Section 43CA not attracted where cancellation deeds reversed void agricultural land purchases and no legally effective transfer existed.

Section 43CA did not apply where the assessee had no lawful title to acquire agricultural land and the original purchase transactions were void ab initio under the governing tenancy law. The registered cancellation deeds merely reversed those void transactions, so the amounts received on cancellation were treated as return of purchase consideration, not consideration for a fresh transfer of land. In the absence of a legally effective transfer for consideration below stamp duty value, the provision could not be invoked and the addition was deleted.

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Issues: Whether section 43CA of the Income-tax Act, 1961 applied to amounts recorded in registered cancellation deeds executed to reverse earlier purchases of agricultural land, where the original purchase itself was void and the assessee had no lawful title in the land.

Analysis: The land purchased was agricultural land and, on the facts found, the assessee-company was not legally entitled to acquire such land under the governing tenancy law. The original purchase transactions were treated as void ab initio, and the cancellation deeds were executed to undo those earlier transactions. The amounts received on cancellation represented return of the purchase consideration and not consideration for a fresh transfer of land. Since section 43CA applies only where there is a transfer of land or building for consideration below stamp duty value, the absence of a legally effective transfer was decisive. The cancellation deeds were thus treated as reversal of void transactions rather than taxable transfers.

Conclusion: Section 43CA was held not applicable, and the addition made on that basis was directed to be deleted in favour of the assessee.

Ratio Decidendi: Where a transaction is void ab initio and a cancellation deed merely reverses that void transaction without effecting a legally cognizable transfer, the receipt on cancellation is not consideration for transfer and cannot be brought to tax under section 43CA.

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