Income Tax Appellate Tribunal - Delhi
Deputy Commissioner Of Income Tax , ... vs Gurmeet Kaur, Delhi on 10 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E': NEW DELHI
BEFORE
SHRI RAJ KUMAR CHAUHAN, JUDICIAL MEMBER
AND
SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER
ITA No.1249/Del/2025, A.Y. 2015-16
Deputy Commissioner of Gurmeet Kaur
Income Tax, 36, Church/ Mall Road,
Room No. 1505, E-2 Block Vs. Vasant Kunj,
Civic Center, Minto Road, South West Delhi,
New Delhi 09-Delhi, 91-India,
110070
PAN: ANIPK1076B
(Respondent) (Appellant)
Appellant by Sh. G.S.Grewal, CA, Sh. Jaspal
Singh Sahni, CA, Ms. Harsimran
Grewal, CA
Respondent by Sh. Ravi Kant Choudhary, Sr.DR
Date of Hearing 16/03/2026
Date of Pronouncement 10/04/2026
ORDER
PER RAJ KUMAR CHAUHAN (J.M.):
1. This appeal is filed by the assessee /appellant against the order of Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), New Delhi [hereinafter referred to as the 1 ITA No. 1249/Del/2025 "CIT(A)"], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as "the Act"] dated 27.12.2024 for the A.Y. 2015-
16, wherein additions made by the Assessing officer were deleted and appeal of the assessee was partly allowed.
2. The facts in brief as culled out from the order of the authorities below are that the respondent/assessee is an individual and filed its ITR for A.Y. 2015-16 on 30.03.2017 declaring an income of Rs. 31,16,120/-. The case was selected for limited scrutiny under CASS by issuing notice 143(2) of the Act on 29.09.2017. Subsequently, notice u/s 142(1) of the Act was issued along with questionnaire issued on 04.12.2017. It is noticed that the assessee has declared income from house property, Capital gain and Other Sources, details of which were filed during the assessment proceedings. When the case was selected for scrutiny under CASS on the following issues:
a. Whether value of consideration for capital gain has been correctly shown in the return of income?
b. Whether deduction from capital gain has been shown correctly?2 ITA No. 1249/Del/2025
3. It was observed that the assessee has sold its half share in land admeasuring 54.9375 bighas at Nanta Village, ladpur tehsil in Kota district of Rajasthan with sales consideration of Rs. 5,08,00,000/- in FY 2014-15. The land use of the said land was mentioned as agricultural for the purpose of revenue records as the land situated in Nanta Village lies well within the municipal limits of kota municipality and the said fact was confirmed by the tehsildar of the ladpur tehsil, Kota. The first reason for selection of the case for scrutiny proceedings stood verified and was found correctly recorded.
4. With respect to the second reason of scrutiny that "whether deduction from capital gain has been shown correctly, the assessee was asked vide notice u/s 142(1) dated 04.12.2017 to furnish details of the claim of deduction alongwith supporting documents. The AR of the assessee appeared from time to time and presented the following details in compliance of the above notice as under:
"Assessee has shown the computation of capital gain in the return of income in the following manner:
Sale consideration received : 5,08,00,000/-
Less cost of acquisition 60,25,810/-
Less cost of improvement 5,54,000/-
Less transfer expenses 4,42,20,190/-
Deduction u/s 54/54F/54B 4,19,50,000/-
Taxable Capital gain 22,70,190/-
3
ITA No. 1249/Del/2025
5. For the cost of acquisition assessee produced purchase deed of the said land dated 14.08.1971, wherein the father of the assessee purchased the said land for consideration of Rs. 40,626. After death of assessee's father the half share of said land acquired and owned absolutely by the assessee vide mutation no. 760 dated 18.05.2012 under succession.
Since, the land sold under consideration is purchased before the year 1981 and the assessee came to be in ownership of the same via succession, therefore the valuation of land for the year 1981 shall be taken as cost of acquisition and indexation shall be provided on the same as per combined reading of section 48 and 49 of the Act. It was further observed by the AO that the question has arisen as to what should be taken as the value of the said land for the year 1981 for the purpose of indexation. In that regard, the AO sought information from the office of Deputy Inspector General, Stamps, Kota seeking the DLC rates or rates approved by Inspector General, Revenue and stamps (IGR&S) for the year 1981 under section 133(6) of the Act. It was further observed by the AO that DIG stamps had replied that the DLC rates were not prevalent for registration of properties before year 1992. Prior to that the registration of documents were done on the basis of a document named index 2. It was also informed that no registry for sale 4 ITA No. 1249/Del/2025 of any land in Nanta village for the year 1981 was found. Therefore, the copies of index 2 are made available for 1980 and 1982. From perusal of the same as produced above, it is evident that the prevailing rate for registration of land in Nanta village were:
In year 1980 For 27 bigha and 19 biswa registry has happened at Rs. 52,000 (per bhiga approx. Rs.1926/-) For 19 bigha registry happened at Rs. 40,000/- (per bigha approx.
Rs.2105/-) In year 1982 For 2 bigha 7 biswa registry happened at 10,000/-(per bigha approx.
Rs. 5000/-).
Further, it is noticed by the AO that the cost of acquisition deemed for the purpose of allowing indexation comes out to be Rs. (5000* 54.9375*0.5-1,37,343.75/-). Providing indexation on the same, the allowable indexed cost of acquisition comes out to be Rs.
1,37,343.75*1024/100- Rs. 14,06,400/-.
6. It was further observed by the AO that the assessee has furnished the valuation report on the letter head of an entity named Designtech 5 ITA No. 1249/Del/2025 Architect which provided a very highly exaggerated valuation of the said land for the year 1981. As it provided valuation of Rs. 90,000/- per bigha. The said valuation report was prepared, as mentioned in it, on the basis of information by the owner. No other basis of valuation was mentioned. Hence, the same was rejected.
