Capital gains valuation turned on the earlier sale agreement, while reassessment notice survived on prima facie escapement grounds.

Reassessment notice was sustained because, at the stage of issue under section 148, the Assessing Officer needed only prima facie reason to believe income had escaped assessment, not conclusive proof. For capital gains and section 50C, the earlier agreement of sale, supported by substantial payment, possession and acted-upon conduct, was treated as the operative transfer arrangement rather than the later registered deed. On those facts, the stamp valuation benchmark was taken with reference to the earlier agreement, and the addition made by applying section 50C on the basis of the 2007 deed was not sustained, giving the assessee partial relief.

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Issues: (i) whether the reassessment notice under section 148 was validly issued; and (ii) whether the transfer of the property and the computation of capital gains were governed by the agreement of sale dated 08.03.1993 or by the registered sale deed dated 09.03.2007 for the purpose of section 50C.

Issue (i): whether the reassessment notice under section 148 was validly issued.

Analysis: The reopening was founded on information emerging from survey material showing that the property had been sold under a registered deed in 2007 and that the stamp duty valuation was much higher than the declared consideration. At the stage of issuing notice, the Assessing Officer was required only to have a prima facie reason to believe that income had escaped assessment. Conclusive proof of escapement was not necessary at that stage.

Conclusion: The reassessment was held to be valid.

Issue (ii): whether the transfer of the property and the computation of capital gains were governed by the agreement of sale dated 08.03.1993 or by the registered sale deed dated 09.03.2007 for the purpose of section 50C.

Analysis: The agreement of sale was supported by substantial payment, delivery of possession, and surrounding conduct showing that the transaction had effectively been acted upon long before 2007. The legal effect of the transaction had to be tested in the context of transfer under the Income-tax Act read with part performance principles under property law. Where an enforceable agreement had already created rights in favour of the purchaser, the later registered deed was treated as a formal completion of an earlier transfer arrangement. On those facts, the stamp valuation as on the date of the agreement, and not the later deed, was the relevant benchmark for section 50C.

Conclusion: Section 50C was held inapplicable on the basis adopted by the lower authorities for assessment year 2007-08, and the capital gains addition could not be sustained in that manner.

Final Conclusion: The reopening was sustained, but the addition made by applying section 50C with reference to the 2007 registered deed was not accepted, resulting in partial relief to the assessee.

Ratio Decidendi: For capital gains purposes, where an enforceable sale agreement with substantial consideration and possession precedes the registered conveyance, the relevant transfer event and valuation basis may be fixed with reference to the earlier agreement rather than the later deed.

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