PREM LATA GUPTA ,DELHI V. ACIT CENTRAL CIRCLE , KARNAL

ITA 1422/DEL/2022

AI Insights

The case involves an appeal by Smt. Prem Lata Gupta against the order of the Commissioner of Income-Tax (Appeals) which partially confirmed the addition made by the AO under the head 'Long Term Capital Gain'. The addition was based on the restricted index cost of construction for a property constructed in 1997-98. The assessee contested the valuation and the additions made, arguing that the valuation report provided by a registered valuer was ignored and that the additions were made without any incriminating material found during the search operation. The Tribunal, referencing several judicial precedents, found merit in the assessee's arguments and directed a recomputation of the fair market value based on the submitted valuation report.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783687 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 16-06-2022
• Other Referred Cases: Shri Somasundaram Vijay Kumar Secundrabad Vs. ITO, Ward- 4(1), Hyderabad, Manick Chandra Paul Vs. DCIT, Circle-8(1), Kolkata, Barjinder Singh Bhatti Vs. ITO, Ward 4(1), Chandigarh, Jaswin Kaur Sethi Vs. DCIT, International Taxation, Gurgaon
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV KAUSHAL
• Assessee Lawyers: VED JAIN; PAWAN GARG
• Keywords: Set aside; Fair market value; Cost of acquisition; Capital Gains; Search and seizure; Valuation report; Value adopted by valuation officer
• Section: 143(3); 142(1); 132; 153A

Judgement Text

" INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 1422/Del/2022 Assessment Year: 2017-18 Smt. Prem Lata Gupta, C-5/2A, Opp CC Colony, Rana Pratap Bagh, North Delhi PIN: 1100 07 PAN: AADPL3023F Vs. Assistant Commissioner of Income Tax, Central Circle Karnal. (Appellant) (Respondent) O R D E R PER VIMAL KUMAR, JUDICIAL MEMBER: The appeal filed by assessee is against order dated 27.05.2022 of Learned Commissioner of Income-Tax (Appeals)-3, Gurgaon (hereinafter referred as “the Ld. CIT(A)”) under Section 250(6) of the Income Tax Act, 1961 ( hereinafter referred as “the Act”) arising out of assessment order dated 31.12.2019 of the Learned Assessing Officer/Deputy Commissioner of Income Tax, Central Circle, Karnal (hereinafter referred as “Ld. AO\") under Sections 143(3) of the Act, 1961 for assessment year 2017-18. Assessee by: Shri Ved Jain, Adv., Shri Pawan Garg & Ishika Dua, CAs Department by: Shri Sanjeev Kaushal, CIT (DR) Date of Hearing: 20.08.2025 Date of pronouncement: 0711.2025 Printed from counselvise.com ITA No.1422/Del/2022 2 2. Brief facts of case are that search and seizure operation under Section 132 of the Act was conducted at business premises of M/s. Oswal Group of Cases , Karnal and residential premises of its members on 22.01.2018 by the Dy. Director of Income Tax Department, Ambala. The case of assessee was also covered under Section 132 of the Act. Later on, assessment jurisdiction over the case of assessee along with other group cases was centralized and transferred to the Office of Ld. AO by Ld. PCIT-12, Delhi vide order dated 05.08.2019. The assessee e-filed his return of income under Section 139(1) of the Act on 07.10.2017 before ITO, Ward-33(1), New Delhi declaring total income of Rs.7,47,320/-. Notice under Section 153A of the Act dated 19.09.2019 for filing of return of income was issued. Assessee submitted copy of return already filed on 02.10.2019. Notice under Section 143(2) of the Act dated 09.10.2019 was issued. Notice under Section 142(1) of the Act along with questionnaire was issued on 09.10.2019. Shri Viney Goel, FCA, counsel for the assessee, attended proceedings filed part reply. On completion of proceedings, Ld. AO vide order dated 31.12.2019 made addition of Rs.49,03,185/-. 3. Against order dated 31.12.2019 of Ld. Assessing Officer, appellant/assessee filed appeal before Ld. CIT(A) which was partly allowed vide order dated 25.05.2022. 4. Being aggrieved, appellant/assessee preferred present appeal with following grounds: Printed from counselvise.com ITA No.1422/Del/2022 3 “1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the order passed by the learned AO under section 153A r.w.s 143(3) is illegal and bad in law as the same has been passed without having valid jurisdiction. 3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the order passed by the learned AO under section 153A r.w.s 143(3) is bad and liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eyes of law. 4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the proceedings initiated under section 153A against the appellant and the assessment framed under section 153A r.w.s. 143(3) are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed. 5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the learned AO has erred in making the addition in order passed u/s 153A r.w.s 143(3) of the Act, without any incriminating material having been found during the course of search. 6. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the addition of Rs. 28,64,067/- by restricting the indexed cost of construction of Rs. 52,23,648/- claimed by the assessee to Rs. 23,59,581/- while computing the income under the head capital gains. (ii) That the above addition has been confirmed arbitrarily estimating the cost of construction of Rs. 6,368/- per square meter without there being any basis for the same. (iii) That the abovesaid addition has been confirmed ignoring the detailed submissions and explanations along with the evidences brought on record by the assessee in this regard. Printed from counselvise.com ITA No.1422/Del/2022 4 7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition by indulging in surmises without bringing on any direct evidence against the assessee, only on the basis of presumption and assumption. 8. That the appellant craves leave to add, amend or alter any of the grounds of appeal.” 5. Learned Authorized Representative for the appellant/assessee submitted that Ld. CIT(A) partially confirmed the addition of Rs.28,64,067/- made by the Ld. AO by restricting the index cost of construction. The assessee has incurred cost of construction way back in the financial year 1997-98. The assessee during the course of assessment proceedings in support of its contention, has submitted all the details vide letter dated 14.11.2019. Another letter dated 14.11.2019 placed at page no. 50 of the paper books and one other letter dated 11.11.2019 was also placed at page no. 58 of the paper books. The assessee has incurred a sum of Rs.57,600/- in respect of boundary wall and land fill and Rs. 11,45,000/- on construction. The Ld. CIT(A) has accepted the fact that assessee has constructed the property as is evident from the Sale Deed as well as House Tax Receipt submitted by the assessee. However, the Ld. CIT(A) has assumed that expenditure of Rs.5,43,228/- by taking some rate of the year 2007-08 and then reversing back to 1997-98. Ld. CIT(A) does not take into consideration effect that assessee being a lady and not engaged in any business, she is not supposed to maintain any books of accounts. Further the assessee in support of her contention has submitted the Valuation Report which the CIT(A) has arbitrarily ignored by stating that the Valuation Report prepared on 01.04.2016 Printed from counselvise.com ITA No.1422/Del/2022 5 cannot be taken as credible evidence in respect of amount spent in construction of the property on the reasoning that construction was done way back in 1997- 98. The above stated allegation is factually incorrect as can be seen from the Valuation Report (PB Pg.51-57). On-going through this report, it may be noted that the Valuer has personally inspected the property on 25.03.2016 (PB Pg 55). Thereafter, the valuer has given all technical specifications as can be seen from the details at Page 56 of the paper books. Thus, the valuer has given every detail about the type of construction which he has physically verified on that basis he has carried out the valuation and stated the basis of valuation on page no. 54 of the paper books. The valuer has categorically stated that cost of construction of 918 sq. ft. area @ 1100/- rupee per sq. ft. will be comes to Rs. 10,09,800/-. Further open area development with Superior quality Marble flooring, boundary wall gate, parapet and mumti etc. the cost of construction is Rs 3,25,000/-. Ld. CIT(A)’s contention that the valuation report cannot be accepted as credible evidence is against the settled law. This contention of assessee is supported by following judicial pronouncements: i) Shri Somasundaram Vijay Kumar Secundrabad Vs. ITO, Ward- 4(1), Hyderabad, 2024 (9) TMI 357 – ITAT Hyderabad, dated September 2,2024; ii) Manick Chandra Paul Vs. DCIT, Circle-8(1), Kolkata, 2024(7) TMI 1016 – ITAT Kolkata, dated July 2,2024; iii) Barjinder Singh Bhatti Vs. ITO, Ward 4(1), Chandigarh, 2015 (7) TMI 1216 – ITAT Chandigarh, Dated July 15, 2015; & Printed from counselvise.com ITA No.1422/Del/2022 6 iv) Jaswin Kaur Sethi Vs. DCIT, International Taxation, Gurgaon, ITA No.2349/Del/2023 decided on 30.07.2025; 2025 (8) TMI 48, ITAT, Delhi. 6. Learned Authorized Representative for the Department of Revenue submitted that the departmental authorities have fairly decided the matter. 7. From examination of record in light of aforesaid rival contentions, it is crystal clear that Ld. AO vide order dated 31.12.2019 made the addition of Rs.49,03,185/- under the head ‘Long Term Capital Gain’. Ld. CIT(A) vide order dated 27.05.2022 partially confirmed the addition of Rs.28,64,067/- by restricting the index cost of construction in the financial year 1997-98. 8. The appellant/assessee, a lady is not engaged in any business. Valuation Report of the property is at page nos. 51 to 57 of the paper books. The Valuer inspected property on 25.03.2016, gave every detail about the type of construction and stated basis of valuation on page no. 54 of the paper books. Ld. CIT(A) did not accept the valuation report. 