Case Law Details
Smt. Sushma Kapur Vs Assessment Unit (ITAT Delhi)
The assessee appealed against the order of the Commissioner of Income Tax (Appeals)-NFAC dated 29.09.2025, arising from the assessment order dated 23.09.2022 passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for Assessment Year 2020-21.
The assessee had filed a return declaring total income of Rs. 9,92,990/-. The case was selected for scrutiny under CASS due to large investments in immovable property reported through Form 26QB and substantial exemption claims under Sections 54 and 54F.
During assessment, the Assessing Officer noted that the assessee had sold an inherited shop at Munirka, New Delhi, for Rs. 44,00,000 and claimed exemption under Section 54F by investing in a residential property purchased on 27.11.2019 for Rs. 3.30 crore. The Assessing Officer accepted this exemption.
The dispute related to capital gains arising from the sale of a residential property at Safdarjung Enclave, jointly owned with Smt. Nutan Kapoor. The assessee declared an indexed cost of acquisition of Rs. 1,73,40,000 and claimed exemption under Section 54 of Rs. 2,97,56,000. The Assessing Officer relied on the original acquisition cost reflected in the 1963 DDA allotment letter, accepted the construction cost from the valuation report, independently computed the fair market value (FMV) as on 01.04.2001, determined the indexed cost of acquisition at Rs. 67,44,197, and made an addition of Rs. 84,99,803. The CIT(A) upheld the addition.
Before the Tribunal, the assessee contended that the cost of land as on 01.04.2001 should be determined on the basis of the registered valuer’s report dated 18.10.2019, which valued the land component at Rs. 60,00,000 (50% share). It was also submitted that the Assessing Officer’s use of DDA 1981 rates with indexation was arbitrary and that the same valuation had already been accepted in the co-owner’s case.
The Tribunal found that the registered valuer had adopted a land rate of Rs. 39,645 per square metre as on 01.04.2001, whereas the Assessing Officer adopted Rs. 12,699 per square metre. It observed that the Assessing Officer had accepted the construction cost but had not provided any cogent or corroborative evidence or reasons for rejecting the registered valuer’s land valuation. The Tribunal held that the Assessing Officer’s method of deriving the FMV of land as on 01.04.2001 through indexation was arbitrary and not legally sound. It also noted that the identical valuation declared by the co-owner had been accepted. The Tribunal reversed the disallowance of the capital gains deduction under Sections 54/54F, allowed the assessee’s grounds, and allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT DELHI
This captioned appeal has been filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-NFAC-Delhi [‘CIT(A)’ in short] dated 29.09.2025 arising from the assessment order dated 23.09.2022 passed by the NFAC, Delhi under Section 143(3) r.w.s 144B of the Income Tax Act, 1961 (‘the Act’) concerning Assessment Year (A.Y.) 2020-21.
2. The grounds raised by the assessee are as under :
1. That the orders passed by the Assessing Officer and the CIT Appeals (Faceless) are bad in law and against the facts of the case and are void.
2. That the Assessing Officer was wrong to make disallowance of Rs.84,99,803/- to the income of the appellant on account of recalculation of the indexed cost claimed by the appellant under the head Long Term Capital Gains, according to his own methodology and on the basis of some old/redundant provisions.
3. That the orders also does not describe the Authority passing the orders, therefore suffers from gross defect.
4. That the method of calculation of the impugned disallowance is erroneous, without any logic and purely based on presumptions, without bringing on records any cogent material to support the impugned disallowance.
5. That the method of calculation of the LTCG adopted by the AO is defective and against the provisions of law applicable, on the date of determination of capital gains/the assessment year.
6. That the impugned additions have been made ignoring the facts, evidence and documents placed on record during the assessment.
7. That the basis adopted by the AO to make the impugned addition is illegal and has no legs to stand upon.
Prayer
That since, as submitted above, the impugned additions/disallowances are illegal, without any firm basis, based on presumptions and it is prayed that the additions/disallowances made by the Assessing Officer be deleted.”
3. Brief facts of the case is that the assessee, an individual, filed her return of income for the Assessment Year 2020-21, declaring a total income of Rs. 9,92,990/-. The case was selected for scrutiny under CASS owing to large investments in immovable property reported through Form 26QB in comparison with the declared income and also due to substantial claims of exemptions under sections 54 and 54F of the Income Tax Act, 1961.
4. In the course of assessment proceedings, the AO observed that the assessee had sold a shop at Munirka, New Delhi, for Rs.44,00,000/-, which was inherited from her late husband, and claimed exemption under section 54F by investing in a new residential property purchased on 27.11.2019 for Rs. 3.30 crore. The AO allowed the exemption as conditions were satisfied.
5. However, in respect of the capital gains arising from the sale of residential property at Safdarjung Enclave, jointly held with her sister-in-law Smt. Nutan Kapoor, the AO made a dispute. The assessee, on sale of Safdarjung Enclave property, declared an indexed cost of acquisition at Rs. 1,73,40,000/- and claimed exemption under section 54 for Rs. 2,97,56,000/-. The AO, considered the original acquisition cost in 1963 at Rs. 22,910/-, found from the DDA allotment letter, the construction cost as per the valuation report, calculated the FMV as on 01.04.2001, and computed the indexed cost of acquisition at Rs. 67,44,197/-. Accordingly, the AO worked out the taxable capital gain at Rs. 84,99,803/- and added the same to the total income of the assessee u/s 143(3) r.w.s 144B of the Act. On appeal the CIT(A) upheld the addition. The aggrieved assessee is before us.
6. The Id counsel of the assessee stated that the substantive issue for adjudication in the instant case is the calculation of cost of acquisition of land as on 01.04.2001. It is submitted that the assessee has relied upon the Valuation report prepared by the Registered valuer dated 18.10.2019 for determining the cost of land as on 01.04.2001 at Rs. 1,21,31,0000/-. It is submitted that the AO’s approach of using the DDA 1981 rates, indexing to 2001, and further indexing to the current year was arbitrary, legally unsound, and unsupported by the Income Tax Act. Further, it is stated that both she and her co-owner, Smt. Nutan Kapoor, had declared identical values for the Safdarjung Enclave property, which had been accepted in her co-owner’s case.
7. We have heard the rival submissions and perused the material on record. We find the issue for adjudication is the manner on which the value of land as on 01.04.2001, is computed. We find that the assessee has furnished the valuation report prepared by a Registered Valuer dated 18.10.2019 who had valued the said property by adding the cost of land (Rs 60,00,000/-, assessee’s share of 50%) and cost of construction (Rs 21,02,000/-). We find that the AO accepted the cost of construction but disputed the cost of land. We note that the Registered Valuer adopted the rate of Rs 39,645/- per sq. meter as 01.04.2001 whereas the AO adopted the rate at Rs 12,699 per mt.
8. We are of the considered view that the valuation of land as on 01.04.2001 adopted by the AO is not supported by any cogent and corroborative evidence. The AO has not given any cogent reason as to how the valuation of land adopted by the Registered valuer, is not acceptable. We therefore consider the approach of the AO of adopting the indexation method for finding the FMV of the land as on 01.04.2001, as arbitrary and not legally sound. Further, the co-owner, Smt. Nutan Kapoor, had declared identical values for the Safdarjung Enclave property, which has been accepted in her co-owner’s case. Once the value of land declared by the co-owner is accepted, there is no reason to deviate from the valuation adopted by the assessee, the other co-owner. The capital gains deduction u/s 54/54F disallowed by the AO is reversed. The grounds are allowed.
10. In the result, appeal of the assessee ITA No. 7294/DEL/2025 is allowed.
Order pronounced in the open court on 08.04.2026
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