AMITKUMAR AMULAKHRAY SHAH,BHAVNAGAR vs. THE DY.CIT, CIRCLE-1, BHAVNAGAR
What did the Tribunal hold?
The Tribunal held that the reassessment proceedings were vitiated due to invalid assumption of jurisdiction under Section 147, as the reasons recorded were vague and lacked specific, tangible material. Furthermore, the addition made under Section 69A was unsustainable on merits due to lack of corroborating evidence and denial of cross-examination.
What were the facts?
The Assessing Officer (AO) initiated reassessment proceedings under Section 147 based on information from the Investigation Wing regarding alleged manipulation in currency derivatives through reversal trades. The AO proposed to treat profits of Rs. 39,51,250/- as fictitious and added them under Section 68.
What were the issues?
The key issues were the validity of reassessment proceedings initiated without sufficient tangible material and the sustainability of the addition made on merits without proper evidence and opportunity for cross-examination.
Which sections of the Income-tax Act were involved?
Section 147,Section 144B,Section 148,Section 143(3),Section 68,Section 115BBE,Section 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. Nos.1746&1747/Ahd/2025 (Assessment Years: 2014-15 & 2015-16) Amitkumar Amulakhray Shah, Vs. Income Tax Officer, 2130-A/2, 3rd Floor, “Vrajraj”, National E-assessment Centre, Atabhai Road, Bhavnagar, Delhi (Jurisdiction officer The Gujarat-364001 DCIT, Circle-1, Bhavnagar) [PAN No.AJBPS3135N] (Appellant) .. (Respondent) Appellant by : Ms. Nupur Shah, AR Respondent by: Shri Rameshwar P Meena, Sr. DR Date of Hearing 07.04.2026 Date of Pronouncement 24.04.2026 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: These are appeals filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide orders dated 30.07.2025 passed for A.Ys. 2014-15 and 2015-16. Since common facts and issues for consideration are involved for both the appeals before us, both the appeals are being taken up together.
We shall first take up assessee’s appeal for A.Y. 2014-15 in ITA No. 1746/Ahd/2025
The assessee has raised the following grounds of appeal:
“1. The Ld. CIT (A) has grossly erred in law and on facts in dismissing the appeal filed by the appellant. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him. I. CHALLENGING THE VALIDITY OF NOTICE ISSUED U/S. 148 OF THE ACT AND PASSING THE ORDER U/S. 147 R.W.S. 144B OF THE ACT
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 2–
The Ld. CIT(A) has erred in upholding the validity of the reassessment proceedings initiated under Section 147 of the Income-tax Act, 1961, despite the fact that the original assessment was completed under Section 143(3), and all material facts were already examined. The reopening is a mere change of opinion and therefore invalid in law. 2. The Ld. CIT(A) failed to appreciate that the Assessing Officer had no new tangible material to form a valid reason to believe that income had escaped assessment. The reopening was based entirely on information from the Investigation Wing, without any independent verification or inquiry. 3. The appellant humbly submits that the reassessment order is vitiated by gross violation of natural justice, as the appellant was not provided with any copy of the Investigation Report or given any opportunity to rebut the alleged findings or cross-examination of any person on whose statement the AO might have relied upon to form the reason to belief. 4. The C1T(A) and Ld. AO has also failed to consider the fact that during the year under consideration the appellant has not entered into any currency derivative transaction. That when no currency derivative transaction is entered into during the year then how can there be escapement of income w.r.t currency derivative transaction. 5. The Ld. CIT(A) has erred in sustaining the addition based on the allegation of reversal trades / fictitious trades transaction, when no evidence was brought on record by the AO to demonstrate the alleged circularity of fictitious nature of traders such as matching counterparty details, timestamps, or trade patterns. II. Addition on account of non-genuine profit of Rs. 39,51,250/- u/s. 68 of the Act 1. The Ld. CIT (A) has erred in law and on facts in confirming the addition of Rs. 39,51,250/-merely on surmises and conjectures. 2. The Ld. CIT(A) and the Ld.AO has made observation that the appellant has earned non-genuine profit of Rs. 39,51,250/- in reversal trade, but has failed to consider that during the year, the appellant has earned more income which is already offered to tax i.e. Rs. 53,47,010/- in the return of income. Hence, no income had escaped assessment, and the addition is factually incorrect. 3. The Appellant humbly submits that the Ld. AO has erred in invoking section 68 to treat the trading income as unexplained. The Ld. AO failed to appreciate that since the appellant is engaged in the business of share and commodity trading, the profits / losses therefrom are business income assessable under section 28, not unexplained cash credits under Section 68 of the Act. 4. The Ld. CIT(A) has erred in confirming taxation under section 115BBE, which is not applicable to A.Y. 2014-15 as it was introduced with effect from A.Y.2017-18. Hence, any reference to or application of section 115BBE is illegal and untenable.