9. A Co-ordinate Bench in ITA No.2349/Del/2023 titled as “Jaswin Kaur Sethi vs. DCIT, International Taxation, Gurgaon in order dated 30.07.2025 in para nos. 4 to 10 held as under: “4. After taking into consideration the rival contentions and the material on record, we find that in the valuation report the fair market value of the property have been taken at Rs.2,70,000/- per sq. yards and which the ld. AO had alleged 4 ITA No.2349/Del/2023 was ‘without any rationale and documentary evidences’ and accordingly, the circle rate was considered to be reflecting the fair market value of the property. The ld. Printed from counselvise.com ITA No.1422/Del/2022 7 DRP observed that ideally, if the AO does not accept the valuation report of a registered valuer provided by the assessee, he should have referred it to a Departmental Valuation Officer u/s 55A of the Act. However, as the AO has not done the same and has resorted to valuation on the basis of stamp value of the impugned property, but, the rates for 01.04.2001 were not notified and by exercise of interpolation and extrapolation to the stamp valuation of the locality in which the property is situated for AY 2007-08, the valuation was done, the same was not appreciated by the DRP, but, the DRP directed the AO to accept the conversion land rates as notified by the Ministry of Urban Development. 5. On considering the impugned orders of the ld. AO and also the DRP, we find that they have not relied any provision of the Act under which these authorities could have resorted to relying any other rates of property for valuation than the one which the Act provides either in the form of valuation report submitted by the assessee and prepared by the registered valuer u/s 55(2) of the Act or of a report of DVO. We are of considered view that when the Act prescribes specific modes for accepting the valuation of a property, then, without establishing that the two modes are not rationally applicable or have any hardship to comply with, the valuation cannot be on the basis of independent parameters. These independent parameter like circle rates or conversion rates notified by the Ministry of Urban Development may be used to corroborate the valuation reports prepared by expert or the DVO but resorting to these independent parameters without getting DVO report is not what the Act expects. The evidentiary value of the valuation report given by expert needs to be disturbed by the AO on the basis of factual findings in the valuation report, rather on a general assumption or applying the rules of prudence, like done in present case. The valuation report of the registered valuer has been prepared by qualified expert in the field after inspection of the premises and carrying out technical analysis. The same cannot be brushed aside on bald allegations that valuation done has been on higher side. As a matter of fact, supplementary comparable sale deeds were provided by the assessee during assessment proceedings to corroborate the FMV determined by the registered valuer in the valuation report, however, the same have also not been considered by the AO. The AO having sufficient powers of inquiry on his own has also not done any exercise of his own to inquire into the value of the surrounding property to disturb the FMV given by the qualified expert. 6. Then, without mentioning reasons for not making reference to Departmental Valuation Officer, assumption of jurisdiction to determine the value on his own, on the basis of circle rates and that too by Printed from counselvise.com ITA No.1422/Del/2022 8 interpolation and extrapolation of the rates was certainly not sustainable and, therefore, the DRP had rightly intervened to hold that AO was supposed to refer to DVO. 6 ITA No.2349/Del/2023 However, we find that DRP also committed an error in giving direction to compute the cost of acquisition of the impugned property by applying Land & Development Office conversion rates. 7. We find justification in the contention of the ld. AR that conversion rates cannot be taken as a benchmark for comparability with the fair market value of an independent property, which is both a residential and commercial. The ld. counsel has drawn our attention to Chandigarh Bench decision in the case of Sanjeev Kumar Kathuria vs. ITO in ITA No.329/Chd/2024, order dated 27.02.2025 where the L&DO land conversion rates were not approved for the purpose of determining fair market value/cost of acquisition of the property. 