SITA P. GERA,,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX,,

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM

This appeal is filed by the assessee against the order of CIT(A)-5, Pune, dated 02.09.2016 for the A.Y. 2005-06.

“1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in upholding the assessment order passed u/s.143(3) of the I.T. Act, which is invalid and bad in law. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in upholding the addition made by AO being rental value of Flat No.6, Gera Serenity at Rs.9,39,804/-.

2 ITA No.2830/PUN/2016 Mrs. Poonam R. Sabunani, Legal heir of Mrs. Sita P. Gera

Poonam R. Sabunani is the legal heir of Smt. Sita P. Gera. She died on

10-12-2011 as per the Death Certificate dated 20-12-2011. Late Smt.

Sita P. Gera left a will and testament made on 03-01-2010 appointing

her daughter (Smt. Poonam R. Sabunani or Mr. Ram L. Sabunani as

the executors of the will. In this regard, Ld. Counsel for the assessee

filed a copy of legal heir certificate and the copy of the will to evidence

the above claims mentioned in the grounds. On hearing the Ld. DR

for the Revenue on this preliminary issue, I proceed to adjudicate the

issues raised in the appeal.

Counsel for the assessee submitted that the assessee owns (1) Flat

No.6, Gera Serenity and (2) Shop No.15, Gera Plaza, Boat Club Road,

Pune. Till A.Y. 2004-05, these properties were rented out and the

rental income was duly reflected in the returns of income. Page 11 of

the paper book shows the computation of income for the A.Y. 2004-05

to support the above. During the A.Y. 2005-06, the said properties

remained vacant for the reasons that the flat was not in good

condition and required heavy repairs. Similarly, the Shop No.15, Gera

Plaza, Pune also could not be let out due to reconstruction work going

on around it. There are no tenants for the said properties during the

year. Ld. Counsel for the assessee brought my attention to these facts

and made a reference to the contents of Para No.5.2 of the order of

3 ITA No.2830/PUN/2016 Mrs. Poonam R. Sabunani, Legal heir of Mrs. Sita P. Gera

CIT(A) and stated that the assessee made all efforts for renting out

these properties. Ld. Counsel also drew my attention to the Para Nos.

6 to 9 of the paper book relevant to the flat and the shop. There are

letter of correspondences between the assessee and the Real Estate

broker and the same are placed in the paper book. The Real Estate

broker intimated the assessee about the essential need for the repairs

for successfully renting out of the properties. They listed out the

nature of repairs in the said letters too. AO and the CIT(A) did not

appreciate the same and proceeded to assess the income out of these

properties on notional basis as under; (1) Rs.9,39,804/- is the Fair

Rental Value for Flat No.6, Gera Serenity adopted in the A.Y. 2003-04

and (2) Rs.1,75,250/- is the Fair Rental Value for Shop No.15, Gera

Plaza adopted in the A.Y. 2003-04.

4.1 Considering the fact that the assessee made all efforts for

renting out the properties and the assessee was unsuccessful, Ld.

Counsel submitted for deleting the additions and relied heavily on the

following decisions (1) Vikas Keshav Garud Vs. ITO 71 taxmann.com

214 (Pune-Trib) and (2) ACIT Vs. Dr. Prabha Sanghi 27 taxmann.com

317 (Delhi)

4.2 Further, Ld. Counsel for the assessee submitted that the

Mumbai Bench of the Tribunal in the case of Prem Sudha Exports Pvt.

Ltd. Vs. ACIT 110 TTJ 89 (Mumbai) was closely applicable to the facts

of the present case. However, the CIT(A) distinguished the same

holding that the assessee did not file any evidence about the intention

to let the said properties in the year under consideration. In this

regard, assessee’s counsel drew my attention to Pages 6 & 8 and pages

4 ITA No.2830/PUN/2016 Mrs. Poonam R. Sabunani, Legal heir of Mrs. Sita P. Gera

7 & 9 of the paper book relating to Flat No.6 and Shop No.15, which

were filed before the CIT(A), and submitted that the said papers were

conveniently ignored by the First Appellate authority.

to the taxation of the notional income of the said two vacant

properties. Further, the relevant legal proposition is a settle one, vide

the decisions cited above. Accordingly, no income is table relating to

the said vacant properties provided the assessee successfully

demonstrates his intention to let the said properties during the year

under consideration. On hearing both the parties on the said legal

proposition, I find it relevant to extract the contents of relevant letters

between the assessee and the Real Estate Agents namely, M/s. Sagar

Shah Associates, Pune and M/s. Bhatnagars, Pune and the same

reads as under:

Page 6 of the paper book – Letter from Sagar Shah Associates, Pune addressed to Raisaheb Pritamdas Gera, dt. 20-06-2004

“Sub : Rental/Lease arrangement for Shop Unit No.15, Ground Floor in Gera Plaza, Boat Club Road – of Mr. Sita P. Gera.

The prospective customer have visited your premises in last 3 to 4 times and they have found the extensive renovation work is going on the ground floor of the building. On another visit they found the floor is bring completely broken up for a change of the flowing and on enquiring it appears that this could take approx between 6 to 8 months as it also involves redoing of the rain water drainage systems and the erection and installation of a Roof above the Atrium Open to Sky area. Furthermore there also reconstruction works being carried out for the shifting of the staircase and the toilet facilities. Our opinion is that these works could take upto 7/8 months and more.