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 3– 5. The Ld. CIT(A) and the Ld. AO both failed to consider the books of account, contract notes, bank statements, and audit reports submitted by the appellant during the proceedings, thereby rendering the order perverse and non- speaking. 6. The appellant humbly submits that the Ld.AO has failed to justify the quantum of addition made in the assessment order as the addition of Rs. 39,51,250/- has no basis in the record and is arbitrary especially when the appellant has disclosed a higher income. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.” 3. The brief facts of the case are that the assessee, an individual, filed his original return of income for Assessment Year 2014–15 declaring total income of ₹53,47,010/-. The case was assessed under section 143(3) of the Act on 17.11.2016, wherein a disallowance of ₹8,45,673/- under section 14A of the Act was made and total income was assessed at ₹61,92,680/-. Subsequently, based on information received from the Investigation Wing, Bhavnagar, and findings of SEBI regarding large- scale manipulation in illiquid currency derivatives on BSE and NSE through reversal trades, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment. The Ld. AO was of the view that the assessee had generated fictitious profits amounting to ₹39,51,250/- through such non-genuine derivative transactions. Accordingly, the Assessing Officer initiated proceedings under section 147 of the Act. During reassessment proceedings, the assessee filed return in response to notice under section 148 of the Act reiterating the income declared in the original return of income. The Assessing Officer required the assessee to furnish details and documentary evidences viz contract notes in respect of the supposed derivative transactions. The Assessing Officer also conducted parallel enquiries by issuing notices under section 133(6) of the Act to BSE and NSE; however, no response was received from these exchanges. The Assessing Officer observed that the assessee
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 4– filed only partial replies and failed to furnish crucial evidences such as contract notes or substantiation of the genuineness of the derivative transactions.
The Assessing Officer issued a show cause notice dated 15.03.2022, wherein the Assessing Officer proposed to treat the alleged profit from currency derivative transactions as fictitious and to assess the same under section 68 of the Act as unexplained income, thereby denying set-off of losses and subjecting the amount to taxation under section 115BBE of the Act. In the show cause notice, read with the draft assessment reasoning, the Assessing Officer alleged that the assessee had engaged in reversal trades in illiquid currency derivatives resulting in artificial profits/losses, which were not genuine business transactions but accommodation entries. The assessee, in response dated 21.03.2022, strongly objected to the proposed action and contended that even if section 68 of the Act were to be invoked, the amended provisions of section 115BBE disallowing set-off of losses were prospective in nature (applicable from A.Y. 2017–18) and hence could not be applied to the year under consideration. The assessee also challenged the characterization of the transactions as fictitious.
The Assessing Officer, however, rejected the explanation of the assessee. While partially accepting the legal contention regarding amendment to section 115BBE of the Act, the Assessing Officer held that the assessee failed to discharge the onus of proving genuineness of the derivative transactions. The absence of contract notes, failure to reconcile transactions, and reliance placed on SEBI findings led the Assessing Officer to conclude that the profits were non-genuine. Further, the Assessing Officer invoked the principle of preponderance of probability,
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 5– also referring to alleged involvement of the assessee in similar suspicious transactions in other assessment years, including penny stock and accommodation entry cases. Accordingly, the Assessing Officer treated the sum of ₹39,51,250/- as unexplained income under section 68 of the Act and added the same to the total income, resulting in assessed income of ₹1,01,43,930/-. Penalty proceedings under section 271(1)(c) were also initiated.
Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The CIT(A) noted that the assessee had raised general grounds challenging reopening under section 147 of the Act, but did not find merit in the same. With respect to the substantive grounds challenging the addition of ₹39,51,250/- under section 68 of the Act, the CIT(A) examined the assessment findings and the material relied upon by the Assessing Officer. The CIT(A) reiterated that SEBI investigations had revealed that the assessee was involved in executing fictitious trades in currency derivatives and had generated artificial profits through reversal trades in illiquid options. The CIT(Appeals) further noted that such profits were not genuine and could not be allowed to be set off against other losses, resulting in escapement of income.
