Addition u/s 68 upon notice u/s 148

I recd 10 lacs in Nov'11 and 61 lacs in Feb'12 under deal for sale of land in cash. Deal went into dispute later. MOU does not mention of Nov transaction, but mentions whole payment asif made in Feb'12. Buyer has confirmed to Deptt about the entire payment in Feb'12 and as his source of cash, furnished another agreement with third party under which he received 1.25 cr cash. Audited B/S of this third party shows that no amount of 1.25cr exists in any head under Current Assets except cash in hand. Evidently, it was a back-dated entry not duly accounted for by the third party, and hence, the buyer's records are NOT RELIABLE. In my books, 10 lacs recd in Nov'11 has remained unutilized till March'12. Hence, even if I had entered this amount in Feb'12, it would have made no difference. Yet, ITO has reopened assessment u/s 148, and rejected my clarifications and proceeding to make addition of this 10 lacs u/s 68. He is not concerned that total amount received is still the same, 10 lacs never utilized and hence, no motive to any wrong entry, and Buyer's statement being unreliable due to audited balance sheet of his third party not showing 1.25 cr payment. Can anything be done to prevent this addition at this state? Order not released yet.

Dear Anil ji,

The cases pertaining to sec. 68 additions are normally settled only at ITAT level.

In the present case, please make proper submissions at ITO and CIT-A Level.

Sec. 68 can only be invoked if the identity, genuineness or creditworthiness of the counter party is at doubt. If the AO proposes to add only 10 lacs and not entire 71 lacs, then he shall make a mistake since he has accepted that the counter party is identifiable, creditworthy and genuine to the tune t 61 lacs.

In the present case, the cash mismatches between the Party and the Third - Party is not our prerogative. Kindly present Gauhati High Court judgment where it is held that the assessee is not liable for transactions between his creditors and their creditors.

Further, also make a submission that Rs. 10 lacs had been received by the Agent in Nov 2011 on your behalf and you had accounted the same in your books. However, the deal got materialised in Feb 2012 and the opposite person recorded it only then. The timing difference is purely due to different perception of the parties to the deal.

However, please note that addition can only be made if I, G and C of counter party is not established. Please present sufficient evidences in this regard to the ITO.