8. Thus, we are of the considered view that the AO, without rebutting and contradicting the valuation report of expert, which has a rebuttable evidentiary value under the Act, could not have resorted to any other mode but to make a reference to DVO only for the purpose of valuation of the impugned property. Reliance in this regard is placed on the decision of the Hon’ble Allahabad High Court in the case of PCIT vs. Smt. Vidhi Agarwal (2017) 88 taxmann.com 306 (All) and the decisions of the coordinate Benches in the cases DCIT vs. Ajanta Tubes Ltd., ITA No.4432/Del/2014; Smt. Ved Kumari Subhash Chander vs. ITO, ITA No.2041/Del/2016; ITO vs. Smt. Gayatri Maitra, ITA Nos.2381 & 4836/Del/2015; and Shri Pyaare Mohan Mathur, HUF vs. ITO, (2011) 12 taxmann.com 170 (Agra Trib). The DRP also erred in directing AO to apply Land & Development Office conversion rates. 9. The Hon’ble Allahabad High Court in the case of Vidhi Agarwal (supra) has approved the finding of the Tribunal noting that when there is nothing on record to doubt the correctness of the report or its contents, the Valuer’s Report should have been accepted by the Department. The coordinate bench at Delhi in Ved Kumari Subhash Chander vs. ITO (supra) has, in similar facts and circumstances, set aside the order directing the AO to recompute the fair market value of the land by taking into account the rate as adopted by the valuer. As for completeness, the findings of the coordinate Bench in para 5.1 to 5.5 are reproduced below:- “5.1 Similarly, in the case of Pyare Mohan Mathur HUF Vs ITO (in ITA No. 471/Agra/2009 vide order dated 21/04/2011) the Agra Bench of the ITAT has held that in view of the provision of section Printed from counselvise.com ITA No.1422/Del/2022 9 55A once the assessee has submitted the necessary evidence by way of the valuation report made by the registered valuer, the onus gets shifted on the AO to contradict the report of the registered valuer. The registered valuation officer is a technical expert and the opinion of an expert cannot be thrown out without bringing any material to the contrary on record. In case the AO was not agreeable with the report of the registered valuer, he was duty bound to refer the matter to the DVO for determining the fair market value of the land as on which he failed to do so. The tribunal held that the revenue has not discharged the onus but merely rejected the fair market value taken by the assessee. It set aside the order of the CIT (A) and directed the AO to recompute the capital gain after taking the fair market value of the land as on 1/4/1981, as claimed by the assessee. Fair market value of the land as on 1/4/1981 estimated by the registered valuer being based on sound factual basis and the phenomenal development in that area could not be rejected by the AO without assigning any specific reasons. 5.2 In the case of CWT Vs Raghunath Singh Thakur (304 ITR 268 HP) the Hon'ble High Court of Himachal Pradesh held that if the Assessing Officer does not agree with the report regarding the valuer relied upon by the assessee, rejection of such valuer's report without making reference to the valuation, order is invalid and the report of the registered valuer shall be accepted. 5.4 The Hon'ble Bombay High Court in the case of C.I.T. vs. Raman Kumar Suri reported in (2013) 255 CTR 107 had held that the valuation done by the registered valuer is with regard to a specific property and the same takes into account its various advantages and disadvantages, all of which would influence the valuation of property. The Hon'ble Bombay High Court went on to hold that the valuation done by an empanelled registered valuer of the Income Tax Department would certainly take precedence over other indicators. 5.5 Therefore, respectfully following the aforesaid juridical precedents, we have no option but to accept the assessee's contention that the Assessing Officer was not right in discarding the report of the registered valuer without having made a reference to the DVO and, therefore, the rate adopted by the Assessing Officer for the purpose of computation of fair market value cannot be upheld. Accordingly, we set aside the order of the Ld. CIT (A) Printed from counselvise.com ITA No.1422/Del/2022 10 and direct the Assessing Officer to re-compute the fair market value of the land as on 1.4.1981 by taking into account the rate as adopted by the registered valuer.” 10. In the light of the aforesaid, we are inclined to sustain the grounds. The appeal of the assessee is allowed. Consequently, the AO is directed to recompute the fair market value by taking into account the valuation report provided by the assessee.” 10. In view of above material facts by following the judicial precedents, the grounds of appeal being meritorious are sustainable. Impugned orders of both the authorities are set aside. The matter is restored to the file of Ld. AO for recomputation of fair market value by taking into account the valuation report submitted by the assessee. 11. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 07th November, 2025. Sd/- Sd/- (S RIFAUR RAHMAN) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 07 /11/2025 Mohan Lal Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi Printed from counselvise.com "