7. It was further observed that the assessee has claimed deduction u/s 54F of the act to the extent of Rs. 4,19,50,000/-. In support of the same, the assessee produced a sale deed dated 19th May, 2015 for the purchase of land described as Musratil no. 36, killa nos. 18 min, 23 min, village Mehrauli, New Delhi. In the said sale deed, the Mehrauli property is purchased for consideration of Rs. 1,50,00,000/-. The property description also states that it is an agricultural land of 2 bighas and 9 biswas located in Mehrauli village situated within the municipal limits of Delhi Municipal Corporation. It was observed that the section 54F of the Act was not applicable in this case.
8. The ld. AO observed that the assessee cannot claim exemption u/s 54F as the condition of making investment for purchase or construction of residential property is not satisfied. The plot of land thus purchased remains a plot and no further construction has been done till the due 6 ITA No. 1249/Del/2025 date of the filing of the return of the assessee. Hence, the claim of the assessee for deduction u/s 54F of the act was rejected as the claim of capital gain deduction was not as per law. The Ld. AO has also disallowed the deduction claimed u/s 54B of the Act on the ground that the condition laid down in Section 54B of the Act regarding the claim of exemption are not fulfilled, because neither the assessee nor of any relative was practicing agriculture on that land in last 2 years as the said land on which the assessee has incurred capital gain was under illegal occupation. Section 54B of the Act gives benefit on the sale of agricultural land which in turn is reinvested to buy another agricultural land for the purpose of practicing agriculture. The plot of land purchased in Mehrauli is also not put to use for practice of agriculture. Therefore, in this case, none of the above condition for claiming exemption u/s 54B of the Act were fulfilled. The ld. AO, therefore, rejected the claim of deduction u/s 54, 54B and 54F of the Act and amount of Rs. 4,19,00,000/- is disallowed and added back to return income of the assessee under the head of "Capital Gain".
9. Aggrieved by the assessment order, the assessee filed appeal before the ld. CIT(A). As per the contents of form 35, the assessee has raised following grounds before the Ld. CIT(A) as under:
7 ITA No. 1249/Del/2025
"1. The Ld. Assessing Officer has erred in reducin g the cost of acquisition from Rs.60,25.810/- to Rs. 14.06.400/-.
2. The Ld. Assessing Officer has erred in reducin g the transfer expenses from Rs. 5,54,000/- to Rs.4,78,353/-
3. The Ld. Assessing Officer has erred in disallo wing the deduction claimed u s 54F of the Inc ome Tax Act, 1961 amounting to Rs.4,19,50,000/-.
4. The Ld. Assessing Officer has erred in passing the order in contravention of Principle of Natural Justice by not providing an opportunity to appellant to challenge the valuation of land sold."
The assessee has claimed that the AO has erred in reducing the cost of acquisition from Rs. 60,25,810/- to Rs./ 14,06,400/-. The AO has further erred in reducing the transfer expenses from Rs. 5,54,000/- to Rs. 4,78,353/- and the AO has erred in disallowing the deduction claimed u/s 54F of the act amounting to Rs. 4,19,50,000/-.
10. Before the ld. CIT(A), it was submitted by the assessee that the land was purchased in the year 1981, the appellant took the fair market value of the property as on 1st April, 1981 as cost of acquisition to compute the capital gain. The appellant has claimed Rs. 60,25,810/- as cost of acquisition with indexation for sale of property at village Nanta, Tehsil Ladpura, district Kota, Rajasthan. It is further submitted that the Ld. AO did not accept the Fair Market Value as claimed by the appellant and cost of acquisition was computed at Rs. 1,37,343.75/-. The assessee 8 ITA No. 1249/Del/2025 further submitted that the Ld. AO did not refer the matter to the Valuation Officer and took the value @ 5,000/- per Bigha alleged to have been given by the office of DIG Stamps. The Ld. AO rejected the valuation report of the assessee got prepared from Designtech Architect which gave the Fair Market Value as on 01.04.1981 as Rs. 90,000/- per Bigha. The ld. AO rejected the valuation report of the appellant without any basis on the ground of high exaggerated valuation of the land. However, after rejecting the valuation report of the assessee, the AO did not refer the matter to Valuation Officer and after completion of the Assessment Proceedings, the appellant got valuation report from another registered valuer who had computed the market value of land as Rs. 70,000/- per Bigha and computed the Fair Market Value of the land along with the dwelling houses constructed thereon as on April 1, 1981 at Rs. 54,16,000/-. The said valuation report dated 04.01.1981 obtained from the Registered Valuer was submitted along with the appeal before the Ld. CIT(A). The ld. AO however, computed the Fair Market Value at Rs. 1,37,343.75 which according to the assessee is incorrect valuation and it suffers from following defects:
"1. The Ld. AO had failed to refer the valuation of the property to DVO as required by the provision of section 55A of the Act.9 ITA No. 1249/Del/2025
2. The Ld. AO, without referring the matter to the DVO, had assumed the role of Valuer and adopted her own method of calculating the Fair Market Value of the property as on 01/04/1981. It is submitted that Ld. AO has herself stated the value of land as given by DIG stamp was Rs.5,000/- per Bigha. Thus, she had not considered the value of Kothi, servant quarters already constructed on the land.
3. The Ld. AO had while calculating the value of the property failed to comply with the principle of natural justice. In compliance with the principles of natural justice, the appellant should have been supplied the information collected before relying thereon and making it a base for assessment."