The CIT(A) observed that the assessee failed to furnish supporting evidences, especially contract notes of derivative transactions, despite specific requisition through notice under section 142(1) of the Act. Accordingly, CIT(Appeals) concurred with the Assessing Officer’s view that the transactions were not recorded in the books and lacked credible evidentiary backing. Accordingly, the CIT(A) upheld the action of the Assessing Officer in treating the amount of ₹39,51,250/- as non-genuine
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 6– profit arising from reversal trades and in bringing the same to tax under section 68 read with section 115BBE of the Act. The addition was thus confirmed in entirety, and the appeal of the assessee was dismissed.
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
We have carefully considered the rival submissions, perused the material available on record including the assessment order, the order of the CIT(Appeals), the reasons recorded for reopening, and the paper-book filed by the assessee. The short but fundamental issue which arises for our consideration is whether the assumption of jurisdiction under section 147 of the Act is valid in the facts of the present case.
It is an undisputed position that the reopening of assessment has been initiated on the basis of reasons recorded by the Assessing Officer wherein it has been categorically alleged that the assessee had generated fictitious profits from currency derivative transactions through non- genuine reversal trades. This allegation constitutes the very foundation of the belief that income chargeable to tax had escaped assessment. However, on a careful perusal of the material placed before us, we find that the assessee, during the course of reassessment proceedings itself, vide submission dated 21.01.2022 (placed at page 204 of the paper-book), had specifically and unequivocally stated that he had not carried out any currency derivative transactions during the relevant assessment year. Further, the assessee has placed on record voluminous documentary evidences including contract notes (pages 644 onwards of the paper- book), which, according to the assessee, substantiate that the allegation of involvement in such derivative transactions is factually incorrect.
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 7– 11. In this backdrop, what assumes critical significance is that the Assessing Officer has not brought on record any independent, cogent or verifiable material to demonstrate that the assessee had in fact entered into currency derivative transactions as alleged in the reasons recorded. The entire reopening is thus premised on a general information report coupled with assumptions, without any live nexus to the specific facts of the assessee’s case. The law is well settled that the “reason to believe” contemplated under section 147 must be based on tangible material having a live link with the formation of belief regarding escapement of income in the hands of the assessee.
The Hon’ble Supreme Court in the case of ITO v. Lakhmani Mewal Das 103 ITR 437 (SC) has held that there must be a rational connection or live link between the material coming to the notice of the Assessing Officer and the formation of belief, and such belief cannot be based on mere suspicion, gossip or rumour. Similarly, in CIT v. Kelvinator of India Ltd. 320 ITR 561 (SC), the Hon’ble Apex Court has categorically held that reopening cannot be based on mere change of opinion and must be supported by tangible material. Further, the Hon’ble Delhi High Court in Pr. CIT v. Meenakshi Overseas Pvt. Ltd. 82 taxmann.com 300 (Delhi) has held that where reassessment was resorted to on basis of information from DIT(Investigation) that assessee had received accommodation entry but and there was no independent application of mind by Assessing Officer to tangible material and reasons failed to demonstrate link between tangible material and formation of reason to believe that income had escaped assessment, reassessment was not justified.
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 8– 13. In the present case, we find that the very basis of reopening, namely the allegation that the assessee earned fictitious profits from currency derivative transactions, stands directly controverted by the assessee’s submissions and supporting evidences. More importantly, the Assessing Officer has neither rebutted these submissions with any independent verification nor has brought any material on record to establish that such transactions were indeed carried out by the assessee.
In fact, even the enquiries made under section 133(6) of the Act to stock exchanges did not yield any adverse material against the assessee. Thus, the reasons recorded are not only unsubstantiated but also factually incorrect.
It is trite law that if the very foundation of the reopening fails, the entire superstructure built thereon must collapse. The Hon’ble Bombay High Court in Hindustan Lever Ltd. v. R.B. Wadkar 268 ITR 332 (Bombay) has held that the reasons recorded must stand or fall on their own and no supplementation is permissible.
Applying the aforesaid settled legal principles to the facts of the present case, we are of the considered view that the assumption of jurisdiction under section 147 of the Act is vitiated in law, as the reasons recorded are based on incorrect factual premises and lack any tangible material establishing escapement of income in the hands of the assessee. Once the reopening itself is held to be invalid, the consequent assessment order passed under section 147 read with section 143(3) of the Act cannot be sustained.
Accordingly, we quash the reassessment proceedings initiated under section 147 of the Act and set aside the assessment order. Since we
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 9– have annulled the reassessment on the legal ground of invalid reopening, the other grounds raised by the assessee on merits are rendered academic and do not require adjudication.
