Capital gains tax depends on the proven year of transfer; absence of a clear finding justified remand for fresh adjudication.

Capital gains tax under section 45 depends on the year in which the assessee's transfer of the capital asset actually occurred. Where the record contained no categorical finding on whether the transfer took place to the bank, reconstruction company, or at a later stage, taxability could not be conclusively determined. The matter was therefore restored to the first appellate authority for a speaking order after giving the assessee a reasonable opportunity of hearing. As the issue was remanded on the foundational fact of transfer, questions on indexed cost of acquisition and cost of improvement were left open for fresh consideration.

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Issues: Whether capital gains arising from the sale of the collateral property could be taxed in the assessee's hands without a clear finding on the year in which the assessee's transfer of the property took place, and whether the matter required remand for fresh adjudication.

Analysis: Liability to capital gains tax under section 45 of the Income-tax Act, 1961 depends on the year in which the transfer of the capital asset takes place. The property in question was ultimately sold by the reconstruction company to the end purchaser, but the crucial question was when, as between the assessee and the bank or reconstruction company, the transfer had actually occurred. The existing record did not contain a categorical finding on that issue, nor was the relevant documentation or order establishing the date of transfer examined. In the absence of a finding on the actual year of transfer, the taxability issue could not be conclusively determined. The correct course was therefore to restore the matter to the first appellate authority for a speaking order after giving the assessee a reasonable opportunity of hearing. Since the matter was being sent back, the quantification issues relating to indexed cost of acquisition and cost of improvement also became academic at that stage and were left open for fresh consideration.

Conclusion: The matter was remanded to the appellate authority for a specific finding on the year of transfer, and the assessee succeeded to that limited extent.

Ratio Decidendi: Capital gains tax can be fastened only in the year in which the transfer of the capital asset by the assessee is found to have occurred, and where that foundational fact has not been determined, the assessment must be restored for fresh adjudication.

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