11. It is to be noticed that on the basis of submission made by the assessee, in order to determine the Fair Market Value of the property as on 1st April, 1981, the earlier Ld. CIT(A) forwarded the file to the office of the ACIT, Circle 50(1), New Delhi with the direction to refer the file to the office of competent Valuation Officer in accordance with Section 50A of the Act. The Valuation report dated 24.12.2019 received from the office of Valuation Officer has computed the Fair Market Value of the land as on 01.04.1981 at Rs. 1,66,320/-. However, according to assessee, the said Valuation Officer was not the competent Valuation Officer. Hence, the valuation report dated 24.12.2019 was not valid. It is explained that as per the guidelines for Valuation of immovable Properties 2009, issued by the Directorate of Income Tax, where under chapter 1 with regard to Judicial and Financial limits of Valuation Office, DVOs, VOs and AVOs perform the 10 ITA No. 1249/Del/2025 concerns of valuation officers within the specific geographical jurisdiction and financial limits. The financial limits specified in Rule 3A of the Wealth Tax Act, 1957 as follows:
"If the value of the asset declared by the assessee exceeds Rs. 300 lakhs or if the asset is not disclosed or the value of the asset is not declared or no return has been made and the value of the asset, in the opinion of the Assessing Officer, exceeds Rs. 300 lakhs, the function of the Valuation Officer shall be performed by the District Valuation Officer."
12. On the basis of Rule 3A as mentioned above, it was claimed by the assessee that in his case, the appellant has declared Rs. 5,08,00,000/- as the value of property sold, and accordingly, the competent authority to value the property is District Valuation Officer, Jaipur, Rajasthan and the valuation report given by the Valuation Officer was not valid as he was below the District Valuation Officer and was not competent valuation officer. Accordingly, the assessee requested the ld. CIT(A) vide submission dated 29.02.2024, 17.06.2023, 09.11.2021, 19.01.2021 and 21.08.2020 for referring the file to the office of the competent officer, i.e. District Valuation Officer, Jaipur, Rajasthan for determining the Fair Market Value of the property as on 01.04.1981 in accordance with section 50A of the Act related with guidelines for valuation of immovable property, 2009 issued by the Directorate of Income Tax.
11 ITA No. 1249/Del/2025
13. With regard to the rejection of the exemption claimed by the appellant u/s 54 of the Act on the ground that the appellant had made investment in a plot of land and not in a residential house, the appellant as per direction of Ld. CIT(A) furnished the copies of electricity bill of March, 2015, April, 2015, May 2015 and June, 2015 regarding electric meter bearing CA No. 100108671 installed at the residential property purchased. It is therefore claimed by the assessee/ appellant, though, as per the revenue records, the property purchased is shown an agricultural land, but considering the electricity bills and the purchase deeds clearly specifies the constructed area consisting of boundary wall, iron gate, tube well, built-up Kothi and servant quarters etc. It is therefore stated that the appellant has established that the property purchased by the appellant was a residential property which qualifies for exemption u/s 54 of the Act. It was therefore submitted by the Ld. AR of the assessee before the Ld. CIT (A) that in the light of the department Circular No. 14(XI-35) of 1955 dated 11.04.1955 and the ratio of the various cases cited, the assessee be allowed deduction u/s 54 of the Act instead of Section 54F of the Act wrongly claimed by the 12 ITA No. 1249/Del/2025 appellant. Accordingly, the revised LTCG was computed by the assessee before the Ld. CIT(A) as under:
Sale Proceeds 5,08,00,000/-
Less: Transfer Expenses 5,54,000/-
Net Sale Consideration 5,02,46,000/-
Less: Indexed Cost of 2,77,29,920/-
Acquisition
[54,16,000/-x
(1024/100x1/2
LTCG 2,25,16,080/-
Less: Exemption u/s 54 1,56,00,000/-
14. After considering the various submissions of the assessee, Ld. CIT(A) came to the conclusion that the land has been purchased by the appellant's father way back in 1971; the description of the land at the time of purchase in 1971 cannot be treated as a starting point to decide as to whether the land sold by the appellant is an agricultural land or residential property. The appellant has sold the property to M/s. Wishmore Investmart Consultancy Pvt. Ltd. on 13.08.2014 along with her co-owner of the property. In this sale deed on internal page 6 of the sale deed the description of the said property is mentioned as a residential property. It was further observed by the Ld. CIT(A) that the appellant has sold the property which was a residential property consisting of dwelling houses and buildings standing thereon. Hence, the observation of the AO in the 13 ITA No. 1249/Del/2025 assessment order were overruled and the disallowance made were deleted.
15. With regard to determining the Fair Market Value of the property as on 1981, it was observed that the Ld. CIT(A) 42, New Delhi had directed the appellant to file a fresh valuation report and in response to the same, the assessee filed a fresh valuation report dated 04.01.2018 of the registered valuer, Mr. Ajay Kumar Bakliwal. The said valuation report was referred to the Assessing officer for referring the matter to a valuation officer. The Assessing Officer instead of referring the valuation to the competent valuation officer namely the District Valuation Officer, Jaipur, Rajasthan, himself assumed the role of valuation officer and determined the Fair Market Value of the property at Rs. 1,66,320/-. The said report of the AO was found to be inadequate by the Ld. CIT(A). It was further observed that the Assessing Officer was not an authorized competent valuer, hence ld. CIT(A) accepted the registered valuer report dated 01.04.2018 because in this valuation report, the valuer has mentioned and estimated the value of the buildings on the piece of land that has been sold. Hence, the valuation report filed by the appellant was accepted and found to be in order to decide the Fair 14 ITA No. 1249/Del/2025 Market Value of the property. On the basis of registered valuer report dated 04.01.2018 the cost of acquisition deemed for the purpose of allowing indexation on the relevant date was determined to be Rs. 54,16,000/-. Providing indexation on the same, the allowable indexed cost of acquisition comes out to be Rs. 2,77,29,920/- (Rs. 54,16,000/- *1024/100).
16. With regard to the transfer expenses claimed of Rs. 5,54,000/- by the assessee, it was observed that the assessee has furnished the bills/evidences of Rs. 4,78,353/- during the assessments proceedings. The Ld. AO has not allowed the difference of this amount (5,54,000/- minus Rs. 4,78,353/-) . The ld. CIT(A) considering the facts and the evidences and considering the proof to the extent of 86%, a lump sum amount of Rs. 30,000/- was allowed as expenses relatable to the transfer of the property.
