ISHA KACKER,DELHI vs. ASSISTANT COMMISSIONER , NEW DELHI

Q: Which sections of the Income-tax Act were involved?

Section 48, Section 55, Section 143(3), Section 144C(13), Section 142(1), Section 2(47)

ITITA 2030/DEL/2025Status: DisposedITAT Delhi23 June 2026AY 2022-2327 pages

AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the AO's decision to assign a 'Nil' value for the cost of construction of the Vasant Vihar property was perverse and legally unsustainable. The AO had effectively ignored the directions of the DRP to compute the cost of construction based on circle rates notified by the Delhi Government. The Tribunal noted that the property in Vasant Vihar was a bungalow, and assigning 'Nil' value for construction was contrary to its existence and the Memorandum of Settlement. The Tribunal also acknowledged the assessee's practical difficulties in furnishing documentary evidence for cost of improvement due to efflux of time and loss of records. Therefore, the Tribunal directed the AO to re-verify the valuation of the Vasant Vihar property based on the specified valuation as per the notification dated 18.07.2007, considering the assessee's submissions and any further evidence provided. The issue was set aside for fresh consideration by the AO, who was directed to pass a speaking order in accordance with the DRP's directions and the relevant circular, granting the assessee an opportunity to be heard. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, Isha Kacker, filed an appeal against the final assessment order for AY 2022-23. The assessee declared a total income of Rs. 43,64,097/-. A significant portion of this income was from capital gains on the sale of property at 5, Munirka Marg, New Delhi, for Rs. 9,25,00,000/- on 12.04.2021, where she held a 50% share. The property was initially acquired by her maternal uncle, then by the assessee and her mother via a Memorandum of Settlement in 2007, and later relinquished by the uncle in favor of the assessee and her mother. The Assessing Officer (AO) questioned the claim of cost of acquisition for the entire property and the cost of improvement, demanding reconciliation and documentary evidence. The assessee provided submissions, but the AO issued a show-cause notice and passed a draft assessment order.

What were the issues?

1. Whether the claim of cost of acquisition for the entire property, instead of the assessee's 50% share, is admissible for computing capital gains, and if the entire cost of improvement should be disallowed for want of documentary evidence (Section 48 and Section 55 of the Income Tax Act, 1961)? Assessee's Contention: The assessee argued that the property was acquired through a family settlement where she and her mother gave up rights in another property (Vasant Vihar) in exchange for the Munirka property. She claimed the cost of acquisition should be based on the value of the relinquished property. She also contended that documentary evidence for cost of improvement was lost due to time, death of relatives, and destruction of bills, but provided affidavits from her maternal uncle and contractor. Revenue's Contention: The Revenue, through the AO, disallowed the claim for cost of acquisition for the entire property, restricting it to the assessee's 50% share, and disallowed the entire cost of improvement due to lack of documentary evidence. The AO also questioned the computation of capital gains based on the family settlement.

Which sections of the Income-tax Act were involved?

Section 48,Section 55,Section 143(3),Section 144C(13),Section 142(1),Section 2(47)

AI-generated summary — verify with the full judgment below

Before: MS MADHUMITA ROY & SHRI SANJAY AWASTHI

आदेश / ORDER

PER MADHUMITA ROY, JUDICIAL MEMBER: The instant appeal filed by the assessee is directed against the final assessment order dated 24.01.2025 passed by the Asstt. Commissioner of Income-tax, Circle International Taxation 2(1)(2), (hereinafter referred to as ‘the

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ld. AO’) under Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2022-23.

Heard the Ld. Sr. Counsel Shri G.C. Srivastava for the appellant and Shri M.S. Nethrapal, CIT-DR for the Revenue.

The assessee filed its return of income on 10.07.2022 for AY 2022-23 declaring total income at Rs.43,64,097/- claiming refund of Rs.1,13,40,900/-. The case of the assessee was selected for scrutiny under CASS and notice under Section 143(2) of the Act dated 01.06.2023 followed by notice under Section 142(1) of the Act were issued from time to time whereupon the assessee filed her submissions.

Relevant to mention that the assessee received rental income of Rs.7,27,265/- from the property lying and situated at 1/13, Shanti Niketan, New Delhi; received interest income of Rs.88,559/- in the form of interest from income tax refund, saving bank and term deposit. The assessee further received income of Rs.36,22,691/- from capital gain from the sale of property lying and situated at Basement and Ground Floor, 5, Munirka Marg, New Delhi – 110 057, which is the subject matter before us, on 12.04.2021 at a sale consideration of Rs.9,25,00,000/- along with her mother meaning thereby the assessee actually received Rs.4,62,50,000/- from the above total sale proceeds. The computation

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of capital gain as provided by the assessee before the authorities below is as follows:- .