In the result, the appeal of the assessee is allowed.
Now we come to the assessee’s appeal for A.Y. 2015-16 in ITA No. 1747/Ahd/2025
The assessee has raised the following grounds of appeal:
“1. The Ld. CIT (A) has grossly erred in law and on facts in dismissing the appeal filed by the appellant. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him. I. CHALLENGING THE VALIDITY OF NOTICE ISSUED U/S. 148 OF THE ACT AND PASSING THE ORDER U/S. 147 R.W.S. 144B OF THE ACT 1. The Ld. AO has erred in law and on facts in invoking the provisions of section 147 of the Act by issuing the notice u/s. 148 of the Act dated 31.03.2021 merely on surmises and conjectures. 2. The Ld. AO has erred in reopening the case of the appellant u/s. 147 of the Act on the basis of the communication so received from Dy. Director of Income Tax (Inv.) Unit 1(3), Ahmedabad regarding search and seizure action in the case of Jignesh Shah and Sanjay Shah on 11.09.2018. However, the Ld. AO has not provided any certified copies of the relevant documents to the appellant even though request has been made to the Ld.AO. 3. The Ld. AO erred in law and on facts by issuing notice u/s 148 dated 31.03.2021. As per CBDT Notification No. 18/2022, such notice must be issued by NFAC in a faceless manner under Section 144B. Since the Jurisdictional AO (ACIT, Circle-1, Bhavnagar) lacked authority, the notice is without jurisdiction and liable to be quashed as held by the Hon'ble Supreme Court in case of Sri Venkataramana Reddy Patloola vs. Deputy Commissioner of Income Tax, Circle 1(1), Hyderabad and Others WRIT PETITION Nos. 13353, 16141 AND 16877 OF 2024 and other rulings. 4. The Ld. CIT(A) has erred in upholding the validity of the reassessment proceedings initiated under section 147 of the Income Tax Act, 1961 based on a notice issued u/s. 148 of the Act alleging that the appellant had received fictitious loan entries totaling Rs. 2,46,04,594/- from Shri Jignesh Shah, Shri Sanjay Shah, Mainak Commtrade Pvt. Ltd. and Christy Comtrade Pvt. Ltd. However, at the time of completing the reassessment, the Ld.AO deviated from the original reasons recorded and instead made an addition of Rs. 1,28,02,297/- allegedly
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 10– representing commodity transactions entered into with ANR Finance Ltd which was not even ; named in the reasons recorded. 5. The Appellant humbly submits that the Ld.AO has erred in making a claim that ANR Finance Ltd was controlled by Shri Jignesh Shah, but no such connection was supported by any material evidence or investigation. The Ld.AO in the reason recorded had alleged the transaction with Jignesh Shah, Shri Sanjay Shah, Mainak Commtrade Pvt.Ltd and Christy Comtrade Pvt.Ltd , whereas, addition is made only with respect of transaction related to ANR Finance Ltd which was not a part of the reason recorded. The Ld.AO has deviated from the reasons recorded, which is a Jurisdictional defect, rendering the reassessment proceedings invalid in law. 6. The Ld. AO shared an Excel sheet on 27.03.2025, at the fag end of the limitation period, which was never part of the recorded reasons for reopening. The order was also passed the same day, denying the appellant any opportunity to rebut, thus violating natural justice. Hence, no tangible material existed at the time of initiation, and the reopening lacks jurisdiction. II. Addition on account of accommodation entries by way of fictitious loans/transactions of Rs. 1.28.02.2977- u/s. 69A of the Act 1. The Ld. CIT(A) has erred in law and on facts in confirming the aforesaid addition merely on surmises and conjectures. 2. The Ld. CIT(A) has erred in law and on facts in not properly considering the written submission filed by the appellant properly wherein, appellant has specifically and categorically denied that appellant has not accepted any cash credit of whatsoever nature, either from Jignesh Shah or from any of the two of his companies. 3. The appellant humbly submits that the Ld. AO has failed to bring on record any cogent material evidence in the form of cash trail, cash vouchers, cash vs cheque entries, any cash deposits or any notings relating to cash given in lieu of cheque by appellant company, in the form of Statements of Jignesh Shah and Sanjay Shah and/or the directors of Mainak Commtrade Pvt.Ltd and Christy Comtrade Ltd operated by Jignesh Shah and others. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.” 20. The brief facts of the case are that the assessee, an individual, filed his return of income for Assessment Year 2015–16 on 30.09.2015 declaring total income of ₹2,45,70,390/-. Subsequently, based on information received from the Investigation Wing, Ahmedabad, pursuant to a search and seizure action conducted under section 132 of the Act in the case of one Jignesh Shah and his associate Sanjay Shah on 11.09.2018,