17. With regard to the observation of the AO that the land purchased was not a residential property but just a plot of land on which having no construction and disallowing the claim u/s 54 of the Act, the Ld. CIT(A) observed that the appellant relied on internal page 4 of the sale deed by which she has purchased this farm house 15 ITA No. 1249/Del/2025 from M/s. Vineetaz Export Pvt. Ltd. and the property purchased by the appellant consist of built-up Kothi (bungalow), servant quarters with all fittings, fixtures, electric connections installed thereon. The appellant has also submitted electricity bills for the period of March to June, 2015. Further, the appellant submitted the various municipal tax paid by the appellant for the property which has been purchased and the tariff category by the electricity provided by BSES has shown the category as domestic (residential). It was therefore, concluded by the Ld. CIT(A) that the appellant has indeed purchased residential property only and therefore, the appellant's deduction claimed u/s 54 of the Act to the extent of Rs. 1,56,00,000/- is found to be in order. The AO was accordingly, directed to recompute the relevant long term capital gain as under:
"5.26 Accordingly, the AO is directed to re-compute the relevant long term capital gain as under:
Sale Proceeds 5,08,00,000/-
Less: Transfer Expenses allowed as 5,54,000/-
per this order
Net Sale Consideration 5,02,46,000/-
Less: Indexed Cost of Acquisition 2,77,29,920/-
as per this order
(54,16,000 X(1024/100]X1/2
2,25,16,080/-
LTCG
Less: Exemption u/s 54 allowed as 1,56,00,000/-
16
ITA No. 1249/Del/2025
per this order
Taxable LTCG 69,16,080/-
18. Aggrieved by the impugned order of the ld. CIT(A), the revenue is in appeal before the Tribunal raising following grounds:
"1. The Ld. CIT (A) grossly erred in computing the indexed cost of acquisition of Rs. 2,77,29,920/- against the indexed cost of acquisition claimed by the assessee in her ITR as Rs. 60,25,810/-which was reduced to Rs. 14,06,400/- by the A.O. in the assessment order u/s 143(3) of the 1.T. Act, 1961 dated 31.12.2017.
2. The Ld. CIT (A) grossly erred in allowing the exemption u/s 54 of Rs. 1,56,00,000/-against the exemption u/s 54F of Rs. 4,19,50,000/- claimed by the assessee in her ITR which was rejected by the A.O. in the assessment order u/s 143(3) of the I.T. Act, 1961 dated 31.12.2017 as the assessce claim neither fulfills the conditions laid down in section 54F nor met the conditions to take benefit u/s 54B.
3. The Ld. CIT (A) grossly erred in allowing the transfer expenses of Rs. 5,54,000/-which was reduced to Rs. 4,78,353/- by the A.O. in the assessment order u/s 143(3) of the I.T. Act, 1961 dated 31.12.2017."
19. We have heard the Ld. AR for the appellant and the Ld. DR for the Revenue and examined the record.
20. Ground No. 1:
(i) The Ld. AR with respect to ground No. 1 submitted that the Ld. CIT(A) has given a categorical finding based on meticulous appreciation of facts and the applicable law and there is no illegality 17 ITA No. 1249/Del/2025 and infirmity in the order of the ld. CIT(A). In support of his oral arguments, the Ld. AR has filed written submissions with regard to ground No. 1 as under:
"Ground No. 1 raised by the Department The Ld. CIT (A) grossly erred in computing the indexed cost of acquisition of 2,77,29,920/- against the indexed cost of acquisition claimed by the assessee in her ITR as ₹60,25,810/- which was reduced to ₹14,06,400/- by the A.O. in the assessment order u/s 143(3) of the IT. Act, 1961 dated 31.12.2017.
Our Submission: The Department's contention that the Ld. CIT(A) grossly erred in computing the indexed cost of acquisition at ₹2,77,29,920/- is unsustainable in law as well as on facts.
The assessee filed her return of income for AY: 2015-16 on 30.03.2017. declaring total income of ₹31,16,120/-, In the said return, the assessee computed long-term capital gains by adopting the indexed cost of acquisition at ₹60,25,810/-.
Subsequently, the return of income was selected for scrutiny, and the computation of long-term capital gains, particularly the cost of acquisition of the land, came under examination.
Section 55A of the Income-tax Act, 1961 provides that where the Assessing Officer is of the opinion that the value of any capital asset as claimed by the assessee is at variance than its fair market value, he may refer the valuation of such capital asset to Departmental Valuation Officer, Thus, the statute prescribes a specific mechanism for determination of fair market value, and the Assessing Officer is required to act through the Valuation Officer rather than substitute his own estimate.
During the course of assessment proceedings, the assessee furnished a valuation report issued by M/s Designtech Architect, wherein the fair market value of the asset was determined at ₹90,000/- per bigha. This Valuation Report, however, was rejected by the Ld. AO without bringing any contrary material on record. Proceeding further, and ignoring the statutory mechanism prescribed, the Ld. Assessing Officer, merely on the basis of guideline rates obtained from the DIG (Stamps), Kota and without making any reference to the Departmental Valuation Officer 18 ITA No. 1249/Del/2025 under section 55A of the Act, adopted rate of 25,000 per bigha for the purpose of determining the fair market value of the land as on 01.04.1981 and proceeded to compute the cost of acquisition of ₹1,37,343.75/- alone ignoring the Dwelling unit etc. on the land.
Accordingly, the Ld. AO determined the indexed cost of acquisition as under: 1,37,343.75 X 1024/100=214,06,400. (Kindly refer to AO order dated 31.12.2017) (Annexure-5) (Refer Pg. no. 51 of PB) (Pg. no. 8 of AO order) It is respectfully submitted that, if the Assessing Officer did not agree with the report as furnished by the assessee, the correct course under section 55A was to refer the matter to the Departmental Valuation Officer. The same was not done. Instead, the Assessing Officer ignored the Valuation Report and proceeded to make his own computation based merely on guideline/circle rates, without assigning any reasons as to why the registered valuer's report was erroneous or unacceptable.