Gain on sale of property Basement 4,62,50,000/- and Ground Floor 5, Munirka Marg, New Delhi-110057, 50% share in property own share of sale price

Indexed Value Date of purchase 59,40,000 1,66,63,540 19.07.2004 Cost of Improvement F.Y.

2007-08 2555485 6279758

2008-09 2478970 5736011

2010-11 2760490 5239972

2011-12 2433450 4192411

2012-13 2848970 4515617

4,26,27,309 Gain on sale property 36,22,691/-

The case of the assessee is that the said property was acquired initially by his maternal uncle, namely, Mr. Navjyot Sachdev on 21.07.2004 for a purchase consideration of Rs.59,40,000/-. Subsequently, by way of Memorandum of

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Settlement dated 20.04.2007, the assessee acquired the property along with her mother Mrs. Loveleen Kacker. Subsequently, on 05.05.2009, a relinquishment deed was executed by the maternal uncle relinquishing all his rights, title and interest in respect of subject property absolutely and forever in favour of the assessee and the co-owners, i.e., the assessee’s mother.

The assessee having 50% of the share of the basement and the ground floor of the said residential unit lying and situated at 5, Munirka Marg, New Delhi, claimed the cost of acquisition for the entire property as of the opinion of the Ld. AO and, therefore, asked the assessee to reconcile the anomaly and to submit the documentary evidences in respect of cost of improvement claimed in ITR by and under the notice dated 09.01.2024 under Section 142(1) of the Act whereupon the assessee submitted a detailed reply on 23rd February, 2024 with the following contents:-

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6.1 Further, reply was also made by the assesseee on 28.02.2024 with the following contentions:-

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The contention made by the assessee was not found to be tenable and, therefore, a show-cause notice dated 08.03.2024 was issued with the following contents:- “Upon perusal of your submission dated 28.02.2024, it is noticed that you had only 50% share in the basement and ground floor of the residential unit 5, Munirka Marg , Vasant Vihar, New Delhi. However, you have claimed Cost of Acquisition for the entire property i.e. 100%. Further, you have failed to submit documentary evidences in respect of cost of improvement claimed in ITR. Hence, you are show-caused as to why the claim of cost of acquisition should not be restricted to 50% and entire cost of improvement should not

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be disallowed and Long Term Capital Gain be recomputed and taxed accordingly. Your reply in this regard should reach this office this office by due date mentioned in this notice, failing to which the assessment shall be completed on the basis of documents available on record. ” 7.1 The assessee duly filed comprehensive reply on 14.03.2024 but the same was turned down by the Learned AO by passing the draft order dated 28.03.2024 under Section 144C (1) of the Act.

The draft order passed by the ITO, International Taxation 2(1)(2) was objected by the assessee by filing application dated 26.04.2024 before the Ld. DRP and thereupon, the following direction was passed on 31.12.2024 by the DRP:-

“4.5 Hence, the Panel hereby holds that a valid transaction to constitute 'exchange' for purposes of section 2(47) of the Act did take place. In transaction of exchange the consideration is in 'kind' and not in monetary terms. On this ground also, the transaction has traits of a valid exchange. As far as computation is concerned the same is as under: 4.5.1 Vasant Vihar Property bearing address no. F-2/4. The area of property is 980 Sqr. Yard. The cost of land and minimum cost of construction, being a residential house, has to be computed as per the circle rate notified by the Revenue Department, Government of Delhi has contained in notification no. F.2(12)/Fin. (E.I)/Part File/Vol.1(ii)/3548 dated 18.07. 2007. The AO is hereby directed to compute the same strictly as per the guideline of Delhi Government. To enable determination of minimum cost of construction, it is imperative to have data of cost of construction. However, the same has not been filed by the assessee. While giving effect to this order, if the assessee is able to submit the necessary documentation, the AO is directed to consider the same. There is no dispute regarding the area of Vasant Vihar property as the same has been verified by the Panel from the Memorandum of family settlement dated 20.04.2007. (Direction 1 of the DRP)

