FIXED!

Steps followed

1. Removed all lines from /var/lib/dpkg/statoverride that mentions the
user debian-transmission (don't keep any blank lines in the file).

2. Fix broken packages using Synaptic package Manager.

3. Fresh upgrade by mounting iso as cdrom (Initial way).

4. The issue resolved(voila!).

Thanks Claud & Michael for helping out.

** Changed in: update-manager (Ubuntu)
       Status: Incomplete => Confirmed

** Changed in: update-manager (Ubuntu)
       Status: Confirmed => Incomplete

-- 
upgrade from 9.10 Karmic to 10.04 Lucid aborted
https://bugs.launchpad.net/bugs/571968
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