Therefore, the valuation adopted by the Assessing Officer is, contrary to the scheme of law and cannot be sustained.
During the appellate proceedings before the Ld. CIT(A), it was submitted that, after completion of the assessment proceedings, the assessee, on her own, obtained a fresh and independent valuation from another registered valuer, Shri Ajay Kumar Bakliwal, registered under the Income-tax Act. The said registered valuer determined the fair market value of the property as on 01.04.1981 adopting rate of ₹70.000 per bigha and after taking into account the existence of dwelling houses, boundary wall and other structures on the land, arrived at a total fair market value of ₹54,16,000/- for the property. It was specifically explained that this valuation was obtained to demonstrate that the earlier valuation submitted during assessment was not higher and that the fair market value adopted by the Assessing Officer on the basis of guideline rates was unrealistically low. (Annexure-6) (Pg. no. 63 to 74 of PB) The Ld. CIT(A), upon consideration of these submissions, directed the assessee to furnish the copy the of the fresh valuation report dated 04.01.2018 obtained from the Registered Valuer which was duly submitted on 13.08.2019.
The matter was thereafter forwarded to the Assessing Officer with a direction to refer it to the competent Departmental Valuation Officer in accordance with section 55A of the Act. A valuation report dated 24.12.2019 was thereafter issued by the Departmental Valuation Officer, wherein the fair market value of the property as on 01.04.1981 was 19 ITA No. 1249/Del/2025 determined at only 21,66,320/- (Refer Annexure-7) (Pg. no. 76 to 82 of PB). On examination of this report, the assessee identified deficiencies and, accordingly, filed detailed objections vide letter dated 28.01.2020, 19.01.2021, 17.06.2023 and 19.02.2024 (Annexure-8) (Pg. no. 83 to 96 of PB). It was pointed out that the report had completely overlooked material and relevant factors in particular:
the value of the existing dwelling house and other superstructures standing on the property had not been considered no basis, sale instances or comparable data were disclosed to justify the value of ₹1,66,320/-adopted as fair market value;
no comparative analysis of similar properties in the vicinity was undertaken;
the location advantage of the land being situated on Bundi Road, a highway. was ignored; and the premium attributable to a large, contiguous land parcel admeasuring 8.79 hectares was also not considered.
It was therefore submitted that the valuation report was not only mechanically prepared but also failed to take into account essential determinants of fair market value, and hence could not be relied upon for the purpose of computing capital gains.
It is submitted that the above valuation has been done by the Valuation Officer, who in accordance with the Guidelines for Valuation of Immovable Properties 2009, issued by the Directorate of Income Tax, is not the competent Valuation Officer and hence the Valuation Report dated 24/12/2019 is not valid.
As per the Guidelines for Valuation of immovable Properties 2009, issued by the Directorate of Income Tax, where under Chapter 1 'Organisation and Jurisdiction of Valuation Cell' under the heading 1.1 "Jurisdiction and Financial Limits of Valuation Office", it is stated as under:
DVOS, VOs and AVOs perform the functions of Valuation Officers within their specific geographical jurisdiction and financial limits. Financial limits specified in Rule 3 A of the Wealth Tax Act 1957 are as follows:
"If the value of the asset declared by the assessee exceeds ₹300 lakhs or if the asset is not disclosed or the value of the asset is not declared or no return has been made and the value of the asset, in the opinion of the 20 ITA No. 1249/Del/2025 Assessing officer, exceeds ₹300 lakhs. the function of the Valuation Officer shall be performed by the District Valuation Officer"
[Above mentioned financial limits are according to the Wealth Tax (Second Amendment) Rules 2009, w. e. f. 13.02.2009. (Gazette Notification S.O.No. 470(E)) In the case under consideration, the assessee had declared Rs.5,08,00,000/- as the value of the property sold and accordingly, the competent Authority to value the property is District Valuation Officer, Jaipur, Rajasthan and not the Department Valuation Officer.
In the case of the assessee, the valuation by the Valuation Officer, who in accordance with the above guidelines issued by the Income Tax Department is not the competent Valuation Officer and hence the Valuation Report dated 24/12/2019 is not valid After examining the rival material and having regard to the deficiencies in the departmental valuation, the Ld. CIT(A) correctly held that the Departmental Valuation Report dated 24.12.2019 cannot be accepted. (Pg. no. 148 of PB) The Ld. CIT(A) held that the Valuation Report dated 04.01.2018 furnished by the assessee represented a more correct and reliable determination of fair market value as on 01.04.1981. The Ld. CIT(A) accordingly adopted the cost of acquisition at ₹54,16,000. The correct indexed cost of acquisition, as adopted by the Ld. CIT(A), is computed as under:
Cost of acquisition as on 01.04.1981 (for entire property):
₹54,16,000 Assessee's 50% share therein: ₹27,08,000 Accordingly Indexed Cost of Acquisiton:
27,08,000 x10.24 = ₹2,77,29,920/-
In view of the above facts and submissions, it is respectfully submitted that the figure of 22,77,29,920/- adopted by the Ld. CIT(A) is the result of a lawful and reasoned process grounded in expert valuation, and proper appreciation of material facts, and correct application of section 55A. On the other hand, the amount of ₹14,06,400/-determined by the Assessing Officer is based merely on guideline rates, without reference to the Departmental Valuation Officer and without rebutting the registered valuer's report, and is therefore unsustainable. Further, the valuation report dated 24.12.2019 is invalid, as the same has not been prepared by the competent valuation authority.21 ITA No. 1249/Del/2025
Apart from the issue of competence, the report aiso suffers from the above stated defects. In these circumstances, the said report cannot be relied upon for determining the fair market value as on 01.04.1981 within the meaning of section 55A of the Act. Therefore, the grievance raised by the Department in Ground No. 1 is, accordingly, devoid of merit and deserves to be dismissed."