Your Shop is on the inside which would be suitable only for certain types of businesses. Moreover there is no water connection and also drainage system for your shop unit. With these conditions it is difficult to find a customer, I suggest that we would show the Shop once the works are completed.

Page 7 of the paper book – Letter from Sagar Shah Associates, Pune addressed to Raisaheb Pritamdas Gera, dt. 27-06-2004

5 ITA No.2830/PUN/2016 Mrs. Poonam R. Sabunani, Legal heir of Mrs. Sita P. Gera

“1. The Flooring Tiles are in Very Poor condition. 2. Too many water patches from the leakages in the ceiling and the walls, probably from the slab above and some due to rain water seepage. 3. Bathrooms/toilets are looking in very poor state – Required for use for staff force and visitors of a minimum of 20 to 25 in number during the day. 4. The painting of the whole premises is required as Walls and Ceiling are in poor condition.”

Page 8 of the paper book – Letter from Bhatnagars, Pune addressed to Mr. Pritamdas Gera, dt. 10-06-2004

“Sub : Commercial lease arrangements for Shop No.15, Ground Floor at Gera Plaza, Boat Club Road, Pune.

Please refer to our conversation of date regarding the renting out of the above property at Gera Plaza.

Kindly note that the said property on inspection by us was found to be having the construction work going on all around it causing pollution and noise pollution and hence at the moment we are not able to rent out the same.”

You are requested to contact us on the completion of the construction work and we will be pleased to rent out the same.”

Page 9 of the paper book – Letter from Bhatnagars, Pune addressed to Mr. Pritamdas Gera, dt. 10-06-2004

Sub : Commercial Leave & Lease for Flat No.6 in Gera Serenity, Koregaon Park, Pune

Please refer to our conversation of date regarding the renting out of the above property at Gera Serenity, Koregaon Park, Pune.

Kindly note that the said property on inspection by us was found to be not upto the mark owing to the following : 1. Water leakages and seepages. 2. Cracks in the wall which needs repairs and repainting to bring it to a presentable condition 3. The floor tiles needs changing

You are requested to contact us on the completion of the work and we will be pleased to rent out the same.”

5.1 From the point of view of intention to rent out both the

properties, in my opinion, the above said letters are clear in stating

that the assessee proposed to let the properties and employed and

agents in this regard and the problems for failure to let the same were

intimated by the agents to the assessee. In my view, these papers

6 ITA No.2830/PUN/2016 Mrs. Poonam R. Sabunani, Legal heir of Mrs. Sita P. Gera

sufficiently suggest the intention of the assessee to let the properties,

although the efforts did not materialize during the year under

consideration. Therefore, in my view, the ratio laid down by the Pune

Bench of the Tribunal in the case of Vikas Keshav Garud Vs. ITO

(supra) is applicable to the facts of the present case. I proceed to

extract the conclusion portion from the same and the said conclusion

reads as under :

“Where assessee intended to let property and took appropriate efforts in letting property but ultimately failed to let same, in terms of section 23(1)(c) its ALV had to be treated as nil being less than sum referred to in section 23(1)(a) :

5.2 Further, I am of the opinion that the ratio of the order of

Mumbai Bench of the Tribunal in the case of Prem Sudha Exports Pvt.

Ltd. Vs. ACIT (supra) relied on by the assessee, helps the case of the

assessee. For the sake of completeness, the relevant conclusion of

the decision is extracted as follows :

“Conclusion : Expression ‘property is let’ in cl (c) of s.23(1) does not mean that the property should have been actually let in the relevant previous year or during any time prior to the relevant previous year but means intended to be let out; property in question being intended to be let out and despite efforts made, it remained vacant for the whole of the relevant previous year, its annual value has to be worked out as nil under s.23(1)(c).”

5.3 In the present case, the assessee made efforts to rent out the

properties. Assessee also could not undertake the repairs too to keep

up the properties fit for renting. Therefore, considering the fact that

the properties were rented out in the past and attempted to rent out in

the current year, I am of the opinion that it is not a fit case for taxing

the income on notional basis. Hence, in view of the above discussion,

I direct the AO to delete the additions made by the AO. Thus, the

grounds raised by the assessee are allowed.

7 ITA No.2830/PUN/2016 Mrs. Poonam R. Sabunani, Legal heir of Mrs. Sita P. Gera

Order pronounced on 25th day of May, 2018.

Sd/-

(डी डी डी.क�णाकरा राव डी क�णाकरा राव क�णाकरा राव/D. KARUNAKARA RAO) क�णाकरा राव लेखा सद�य लेखा सद�य लेखा सद�य / ACCOUNTANT MEMBER लेखा सद�य

पुणे / Pune; �दनांक / Dated : 25th May, 2018. Satish

आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeal) -5, Pune. 4. The Pr.CIT-4, Pune. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “एक एक-सद�य सद�य” ब�च, 5. एक एक सद�य सद�य पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

आदेशानुसार / BY ORDER, // True Copy //

िनजी सिचव /Sr. Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.