Conditional transfer and uncorroborated on-money allegations shaped tax treatment of property sale gains and assessment scope.

Sale of project property was treated as conditional on receipt of full consideration where the deed deferred possession and preserved limited development rights, so registration alone did not fix transfer for tax purposes and the gains were not taxable in that year. Alleged on-money receipt was not established because third-party search material, a pen drive and an uncorroborated statement did not independently prove payment to the assessee; the addition was deleted. A limited scrutiny challenge also failed because the disputed issues fell within the stated scope and no absence of approval for widening scrutiny was shown; reliance on third-party material in regular assessment was not invalid for want of section 153C jurisdiction.

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Issues: (i) Whether the gains arising on sale of the project property were taxable in the assessment year under consideration when possession was deferred and the full consideration was received later; (ii) whether the alleged on-money receipt on sale of the property was proved so as to justify addition; (iii) whether the assessment could be invalidated on the ground of limited scrutiny and alleged absence of approval for expanding the scope of assessment.

Issue (i): Whether the gains arising on sale of the project property were taxable in the assessment year under consideration when possession was deferred and the full consideration was received later.

Analysis: The sale deed provided that the buyer would get possession only after payment of the entire consideration, while the assessee retained limited development rights till then. The property was held as stock-in-trade, so the question turned on the general law and the intention of the parties gathered from the deed. Where transfer is made conditional upon receipt of full consideration, registration alone is not conclusive of transfer. On the facts, the condition precedent was not satisfied during the year under consideration.

Conclusion: The gains were not taxable in the assessment year under consideration and the deletion of the addition was in principle and in favour of the assessee.

Issue (ii): Whether the alleged on-money receipt on sale of the property was proved so as to justify addition.

Analysis: The addition rested on third-party search material, a pen drive, and statements recorded from a buyer's representative. However, the relevant statement did not conclusively establish payment of on-money to the assessee, and the assessee denied receipt. No independent corroborative evidence or further enquiry was brought on record to substantiate the allegation. Mere notings in another person's records, without reliable corroboration, were insufficient to sustain the addition.

Conclusion: The alleged on-money receipt was not proved and the addition was rightly deleted, resulting in relief to the assessee.

Issue (iii): Whether the assessment could be invalidated on the ground of limited scrutiny and alleged absence of approval for expanding the scope of assessment.

Analysis: The issues on which addition was made fell within the broad reason for selection concerning understatement of sale consideration. The assessee did not establish that the requisite approval for expanding scrutiny had not been obtained. The plea based on section 153C also failed because the regular assessment could use third-party material after opportunity of rebuttal, and the jurisdictional preconditions for invoking section 153C were not shown to exist.

Conclusion: The jurisdictional challenge failed and was decided against the assessee.

Final Conclusion: The revenue's appeal failed, the assessee succeeded on the core additions relating to alleged on-money and timing of transfer, and the jurisdictional challenge did not alter the assessment's validity.

Ratio Decidendi: Where the sale deed makes transfer conditional upon receipt of full consideration, transfer occurs only upon satisfaction of that condition; and an addition for alleged on-money receipt cannot be sustained without independent corroborative evidence beyond third-party notings or uncorroborated statements.

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