(ii) Ld. DR on the other hand, while relying upon the order of the Assessing Officer submitted that the Ld. CIT(A) has wrongly rejected the valuation done by the Assessing officer as well as the Government Valuation Officer. However, the Ld. DR could not rebut the assertion and observation of the Ld. CIT(A) wherein it was held that since the amount value of the asset declared by the assessee exceeded 3 Crores, the valuation was required to be done by District Valuation Officer.
(iii) We are of the considered opinion that the argument advanced on behalf of the assessee in that regard are cogent and convincing and the finding returned by the Ld. CIT(A) is based on proper examination and appreciation of material facts and relevant law applicable to the facts and circumstances of the case. In the given facts and circumstances, we find no illegality or perversity in order to Ld. CIT(A) wherein he has rejected the valuation done by the Assessing Officer himself as well as by the Valuation Officer who was not the competent valuation officer as not being District Valuation Officer and has thus rightly relied upon the valuation report obtained from an 22 ITA No. 1249/Del/2025 approved valuation officer submitted by the assessee/appellant. In view of the cogent and convincing arguments on behalf of the assessee as discussed above, we do not find any substance in ground No. 1 raised by the Revenue and the same is accordingly dismissed.
20. Ground No. 2 raised by the Department
(i) Ld. AR on behalf of the assessee has made following written submissions while supporting the judgment of the Ld. CIT(A) as under:
"The Ld. CIT (A) grossly erred in allowing the exemption u/s 54 of ₹1,56,00,000/-against the exemption u/s 54F of ₹4,19,50,000/- claimed by the assessee in her ITR which was rejected by the A.O. in the assessment order u/s 143(3) of the I.T. Act, 1961 dated 31.12.2017 as the assessee claim neither fulfils the conditions laid down in section 54F nor met the conditions to take benefit u/s 54B.
Our Submission:
Eligibility u/s 54 of the Act:
Section 54 provides exemption from long-term capital gains arising from transfer of a residential house property where the gains are invested in purchase or construction of another residential house within the stipulated period.
Section 54 of the Act lays down the following conditions for availing the exemption as under:
1. That the capital asset transferred must be a residential house.23 ITA No. 1249/Del/2025
2. That the capital gain must be long-term in nature, and
3. That the assessee must either purchase a new residential house one year before or two years after or construct one within three years after the date of transfer.
We would like to humbly submit that the assessee has complied with all statutory conditions, explained as under:
Nature of the Asset Sold- Residential Property:
The property sold by the assessee during the year is a residential property, situated at:
Village Nanta, Tehsil Ladpura, Distt. Kota, Rajasthan consisting of dwelling units, boundary walls, fencing, labour huts, and other residential constructions In support, we submit the following details and documents:
Purchase Deed:
The property in question was purchased by the assessee's father, Sardar Takhat Singh Sethi, on 14th August 1971, for Rs.40.626/- with a stamp duty payment of Rs.2.034/-.
The property consisted of Dwelling units, boundary walls, fencing, labour huts, and other residential constructions and land appurtenant thereto, measuring 54.9375 Bigha. (Annexure-2) (Kindly refer to Pg. no.2 to 15 of PB) [12] After the death of Sardar Takhat Singh Sethi, 50% share in the property was inherited by the assessee (daughter). This property was duly mutated in her name vide Mutation No. 760 dated 18/5/2012 in the Government records.
Sale Deed:
This property was subsequently sold on 13th August 2014 for Rs.5.08 crores to Wishmore Investmart Consultancy (Copy of sale deed attached as Annexure-3) (Pg. no. 16 to 30 of PB). We would like to draw your attention to the sale deed and request you to observe that it has 24 ITA No. 1249/Del/2025 been stated that the property sold consists of dwelling house and all buildings standing thereon, containing 8.79 hectare or say 54.9375 Bighas confirms the existence of these residential structures and improvements on the property, validating that it was indeed a residential property, not merely vacant land.
Valuation Report dated 04/01/2018 During the assessee proceeding, as directed by the earlier Ld. CIT(A)- 42, New Delhi, the assessee had submitted a fresh Valuation Report dated 4th January 2018 from a registered valuer. The report explicitly states that the property sold by the assessee was not the land alone but had existing buildings, boundary walls, fencing, labour huts, and chara gaudam (Annexure-6, Pg. no. 63 to 74 of PB) which can also be verified from the Purchase Deed attached as Annexure-2 (Pg. No. 2 to 15 of PB). This reinforces that the property was a residential property with land appurtenant thereto, as per the provisions of Section 54.
Electricity Bill:
During the appellate proceedings, the assessee on the directions of Ld. CIT(A) furnished copy of the electricity bills paid by the assessee of the house transferred during the year under consideration is attached as (Annexure-10) (Pg. no. 105 to 110 of PB). The bill clearly states that the property is categorized as residential further proving that the house was used for residential purposes.
Property Tax Receipt:
We are submitting the Property Tax Receipt issued by the Municipal Corporation of Delhi, as Annexure-11 (Pg. 111 to 114 of PB). The receipt confirms that the assessee has paid tax for the residential property. It mentions that the property type is a farmhouse and therefore, a residential property. This further establishes that the Property at Village Nanta, Tehsil Ladpura, Distt. Kota, Rajasthan qualifies as a residential property.
Therefore, from the above, it is established that the property, though as per the, revenue records, the property purchased is an land but considering the electricity bills, the purchase deed and the sale deed submitted by the assessee it is established that the property purchased 25 ITA No. 1249/Del/2025 by the assessee is a residential property which qualifies for exemption u/s 54 of the Act We place our reliance on the following judgments:
ACIT, Circle-31(1), New Delhi vs Rajat Bhandari (ITA No. 4840/DEL/2017):
The Hon'ble Delhi Tribunal held that merely because a property is called farm house it does not became a non-residential house property unless otherwise proved. Accordingly, the exemption claimed was allowed.
