ITAT Delhi Allows Section 54/54F Exemptions, Discards Arbitrary FMV Computation as on 01.04.2001

Background and Procedural History

The dispute in Smt. Sushma Kapur Vs Assessment Unit (ITAT Delhi) arises from an assessment framed under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for Assessment Year 2020-21. The assessee, an individual, had filed her income-tax return declaring a total income of Rs. 9,92,990/-.

The case was picked up for complete scrutiny through CASS on account of:

  • Significant investments in immovable property reported via Form 26QB, when compared with the income returned, and
  • Substantial exemption claims made under Section 54 and Section 54F.

The assessment was completed by the NFAC, Delhi, and an addition of Rs. 84,99,803/- was made towards long-term capital gains by recomputing the indexed cost of acquisition. This addition was affirmed by the Commissioner of Income Tax (Appeals)-NFAC-Delhi vide order dated 29.09.2025. Aggrieved, the assessee approached the ITAT Delhi.

Grounds of Appeal

The assessee challenged the assessment and first appellate orders on multiple grounds, broadly contending that:

  1. The orders of the Assessing Officer and the CIT(A) (Faceless) are invalid in law as well as on facts.
  2. The disallowance of Rs. 84,99,803/- by reworking the indexed cost of acquisition under the head “Long Term Capital Gains” is based on an impermissible and flawed methodology.
  3. The orders are defective as they do not clearly state the authority passing them.
  4. The computation method adopted for the impugned addition is illogical, rooted in presumptions, and unsupported by any cogent material.
  5. The AO’s approach to calculating long-term capital gains is inconsistent with the law applicable for the relevant assessment year.
  6. The additions were made by disregarding the evidence and documents placed on record.
  7. The very basis adopted by the AO for making the addition is illegal and untenable.

The assessee accordingly prayed for deletion of the additions/disallowances.

Facts Relating to Property Transactions

Sale of Inherited Shop and Claim under Section 54F

During the assessment, the AO noticed that the assessee had transferred a shop located at Munirka, New Delhi, for a consideration of Rs. 44,00,000/-. This shop had devolved upon her from her late husband. The assessee claimed exemption under Section 54F by investing in a new residential house purchased on 27.11.2019 for Rs. 3.30 crore.

The Assessing Officer examined this claim and, having found that the statutory conditions embedded in Section 54F were fulfilled, allowed the exemption in full. There was no controversy before the Tribunal on this aspect.

Dispute on Capital Gains from Safdarjung Enclave Property

The core dispute concerned the long-term capital gains from the sale of a residential property at Safdarjung Enclave, co-owned by the assessee along with Smt. Nutan Kapoor. The assessee declared:

  • Indexed cost of acquisition at Rs. 1,73,40,000/-, and
  • Exemption under Section 54 to the tune of Rs. 2,97,56,000/-.

To recompute the capital gains, the AO: