Section 54 purchase relief may extend to part-performance transactions even without registration, and Rule 46A is not triggered for existing record material.

Section 54 relief was explained in a practical, purposive manner: a purchase can be recognised even without a registered agreement to sell where substantial consideration has been paid, possession has been given, and the transaction is protected by part performance under section 53A of the Transfer of Property Act. A disputed vendor title, by itself, does not defeat the exemption unless a legal bar to the transaction is shown. On the appellate procedure point, Rule 46A was not attracted because the documents relied on by the CIT(A) were already on record before the Assessing Officer, so no additional evidence issue arose.

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Issues: (i) Whether exemption under section 54 of the Income-tax Act, 1961 could be denied merely because the agreement to sell was unregistered and the vendor's title was disputed; (ii) whether the CIT(A) violated Rule 46A of the Income-tax Rules, 1962 by relying on material allegedly not placed before the Assessing Officer.

Issue (i): Whether exemption under section 54 of the Income-tax Act, 1961 could be denied merely because the agreement to sell was unregistered and the vendor's title was disputed.

Analysis: The expression "purchase" in section 54 was applied in a practical and purposive sense. The substantial payment made by the assessee, coupled with possession and part performance, brought the transaction within the protective ambit of section 53A of the Transfer of Property Act, 1882. The absence of registration did not, by itself, negate a qualifying purchase for section 54 purposes. The title objection was also found insufficient to disturb relief, since the conveyance deed showed mutation in favour of the vendor and the property stood conveyed before the relevant agreement, while the Revenue did not show any legal bar preventing the vendor from entering into the transaction on the relevant date.

Conclusion: The exemption under section 54 was rightly allowed and the disallowance was unsustainable.

Issue (ii): Whether the CIT(A) violated Rule 46A of the Income-tax Rules, 1962 by relying on material allegedly not placed before the Assessing Officer.

Analysis: The record showed that the conveyance deed and connected material relied upon by the CIT(A) were already before the Assessing Officer. As the decisive documents were not newly introduced at the appellate stage, the conditions for treating them as additional evidence were not made out. No procedural breach under Rule 46A was established.

Conclusion: There was no violation of Rule 46A.

Final Conclusion: The Revenue's challenge failed on both merits and procedure, and the relief granted to the assessee was sustained.

Ratio Decidendi: For section 54, "purchase" is not confined to a registered sale deed and may be satisfied by a transaction involving consideration, possession, and part performance; additionally, material already on record before the Assessing Officer cannot be treated as additional evidence so as to invoke Rule 46A.

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