Girish Mohan vs. ACIT [2023] 153 taxmann.com 554 (Delhi - Trib) [14-07-2023] The Hon'ble Delhi Tribunal had held that where Assessing Officer disallowed section 54F exemption claimed by assessee holding that assessee was merely possessing a piece of land without any construction thereon but valuation report and other documentary evidence clearly revealed that assessee had constructed residential buildings comprising of two rooms, kitchen, toilet having electricity and water connection which was being used as residential unit, exemption under section 54F should be allowed to assessee.
Shyam Sunder Makhija Vs. ITO 15 April, 1991 [38 ITD 125 (Jaipur ITAT)]:
The Hon'ble Bench held that the expression residential house' used in section 54F has not been defined. The popular meaning of the word 'house' is a place or building used for habitation of man. 'Residential house' is a dwelling house as distinct from a house of business, warehouse, office, shop, etc. In other words, a residential house is a building used as a place of abode in which people reside or dwell in contra-distinction to one which is used for commercial or business purposes. It is enough if it was a house for residence. A farm house is also a residential house. A farm house, according to the dictionary, is a farmer's house attached to a farm.
Accordingly, the Hon'ble Bench allowed the deduction claimed under section 54F of the Act.26 ITA No. 1249/Del/2025
In light of the above case laws and the documents provided, it is established that the farmhouse transferred by the assessee during the year under consideration is a residential property and the assessee has rightly claimed the deduction u/s 54 of the Act and accordingly no disallowance should be made.
Capital Gain must be long-term in nature:
As submitted earlier, the residential property in question was originally acquired by Late Shri Sardar Takhat Singh Sethi, father of the assessee dated 14th August 1971.
Subsequently, the said property was sold by the assessee on 13th August 2014. Since the holding period exceeds 36 months, the property qualifies as a Long-Term Capital Asset in terms of Section 2(29A) and 2(298) of the Income Tax Act, 1961.
Accordingly, the capital gain arising on the sale is Long-Term Capital Gain and is eligible for exemption u/s 54 of the Act.
Time Limit for Purchase or Construction of New Residential House and deposit in Capital Gains Account Scheme As per the provisions of Section 54(1) of the Income Tax Act, 1961, to avail exemption on Long-Term Capital Gains, the assessee must:
Purchase a new residential house within one year before or two years after the date of transfer, or Construct a residential house within three years from the date of transfer.
In the present case,
a) We would like to humbly submit that the assessee had invested Rs. 1.56 crores (including stamp duty) on the purchase of a residential house along with land measuring 2 Bighas 9 Biswas along with boundary wall, iron gate, tube well, built up kothi and servant quarters with all fittings, fixtures, electric connection installed therein, on Church Road, Vasant Kunj, New Delhi. It is situated in the Revenue Estate of Village Mehrauli, Tehsil 27 ITA No. 1249/Del/2025 Mehrauli, New Delhi and claimed exemption under of the Act. The copy of the purchase deed dated 29/05/2015 is attached herewith as Annexue-4. (Pg. no. 31 to 43 of PB) The purchased residential farmhouse already consisted of a built-up kothi, servant quarters, boundary walls, tube well, electric connection, and other residential features.
b) The new residential property was purchased on 19th May, 2015 which is within the time limit of 3 years as specified.
c) On the direction of the Ld. CIT(A), we furnished the copy of electricity bills which were in the name of previous owner (M/s Veentez Exports Pvt. Ltd.) for the period June 2015 to January, 2016 to confirm that the property purchased was a residential dwelling farmhouse which already had electricity connection prior to purchase made by the assessee. On review of the same, your Honour will observe that the electric meter bearing CA No. 100108671 was already installed at the residential property purchased. The Electric Bill is in the name of the seller Veentz Exports Pvt. Ltd. with billing address stated as KH NO-36/23 Mall Road, Kishan Garh Mehrauli, Near Gupta Farm, New Delhi-
110070.
On review of the above facts and documents, it is observed that the assessee has strictly complied with the requirements of Section 54 of the Income Tax Act, 1961.
Besides, as stated above the assessee had made investment in the purchase of a residential house along with land apparent thereto. Therefore, the assessee is entitled to exemption u/s 54 of the Act and the exemption has been wrongly claimed u/s 54F of the Act. Hence, all the conditions for claiming exemption under section 54 have been duly complied with, and the denial of the claim by the Ld. Assessing Officer is unjustified.
In this context, attention is invited to CBDT Circular No. 14(XL-35) (Annexure-12) (Pq. no. 115 and 116 of PB), dated 11-04-1955, which requires that officers of the Department must not take advantage of an assessee's ignorance of the law and are duty-bound to assist the taxpayer in every reasonable manner. The Circular emphasizes that the 28 ITA No. 1249/Del/2025 Department should guide the assessee wherever the records indicate that any relief or deduction is legitimately due, even if not expressly claimed Accordingly, the assessing authority is obligated to
(i) point out any reliefs or deductions to which the assessee is clearly entitled, and
(ii) allow such reliefs when the facts on record justify them. In view of the above principle, it is respectfully submitted that the assessee is entitled to exemption under Section 54 of the Income-tax Act, as the sale proceeds of the earlier residential property were duly reinvested in the purchase of another residential house within the prescribed statutory timelines. The complete utilisation of the capital gains is evident from the banking records and property documents already placed on record. As per CBDT Circular No. 14, it is the duty of the assessing authority to draw attention to and allow all reliefs lawfully available to the assessee. Accordingly, the exemption under Section 54, being a legitimate and statutorily sanctioned relief, ought to have been allowed by the Ld. AO in the computation of income. It is brought to the attention of your honor that the Apex court on numerous occasions has held that the circulars issued by CBDT are binding in nature on tax authorities, even if directions given by CBDT are at variance with the provisions of law. Reliance in this regard can be placed on the following judgements:
Ellerman Lines Ltd. vs. CIT (82 ITR 913) K. P. Varghese vs. ITO (131 ITR 597) UCO Bank vs. CIT (237 ITR 889) CIT vs. Anjum M. H. Ghaswala (252 ITR 1) Spentex Industries Ltd. vs. CCE (Civil app. No. 1978 of 2007) Accordingly, on the basis of the above submissions and material placed on record, the Ld. CIT(A) accepted the assessee's contention regarding the correct cost of acquisition and the allowability of exemption under section 54. Accordingly, the long-term capital gains were recomputed, and the revised LTCG is computed as under:29 ITA No. 1249/Del/2025
PARTICULARS AMOUNT (Rs.)
