Cost inflation index cannot be reverse-worked from a later circle rate; section 54B relief and agricultural-income findings were upheld.

A later circle rate could not be used to reverse-work the cost inflation index for an earlier year, and the addition made on that basis was deleted. On the agricultural receipts issue, contemporaneous revenue records such as Jambandi and Girdawari supported the finding that the land remained in the assessee's possession, so the amount was not treated as long-term capital gain. Deduction under section 54B was upheld because the agreement to purchase, transfer of possession, and deposit of consideration in the capital gain account scheme satisfied the statutory conditions and the principles of part performance. The Revenue's appeal failed on all substantive issues.

---

---

Issues: (i) Whether the indexed cost of acquisition could be reduced by making a backward calculation from a later circle rate and by relying on an unshown registry; (ii) whether the amount shown as agricultural income was liable to be taxed as long-term capital gain; (iii) whether deduction under section 54B was correctly allowed on the facts found by the appellate authority.

Issue (i): Whether the indexed cost of acquisition could be reduced by making a backward calculation from a later circle rate and by relying on an unshown registry.

Analysis: The appellate authority had held that the Assessing Officer's reduction of the cost of acquisition had no proper basis, that the registry relied upon was never supplied to the assessee for comment, and that the cost inflation index could not be applied in reverse. The Tribunal noted that no contrary authority was shown by the Revenue and that the assessee's objection to the unverified material remained unanswered.

Conclusion: The addition on account of indexed cost of acquisition was rightly deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the amount shown as agricultural income was liable to be taxed as long-term capital gain.

Analysis: The appellate authority recorded a factual finding, based on Jambandi and Girdawari, that the land stood in the assessee's possession and that the agricultural income was supported by the records available in assessment proceedings. It also found that the Revenue did not effectively pursue verification from the local revenue authorities and could not demonstrate any factual error in those findings.

Conclusion: The addition treating the agricultural receipts as long-term capital gain was rightly deleted and the issue was decided in favour of the assessee.

Issue (iii): Whether deduction under section 54B was correctly allowed on the facts found by the appellate authority.

Analysis: The appellate authority found that an agreement for purchase had been executed, possession had been transferred under the revised arrangement, the consideration remained protected in the capital gain account scheme till registration, and the transaction satisfied the conditions of section 54B read with the principles of part performance reflected in section 53A of the Transfer of Property Act, 1882 and section 2(47)(v) of the Income-tax Act, 1961. The Revenue failed to show any factual or legal defect in those findings.

Conclusion: The allowance of deduction under section 54B was upheld and the issue was decided in favour of the assessee.

Final Conclusion: The Revenue's appeal failed in full on the issues that were substantively adjudicated, and the additions and disallowance under challenge were left undisturbed in favour of the assessee.

Ratio Decidendi: A later circle rate cannot be used to reverse-work the cost inflation index for an earlier year, and where the appellate authority's factual findings on ownership, possession, and statutory compliance are supported by contemporaneous revenue records, they will not be interfered with absent demonstrated error.

---