Very unique case I have kindly needed hints?

you will have to get the correction done at the registrar office. It is not for the Income-tax department to question what is written in the registered document. So if it says it is a sale, it is a sale for them.

one thing to note will be the stamp duty paid. See if there is any difference on gift to family vs sale. If your stamp duty % is that of the gift deed, it might be easier to convince the registrar office as well as the Income-tax department. 

He also can check time limit to execute Gift deed , from date of transfer . Can he excute Gift deed now ? if yes as per the law then you can reply with Gift deed that will be easy for exemption ,so you confirm all these things.

once you have already sold a property, without cancellation of that deed, you cannot gift it again!