Sita P. Gera, Pune V. Deputy Commissioner of Income tax,

ITA 2830/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3033 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 14-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: HARI KRISHAN

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO. 2830/PUN/2016 / ASSESSMENT YEAR : 2005-06 MRS. POONAM R. SABUNANI, (LEGAL HEIR OF SMT. SITA P. GERA), PRITAM VILLA, 8/532, BOAT CLUB ROAD, PUNE 411 001 PAN : ADIPG2326C ....... / APPELLANT / V/S. DCIT, CIRCLE-2, PUNE / RESPONDENT APPELLANT BY : SHRI HARI KRISHAN RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 17.05.2018 / DATE OF PRONOUNCEMENT : 25.05.2018 / ORDER 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. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN UPHOLDING THE ASSESSMENT ORD ER PASSED U/S.143(3) OF THE I.T. ACT, WHICH IS INVALID AND BA D IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E 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 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN UPHOLDING THE ADDITION MADE BY THE AO BRING RENTAL VALUE OF SHOP NO. G-15, GERA PLAZA AT RS.1,7 5,250/-. 4. THE APPELLANT RESERVES THE RIGHT TO ADD, TO ALTE R, OR AMEND THE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE A PPEAL. 3. BRIEFLY STATED RELEVANT FACTS INCLUDES THAT THE ASSESS EE SMT. POONAM R. SABUNANI IS THE LEGAL HEIR OF SMT. SITA P. GERA. SH E DIED ON 10-12-2011 AS PER THE DEATH CERTIFICATE DATED 20-12-20 11. 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. SABUN ANI AS THE EXECUTORS OF THE WILL. IN THIS REGARD, LD. COUNSEL FOR T HE 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 AD JUDICATE THE ISSUES RAISED IN THE APPEAL. 4. NARRATING THE FACTS RELATING TO USE OF THE SAID PROPE RTIES, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE O WNS (1) FLAT NO.6, GERA SERENITY AND (2) SHOP NO.15, GERA PLAZA, BOAT CLU B 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 RECONSTRUCT ION WORK GOING ON AROUND IT. THERE ARE NO TENANTS FOR THE SAID PROPERT IES 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 T HE 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 R ENTING 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 S HOP. THERE ARE LETTER OF CORRESPONDENCES BETWEEN THE ASSESSEE AND T HE 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 CI T(A) DID NOT APPRECIATE THE SAME AND PROCEEDED TO ASSESS THE INCOM E OUT OF THESE PROPERTIES ON NOTIONAL BASIS AS UNDER; (1) RS.9,39,804/- IS T HE 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 UNSUC CESSFUL, LD. COUNSEL SUBMITTED FOR DELETING THE ADDITIONS AND RELIED HE AVILY ON THE FOLLOWING DECISIONS (1) VIKAS KESHAV GARUD VS. ITO 71 TAXMANN .COM 214 (PUNE-TRIB) AND (2) ACIT VS. DR. PRABHA SANGHI 27 TAXM ANN.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 EX PORTS PVT. LTD. VS. ACIT 110 TTJ 89 (MUMBAI) WAS CLOSELY APPLICABLE TO T HE 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 CONSIDERATIO N. IN THIS REGARD, ASSESSEES COUNSEL DREW MY ATTENTION TO PAGES 6 & 8 AND PA GES 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 N O.15, WHICH WERE FILED BEFORE THE CIT(A), AND SUBMITTED THAT THE SAID P APERS WERE CONVENIENTLY IGNORED BY THE FIRST APPELLATE AUTHORITY. 5. I HEARD BOTH THE SIDES. THE CORE ISSUE FOR ADJUDICA TION RELATES TO THE TAXATION OF THE NOTIONAL INCOME OF THE SAID TWO VA CANT 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 SUCCE SSFULLY DEMONSTRATES HIS INTENTION TO LET THE SAID PROPERTIES DUR ING 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 NAME LY, 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 A SSOCIATES, PUNE ADDRESSED TO RAISAHEB PRITAMDAS GERA, DT. 20-0 6-2004 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 I S GOING ON THE GROUND FLOOR OF THE BUILDING. ON ANOTHER VISIT THE Y FOUND THE FLOOR IS BRING COMPLETELY BROKEN UP FOR A CHANGE OF THE FLOW ING 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 C ARRIED 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 CO NNECTION 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 A SSOCIATES, PUNE ADDRESSED TO RAISAHEB PRITAMDAS GERA, DT. 27-0 6-2004 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 STAT E 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 O F 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 GER A SERENITY, KOREGAON PARK, PUNE PLEASE REFER TO OUR CONVERSATION OF DATE REGARDING THE RENTING OUT OF THE ABOVE PROPERTY AT GERA SERENITY, KOREGAON PARK, PUN E. 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 REPAINTI NG TO BRING IT TO A PRESENTABLE CONDITION 3. THE FLOOR TILES NEEDS CHANGING YOU ARE REQUESTED TO CONTACT US ON THE COMPLETION O F 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, T HESE 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 T HE PROPERTIES, ALTHOUGH THE EFFORTS DID NOT MATERIALIZE DURING THE YEAR U NDER CONSIDERATION. THEREFORE, IN MY VIEW, THE RATIO LAID DOWN BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF VIKAS KESHAV GARUD V S. ITO (SUPRA) IS APPLICABLE TO THE FACTS OF THE PRESENT CASE. I P ROCEED TO EXTRACT THE CONCLUSION PORTION FROM THE SAME AND THE S AID CONCLUSION READS AS UNDER : WHERE ASSESSEE INTENDED TO LET PROPERTY AND TOOK A PPROPRIATE 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 LES S THAN SUM REFERRED TO IN SECTION 23(1)(A) : 5.2 FURTHER, I AM OF THE OPINION THAT THE RATIO OF THE OR DER OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PREM SUDHA EX PORTS PVT. LTD. VS. ACIT (SUPRA) RELIED ON BY THE ASSESSEE, HELPS THE CASE OF THE ASSESSEE. FOR THE SAKE OF COMPLETENESS, THE RELEVANT C ONCLUSION 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 LE T IN THE RELEVANT PREVIOUS YEAR OR DURING ANY TIME PRIOR TO THE RELEV ANT PREVIOUS YEAR BUT MEANS INTENDED TO BE LET OUT; PROPERTY IN QUESTION BEING INTENDED TO BE LET OUT AND DESPITE EFFORTS MADE, IT REMAINED VACAN T 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 R ENT OUT THE PROPERTIES. ASSESSEE ALSO COULD NOT UNDERTAKE THE REPA IRS TOO TO KEEP UP THE PROPERTIES FIT FOR RENTING. THEREFORE, CONSIDERING T HE FACT THAT THE PROPERTIES WERE RENTED OUT IN THE PAST AND ATTEMP TED 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 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 25 TH DAY OF MAY, 2018. SD/- ( . /D. KARUNAKARA RAO) / ACCOUNTANT MEMBER / PUNE; / DATED : 25 TH MAY, 2018. SATISH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEAL) -5, PUNE. 4. THE PR.CIT-4, PUNE. 5. , , - , / DR, ITAT, SMC BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // /SR. PRIVATE SECRETARY , / ITAT, PUNE.