Sale Proceeds 5,08,00,00
0/-
Less: Transfer Expenses 5,54,000/-
Net Sale Consideration 5,02,46,00
0/-
Less: Indexed Cost of 2,77,29,920
Acquisition /-
[54,16,000/- x (1024/100)]x 1/2
LTCG 2,25,16,080
/-
Less: Exemption u/s 54 1,56,00,000
/-
Taxable LTCG 69,16,080/-
In view of the above, the exemption allowed under section 54 by the Ld. CIT(A) is in accordance with law and facts on record, since the assessee had sold a residential property and invested the consideration in another residential house within the prescribed time. The earlier claim under section 54F was a mere clerical error in citation of the provision, without affecting the substantive eligibility. The allegation that the assessee does not satisfy the conditions of sections 54F or 54B is therefore irrelevant, as the correct provision applicable is section 54.
The ground raised by the Department is baseless and deserves to be dismissed."
(ii) Ld. DR, on behalf of the Revenue supported the order of the AO and submitted that the Ld. CIT(A) has wrongly allowed the exemption u/s 54 of the Act, whereas the assessee has sought exemption u/s 54F of the Act to which assessee was not entitled to claim.
30 ITA No. 1249/Del/2025
(iii) We have considered the rival submissions. Before the ld. CIT(A), the assessee/appellant has produced sufficient documentary evidences to establish that the property purchased and sold was a dwelling house and not merely a piece of land. Therefore, the residential property purchased by the assessee has been held to qualify for exemption u/s 54 of the Act. We do not find any force in the arguments of the ld. DR that the benefit of Section 54 of the Act should not have been given by the ld. CIT(A) merely on the ground that the assessee has initially claimed exemption u/s 54F of the Act and not u/s 54 of the Act. The reasons given by the Ld. CIT(A), while referring to and relying upon the legal precedents are found to be apt and apposite. In view of the arguments advanced on behalf of the assessee/appellant, which are found to be convincing and cogent, we do not find any merit in the argument advanced on behalf of the Revenue. Accordingly, the ld. CIT(A) has rightly decided the issue of exemption u/s 54 of the Act in favour of the assessee. Hence, Ground No. 2 raised by the Revenue also dismissed.
21. Ground No. 3 raised by the Department:
31 ITA No. 1249/Del/2025
(i) Ld. AR on behalf of the assessee has made the following written submissions extracted below as under:
"The Ld. CIT (A) grossly erred in allowing the transfer expenses of ₹5,54,000/-which was reduced to ₹4,78,353/- by the A.O. in the assessment order u/s 143(3) of the I.T. Act, 1961 dated 31.12.2017.
Our Submission:
The grievance of the Department that the Ld. CIT(A) has wrongly allowed transfer expenses of ₹5,54,000/- is unfounded on both facts and law. The assessee had originally claimed transfer expenses of ₹5,54,000/- incurred wholly and exclusively in connection with the transfer of the property, which are squarely allowable under section 48 of the Income-tax Act.
During assessment proceedings, documentary evidences aggregating to 24,78,353/-were furnished and duly examined by the Assessing Officer. The balance expenses. represented routine transaction-related outlays for which third-party vouchers were either not available or not traceable due to passage of time, though the expenditure was in fact incurred. The Ld. CIT(A) correctly noted that more than 86% of the expenditure stood fully evidenced, clearly establishing the genuineness and nature of the transaction costs.
On this basis, the Ld. CIT(A) further allowed a lump sum of 30,000/- as expenses relateable to transfer of property (Pg. no. 149 of PB) The approach of the Ld. CIT(A) is consistent with the settled principle that where the fact of expenditure is established and the majority is evidenced, reasonable estimation of the balance is legally permissible. Tax adjudication proceeds on preponderance of probabilities and commercial reality, not rigid technicality It is pertinent to mention that the Department has not brought any material on record to demonstrate that the transfer expenses were bogus, excessive or unrelated to the sale transaction. In the absence of any contrary evidence, there is no basis to disturb the finding of fact recorded by the Ld. CIT(A), who has passed a reasoned order after appreciating the evidences and circumstances of the case Accordingly, the transfer expenses of ₹ 5,08,353/- have been rightly allowed and the ground raised by the Department is devoid of merit and liable to be dismissed."32 ITA No. 1249/Del/2025
(ii) On perusal of the material available on record. The Ld. DR has stated that the Ld. CIT(A) has erred allowing transfer expenses of Rs. 5,54,000/- instead of 4,78,353/- as calculated by the AO.
(iii) On perusal of the arguments advanced on behalf of the assessee, we do not find any illegality and infirmity/ perversity in the order of the ld. CIT(A), which is well reasoned. The argument of the assessee in that regard are found to be cogent and convincing; therefore, needs no interference by this Tribunal. For these reasons Ground No. 3 raised by the Revenue is dismissed.
22. In view of the above discussions, the appeal of the Revenue is accordingly dismissed.
Order pronounced in open Court on 10th April, 2026 Sd/- Sd/-
(BRAJESH KUMAR SINGH) (RAJ KUMAR CHAUHAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Da t ed: 1 0/ 04 / 20 26
Bi n i ta , S r. P S
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT/PCIT
4. CIT(Appeals)
5. Sr. DR: ITAT
ASSISTANT REGISTRAR
ITAT, NEW DELHI
33