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4.5.2 Once the cost of bungalow(land+construction) at Vasant Vihar is determined as per direction 1 of DRP, the value of this property is to be equated to the two properties exchanged in the family settlement in 50-50 ratio as attributes of the two properties are more or less similar.(Direction 2 of DRP) 4.5.3 Thereafter, once the cost of acquisition of Munirka property is determined as on 20.04.2007, the same is to be divided by two so as to ascertain the cost of acquisition of this property in the hands of the assessee. It is pertinent to mention that as a result of the family settlement, the property had devolved to Sh. DBS Sachdev (Nana Ji of the assessee) who assigned the property to the assessee and her mother in equal ratio. (Direction 3 of DRP) 4.5.4 Once, the cost of acquisition of Munirka property has been determined, the same is to be indexed from FY 2007-08 onwards to determine the indexed cost of acquisition for purposes of computation of capital gains income. (Direction 4 of DRP) 4.5.5 As far as cost of construction/improvement of Munirka property is concerned, the claim was disallowed by the AO due to non-furnishing of necessary details by the assessee. During the course of the proceeding before the Panel, the assessee has submitted that are practical difficulties in submission of relevant evidence due to efflux of time, death of assessee's Nanaji, destruction of relevant bills and vouchers etc. However, to substantiate her claim, assessee has furnished Affidavits of her maternal uncle and the concerned contractor who had provided manpower for the construction work. As these evidences fall short of the standard of proof required in Income Tax proceeding, therefore, the claimed amount of cost of construction cannot be allowed. However, it is also a fact that construction activity was carried out in these years. The same is evident from the information contained in this regard in the Registered Sale Deed for the Munirka property as under:

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4.5.6 The cost of construction as per the above information was Rs. 37,03,159/- which is to be divided by two to arrive at assessee's share of cost of construction and thereafter indexed from FY 2009-10 to arrive at the indexed cost of improvement for purposes of computation of long-term capital gains. (Direction 5 of DRP) 5. The objections of the assessee are decided as above. The Assessing Officer is directed to incorporate the finding of the DRP in respect of various objections suitably in the final order. AO shall also place a copy of the DRP Directions as Annexure to the final order."

The Ld. AO, considering the entire aspect of the matter passed the orders with the following observations upon making addition of Rs.1,70,15,731/- in the hands of the assessee after considering the observations and directions given by the DRP in paragraph Nos.4.5, 4.5.1 to 4.5.6 as quoted above:-

“17.1 The directions of the Ld. DRP has been perused carefully. It is pertinent to mention here that the assessee has filed a letter vide e-mail dated 21.01.2025, wherein, the assessee has not submitted any documentary evidence with respect to the cost of construction. The assessee has only reiterated the facts which was already brought on record during the course of assessment proceedings as well in DRP proceedings. Therefore, it is inferred that the assessee has not brought on record any relevant documentary evidence with respect to the claim of cost of construction.

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Considering the same, the cost of acquisition of the property is determined as under: -

17.2 Further, with regard to the cost of construction of the property, the Ld. DRP has directed in its direction 5, that an amount of Rs.37,03,159/-to be taken as cost of construction in which assessee’s share is 50% i.e. Rs.18,51,580/-(50% of Rs.37,03,159/-) and the same should be indexed from FY 2009-10. 18. Considering the above directions of the Ld. DRP, income form long term capital gain of the assessee is re-computed hereunder:- Sale consideration (assessee’s share 50%) : Rs.4,62,50,000/- Less: Indexed Cost of acquisition :Rs.2,16,45,694/- [Rs.88,08,500 x 317/129] Less: Indexed cost of construction : Rs.39,65,884/-

[Rs.18,51,580 x 317/148] Long term capital gain : Rs.2,06,38,422/-

18.1 Hence, the addition made on account of LTCG is computed below:

Assessed LTCG on sale of property : Rs.2,06,38,422/- LTCG as disclosed by the assessee in ITR :Rs.36,22,691/-

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Difference in capital gain :Rs.1,70,15,731/- 18.2 Hence, in view of the above, addition of Rs.1,70,15,731/-is being added to the total income of the assessee. (Addition: Rs.1,70,15,731”

10.

After careful reading of the order passed by the Ld. DRP we have considered the Notification dated 18.07.2007 issued by the Lieutenant Governor, NCT of Delhi contents whereof are as follows:

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11.

The case of the appellant is this that the Ld. Assessing Officer has passed the order of addition of ₹ 1,70,15, 731/-in the hands of the assessee and totally contrary to the directions passed by the Ld. DRP.

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12.

It is apparent that under Section 144C(10) of the Act, the directions passed by the DRP are binding on the Ld. AO and he doesn’t have any discretion to deviate from or selectively implement the said directions.

13.

It is also a fact that the transaction took place in 2007 was not mere inheritance but a family settlement by and under the Memorandum of Family Arrangement and Settlement under which the assessee and her mother gave up their potential rights in respect of the property lying and situated in Vasant Vihar. In return they received the subject property. In that view of the matter the cost of acquiring the subject property’s value of what they gave up in Vasant Vihar property.

