conducted by the valuers. For years, sub-registrars had been held accountable for undervaluation of buildings and resulting revenue losses. The responsibility for rectifying this issue now falls on the government.
The auditor also highlighted the absence of relevant provisions in the Kerala Stamp Act or Registration Act to assign liability to authorities and impose penalties for losses incurred due to shortcomings in valuation certificates issued by them. It is worth noting that previous instances of undervaluation have been found in other sub-registrar offices in Ernakulam, underlining the need for comprehensive reforms and enforcement of proper valuation procedures in property transactions.
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