Understanding Capital Gains Tax: Determining the Exact Date of Property Transfer
Determining the precise date on which a “transfer” of immovable property occurs is central to capital gains taxation under the Income Tax Act 1961. A wrong interpretation of this date can result in non-disclosure of capital gains, reassessment proceedings, interest, and penalties.
A recent ruling of the ITAT Mumbai in Shree Jain v. Assistant Commissioner of Income Tax (2026) once again underlined how crucial it is to correctly identify the year in which the transfer is regarded as having taken place, especially when there are disputes over payment of consideration.
This write-up explains:
- The core facts and findings in Shree Jain v. Assistant Commissioner of Income Tax (2026)
- Why execution and registration of the sale deed generally fix the “date of transfer”
- How non-receipt of sale consideration impacts, or does not impact, capital gains tax
- Key practical takeaways for any assessee dealing in immovable property
Brief Facts of the Case: Shree Jain v. Assistant Commissioner of Income Tax (2026)
To understand the legal position, it is useful to first outline the basic facts considered by the ITAT Mumbai.
Purchase and Subsequent Registered Sale
- The assessee, Shree Jain, acquired a piece of land during FY 2012–13 for a purchase price of ₹4.37 crore.
- The same land was later sold through a registered sale deed dated 07.08.2015 for a reported sale consideration of ₹8.96 crore.
- As per the recitals in the registered deed:
- The buyer was stated to have made full payment of ₹8.96 crore via cheque drawn on Axis Bank.
Section 194-IAtax deduction at source of ₹8.96 lakh was shown as having been made.
Return of Income and Non-Reporting of Capital Gains
- For AY 2016–17, the assessee filed the return of income.
- No capital gains from the above transfer were reported, despite the registered sale deed and TDS entry.
- The assessee’s stand was that:
- Though the deed was executed and registered, the buyer did not clear the cheque.
- Due to non-payment of consideration, the assessee claimed that the transaction had effectively failed.
- On that basis, the assessee argued that the sale deed was void or inoperative, and therefore no “transfer” had taken place for tax purposes.
The return was processed under Section 143(1) without scrutiny; no regular assessment was initially framed.
Reassessment Proceedings Under Section 147
Subsequently, the Department obtained information that:
- A registered sale deed existed in respect of the land, and
- TDS under
Section 194-IAon the sale of the property was reflected in Form 26AS.
On this basis, the Assessing Officer formed a belief that capital gains had escaped assessment and issued a notice under Section 148, thereby reopening the assessment under Section 147.
During reassessment:
- The assessee contended that the buyer had, at a later stage, transferred 84 flats and that the capital gains on those subsequent transactions had been offered to tax in later assessment years.
- It was effectively argued that since the original cheque was not honoured and later arrangements were made, no transfer giving rise to capital gains had occurred in AY 2016–17.
Findings of the Assessing Officer
The Assessing Officer rejected the assessee’s submissions, noting especially that:
The registered sale deed dated 07.08.2015 unambiguously:
- Recorded transfer of ownership rights in the land; and
- Stated that consideration had been received via cheque, with corresponding TDS deduction.
The assessee did not furnish any registered deed of cancellation or any other legally valid document annulling the original conveyance.
Since the property was held for less than 36 months prior to the date of transfer, the gain was treated as Short-Term Capital Gain (STCG).
- The Assessing Officer computed STCG at ₹4.56 crore, based on the difference between the stated sale price of ₹8.96 crore and the cost of acquisition of ₹4.37 crore (subject to any allowable adjustments).