Part-performance transfer principle fixed capital gains timing; later registration did not shift taxability to a subsequent year.

Reassessment initiated after four years was upheld where fresh material showed that the assessee had executed an immovable property sale deed and had not disclosed the transaction in the return. For capital gains, transfer was treated as having occurred when consideration was received and possession was handed over under part performance, so later registration did not defer taxability. The transfer was therefore attributable to the earlier assessment year, and section 50C could not sustain an addition in assessment year 2007-08 on these facts. The addition for that later year was deleted.

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Issues: (i) Whether reassessment initiated after four years from the end of the relevant assessment year was valid. (ii) Whether the capital gains arising from the transfer of the immovable property were assessable in the relevant assessment year 2007-08 and whether section 50C could be applied on the basis of the registered sale deed value.

Issue (i): Whether reassessment initiated after four years from the end of the relevant assessment year was valid.

Analysis: Fresh material came to light during the relevant assessment proceedings showing that the assessee had executed a sale deed for immovable property and had not disclosed the transaction in the return. On those facts, the reopening was held to be justified and no infirmity was found in the reassessment action.

Conclusion: The reassessment initiated after four years was upheld against the assessee.

Issue (ii): Whether the capital gains arising from the transfer of the immovable property were assessable in the relevant assessment year 2007-08 and whether section 50C could be applied on the basis of the registered sale deed value.

Analysis: The record showed receipt of consideration in December 2003, execution of an unregistered notarised sale deed in January 2004, and handing over of possession. Such facts attracted the principle of transfer by part performance under section 2(47)(v), read with section 53A of the Transfer of Property Act, 1882. The later registration in November 2006 did not postpone the transfer for capital gains purposes, and the escaped assessment for an earlier year could not be brought to tax in the later year. Consequently, the enhanced value under section 50C for assessment year 2007-08 was not sustainable on these facts.

Conclusion: The capital gains were held taxable only in assessment year 2004-05 and the addition for assessment year 2007-08 was deleted in favour of the assessee.

Final Conclusion: The reopening was sustained, but the addition towards long-term capital gains for assessment year 2007-08 was set aside, leaving the appeal only partly successful.

Ratio Decidendi: For capital gains purposes, transfer of immovable property occurs when possession is handed over in part performance of the contract and consideration is received, even if formal registration takes place later; such transfer cannot be shifted to a later assessment year merely because registration occurred subsequently.

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