Unregistered sale agreement and incomplete payment defeat transfer under part-performance principles, barring stamp valuation and penalty.

An unregistered agreement to sell, coupled with incomplete payment and continued ownership in revenue records, was analysed as not satisfying the requirements of transfer by part performance under section 2(47) read with section 53A, so capital gains could not be fastened on that basis. Section 50C was held inapplicable in its pre-amendment form because the transaction was not one where value had been adopted or assessed by the stamp valuation authority, and the later "or assessable" amendment was prospective. A valuation-officer reference under section 142A could not justify substitution of ready reckoner value for the agreed consideration, and a penalty under section 271(1)(c) could not survive once the quantum addition failed.

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Issues: (i) whether the agreement to sell the plot of land, executed without registration and with incomplete payment, amounted to a transfer giving rise to capital gains under section 2(47) of the Income-tax Act read with section 53A of the Transfer of Property Act; (ii) whether section 50C of the Income-tax Act could be applied to adopt stamp-duty based valuation where the transaction was not registered; (iii) whether the reference to the valuation officer and the resulting valuation based addition were sustainable; and (iv) whether the penalty levied under section 271(1)(c) could survive after the quantum addition was set aside.

Issue (i): whether the agreement to sell the plot of land, executed without registration and with incomplete payment, amounted to a transfer giving rise to capital gains under section 2(47) of the Income-tax Act read with section 53A of the Transfer of Property Act.

Analysis: The agreement to sell was not registered. The purchaser had not complied with the agreed payment schedule. The revenue records continued to show the assessee and the other co-owners as owners of the property, although possession was with the purchaser. On these facts, the ingredients of a transfer by way of part performance were not satisfied.

Conclusion: There was no transfer within section 2(47) read with section 53A, and capital gains could not be fastened on that basis.

Issue (ii): whether section 50C of the Income-tax Act could be applied to adopt stamp-duty based valuation where the transaction was not registered.

Analysis: The transaction was an unregistered agreement to sell. The amendment inserting the words "or assessable" in section 50C was held to be prospective, and the provision as it stood for the year in question applied only where the value had been adopted or assessed by the stamp valuation authority. The case did not fall within that ambit.

Conclusion: Section 50C was inapplicable, and the stamp-duty based valuation could not be sustained.

Issue (iii): whether the reference to the valuation officer and the resulting valuation based addition were sustainable.

Analysis: The reference was made under section 142A and not under section 55A. In the factual setting, the adoption of the ready reckoner value to substitute the agreed consideration was not in accordance with law.

Conclusion: The valuation-based addition was unsustainable.

Issue (iv): whether the penalty levied under section 271(1)(c) could survive after the quantum addition was set aside.

Analysis: The penalty was founded on the quantum addition relating to the alleged transfer and concealment of income from the sale of the plot of land. Once the quantum issue did not survive in the manner assumed by the Revenue, the penalty lacked an independent foundation.

Conclusion: The penalty could not survive.

Final Conclusion: The Revenue's appeals were dismissed, while the assessee obtained partial relief on the treatment of the amount received and on the connected penalty issue.

Ratio Decidendi: An unregistered agreement to sell, coupled with non-compliance of the agreed payment schedule and continued ownership in the revenue records, does not amount to a transfer under section 2(47) read with section 53A; section 50C, in its pre-amendment form, cannot be invoked to substitute stamp-duty valuation in such a case, and a penalty dependent solely on the unsustainable quantum addition cannot stand.

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