14.

By an under the direction passed by the Learned DRP the Learned AO was to compute the value of the relinquished Vasant Vihar property for determining the COA. It is specifically mentioned that the cost of land and minimum cost of construction has to be computed as per the circle rate notified by the Revenue department dated 18.07.2007. The Ld. AO was further directed to compute the same strictly as per the guidelines of Delhi Government as above.

15.

In that view of the matter, the value has to be divided to find out the cost of acquisition of the subject property in the following manner:

valuation of the property = land value+ building (construction) value. 23

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16.

It appears that the Learned AO calculated the land value of the Vasant Vihar property at ₹ 3.52 crores but for the cost of construction he assigned the value at Nil. Adoption of valuation at ‘Nil’ for the property having almost 10,000 sq. ft being a bungalow in Vasant Vihar is found to be perverse and legally unsustainable as neither the existence of the building are in dispute and furthermore, the same is recorded in the Memorandum of Settlement. Apart from that when the documents for cost of construction was not been able to be submitted by the appellant before the DRP as the same was practically done by the Nanaji of the Assessee and in fact the extensive renovation of flooring, woodwork and electricians were carried out on the subject property to make it inhabitable by the grand parents and both are Nana and Nani passed away in the year 2009 and the improvement shown after that were done by the maternal uncle who was the registered purchaser of the property in question, and time and again the assessee submitted that she had honestly claimed the figures of cost of improvement as made available to her by Nana ji and Nani ji while they were alive and her mama ji and the benefit of indexation and as such the assessee could not furnish the documents in regard to the cost of improvement which was actually carried out by the previous owner and the evidence could not be traced/could not be located by his successors also, the Ld. AO failed to consider the same in its proper perspective. Surprisingly the Ld. AO did not doubt the veracity of improvements carried out as claimed by the appellant but he denied the cost of construction claimed for want of documentary evidences which

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according to us is not permissible particularly keeping in view of the Notification dated 18.07.2007 by LG, NCT Delhi. Relevant to mention that the Ld. AO was directed to use the circle rates precisely because the actual cost of evidence was missing. As per Delhi government notification dated 18.07.2007 as already reproduced hereinabove prescribes specific for ‘minimum rates of construction’ e.g. rupees 14960/-per square meter for category A. Needless to mention that the property in question is coming under the purview of this particular rate specified by the said Notification of 2007.

17.

Under these facts and circumstances of the matter assigning ‘Nil’ value for cost of construction in the absence of documentary evidence, the Ld. AO is found to have effectively reviewed and overruled the direction to use estimation on circle rates passed by the Learned DRP.

18.

Considering the entire aspect of the matter when we find that the direction to compute the cost of construction on circle rate provided by the notification of government of National Capital Territory of Delhi, revenue department, dated 18.07.2007 has completely been given a go bye, assessing the value of cost of construction at “NIL” by the Learned AO is found to be perverse and not sustainable in the eyes of law and therefore, quashed.

19.

The Learned AO is directed to verify the valuation of property lying and situated at F-2/4, Vasant Vihar, New Delhi on the basis of specified valuation as per notification dated 18.07.2007.

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20.

However, the assessee has furnished the following calculation of the valuation of the subject property lying and situated at F-2/4, Vasant Vihar, New Delhi, on the basis of the aforesaid notification dated 18.07.2007:

21.

Thus, keeping in view the principle of fair play as we find that the cost of construction to be calculated on the basis of the notification dated 18.07.2007, the issue is required to be set-aside for consideration of the Learned AO afresh. The Learned AO is directed to verify the valuation of the said property as submitted by the assessee and to pass speaking order strictly in accordance with above Circular dated 18.07.2007, in terms of the order passed by the Learned 26

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DRP. While dong so he is further directed to grant an opportunity of being heard to the assessee and to consider the evidence on record and any other evidence which the assessee may choose to file at the time of hearing of the matter.

22.

The appeal preferred by assessee is, therefore, allowed for statistical purposes.

Order pronounced in the open court on 23rd June, 2026.

Sd/- Sd/- (SANJAY AWASTHI) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23rd June, 2026. dk Copy to: ISHA KACKER, 5, MUNIRKA MARG, VASANT VIHAR, 1 SOUTH WEST DELHI, DELHI 110057, NEW DELHI-110057, DELHI ASSISTANT COMMISSIONER , CIVIC CENTRE, MINTO ROAD, NEW 2 DELHI, NEW DELHI-110002, DELHI 3 THE PCIT / CIT, 4 THE D.R., ITAT, DELHI BENCH 5 GUARD FILE

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