Where an assessee relinquishes a bundle of rights including development, possession, and litigation claims over an entire land parcel under a consolidated judicial settlement, the indexed cost of acquisition must be computed with reference to the entire parcel, as the transfer constitutes a global exit rather than a partial sale.

O R D E R

PER R.K. PANDA, VP:

This appeal filed by the Revenue is directed against the order dated 08.10.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2023-24.

Facts of the case, in brief, are that the assessee is an individual and has filed his return of income u/s 139 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the impugned assessment year declaring total income of Rs.98,53,380/-. The case was selected for scrutiny under CASS on the ground that the sale consideration of the property reported in ITR is less than the sale consideration of property reported in SFT. Accordingly, the Assessing Officer issued statutory notice u/s 143(2) of the Act and thereafter notice u/s 142(1) of the Act along with a questionnaire were issued and served on the assessee in response to which the assessee filed his response.

During the course of assessment proceedings the Assessing Officer noted that the assessee has received an amount of Rs.33,00,00,000/- as sale consideration for immovable property. The value of the property as per the stamp valuation authority was declared at Rs.15,18,86,616/-. He noted that the assessee has claimed deduction under section 48 of the Act for the indexed cost of acquisition of Rs.32,44,30,676/- wherein the cost of acquisition was declared at Rs.9,80,15,310/-. Further, the assessee claimed deduction under section 54F amounting to Rs.14,47,358/-. The assessee accordingly declared long term capital gains of Rs.41,21,966/-.

The Assessing Officer, on perusal of the sale deed, noted that the conveyance deed of Rs.83,36,27,000/- in respect of area admeasuring 01 hectare, 39.675 acres i.e. 13967.500 sq.mtrs out of survey No.230A/2, admeasuring 01 hectare i.e. 17800 sq.mtrs situated at village Lohegaon, Haveli Taluka, Pune was entered between the vendors M/s Lunkad Reality (partners Shri Amit Kantilal Lunkad & Shri Amol Kantilal Lunkad) and the Purchaser M/s Highspot Realtors LLP wherein the assessee was a confirming party. The assessee was paid an amount of Rs.33 crores for transferring his interest in the said property. Thus the capital asset transferred was the land admeasuring 13967.500 sq.mtrs. and the consideration received in respect of the above land was Rs.83,36,27,000/-. Out of Rs.83,36,27,000/-, Rs.33,00,00,000/- was received by the assessee, who was the confirming party in terms of the Consent decree dated 03.08.2021. The assessee has claimed cost of acquisition of Rs.9,80,15,310/- (F.Y.2001-02) in respect of the above land. He, therefore, issued a show cause notice asking the assessee to explain as to why the amount of Rs.33 crores should not be added to the total income under the head ‘Income from other sources”. The Assessing Officer noted that the assessee failed to submit any document in respect of cost of acquisition declared at Rs.9,80,15,310/- in the F.Y. 2001-02. He further noted that as per the sale deed the said property admeasuring 13967.50 sq.mtrs out of the larger land admeasuring 35,600 sq.mtrs was sold. As per the valuation report submitted by the assessee, the value determined at Rs.9,96,80,000/- is in respect of larger land admeasuring 35,600 sq.mtrs. The Assessing Officer further noted that the share of the assessee out of the sale consideration of Rs.83,36,27,000/- is only Rs.33,00,00,000/-. Therefore, he was of the opinion that the right of the assessee in the sold property be taken on proportionate basis i.e. Rs.33,00,00,000/ Rs.83,36,27,000 which works out to 0.396. The Assessing Officer accordingly worked out the indexed cost of acquisition at Rs.5,04,06,410/- as against Rs.9,96,80,000/- claimed by the assessee and worked out the long term capital gains at Rs.20,28,10,757/-. He accordingly assessed the total income of the assessee at Rs.21,26,64,137/- as against the returned income of Rs.98,53,380/-.

In appeal the Ld. CIT(A) / NFAC allowed the appeal of the assessee and deleted the addition holding that the assessee has relinquished his righ