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 11– the Assessing Officer formed a belief that income chargeable to tax had escaped assessment. The search showed that Jignesh Shah was engaged in providing accommodation entries through a web of paper companies, including entities such as Mainak Commtrade Pvt. Ltd., Christy Comtrade Ltd., and ANR Finance Limited, and that these entities were used for routing fictitious transactions, bogus long-term capital gains, and accommodation entries through banking channels. Based on such information, the Assessing Officer alleged that the assessee was one of the beneficiaries who had availed accommodation entries amounting to ₹1,28,02,297/- through ANR Finance Limited. Accordingly, the Assessing Officer initiated proceedings under section 147 of the Act. During the reassessment proceedings, the assessee filed return in response to notice under section 148 of the Act reiterating the original return of income. The Assessing Officer issued notices under sections 143(2) and 142(1) of the Act, calling for details and evidences regarding the transactions undertaken with ANR Finance Limited. The assessee, in response, submitted that the transactions in question were genuine commodity transactions carried out through a registered broker on the platform of the National Multi Commodity Exchange of India Ltd., which were duly supported by invoices, executed through proper banking channels, and recorded in the regular books of account. The assessee further contended that the transactions could be verified from independent regulatory records and that if required, the Assessing Officer could exercise powers under sections 131 or 133(6) of the Act to verify the same directly from the concerned entities.
However, the Assessing Officer was not satisfied with the explanation of the assessee. By placing reliance on the material gathered during the search proceedings in the case of Jignesh Shah, including
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 12– statements, affidavits of dummy directors, seized digital data such as “PD Entry” files, and alleged records of accommodation entries, the Assessing Officer held that ANR Finance Limited was merely a conduit for providing accommodation entries. The Assessing Officer observed that certain entries in the seized data apparently reflected transactions relatable to the assessee, including specific amounts and dates, which, according to the Assessing Officer, established that the assessee had participated in the modus operandi of obtaining accommodation entries. Accordingly, the Assessing Officer proposed to treat the sum of ₹1,28,02,297/- as unexplained money under section 69A of the Act on the ground that the assessee had availed accommodation entries in the guise of fictitious transactions through ANR Finance Limited. The assessee, in response dated 22.03.2022, objected to the proposed addition and contended that the entire action of the Assessing Officer was based on third-party material collected behind the back of the assessee without providing copies thereof or granting an opportunity of cross-examination. The assessee further submitted that all transactions were genuine, duly supported by documentary evidences, carried out on recognized exchanges, settled through banking channels, and already reflected in the returned income. The assessee also submitted that that there was no direct evidence linking him to any alleged accommodation entry activity of Jignesh Shah.
The Assessing Officer, however, rejected the submissions of the assessee. Placing reliance on the seized material, statements, and surrounding circumstances, and invoking the theory of human probabilities and circumstantial evidence, the Assessing Officer held that the assessee had failed to establish the genuineness and source of the impugned transactions. The Assessing Officer held that although the
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 13– transactions were routed through banking channels, they were merely accommodation entries involving countervailing cash movement, as evidenced from the material seized during the search. Accordingly, the Assessing Officer treated the amount of ₹1,28,02,297/- as unexplained money under section 69A of the Act, resulting in total assessed income of ₹3,73,72,687/-. Penalty proceedings under section 271(1)(c) were also initiated.
Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The assessee challenged both the reopening as well as the addition on merits, contending inter alia that the addition was made solely on the basis of third-party statements and seized material without any independent enquiry or corroboration, that no opportunity of cross-examination was provided, and that the transactions were genuine and duly substantiated by documentary evidences. The assessee also submitted that the Assessing Officer had failed to establish any direct nexus between the assessee and the alleged accommodation entry racket.
The CIT(Appeals), however, was not inclined to accept the contentions of the assessee. The appellate authority observed that the information received from the Investigation Wing, coupled with the material seized during the search, clearly established that Jignesh Shah and his group entities were engaged in providing accommodation entries and that the assessee was found to be a counterparty in transactions routed through such entities. The CIT(A) held that the assessee had failed to satisfactorily explain the genuineness and source of the transactions and that mere routing of funds through banking channels did not establish their
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 14– authenticity in the face of incriminating material which indicated a larger accommodation entry scheme.
The CIT(A) further concurred with the Assessing Officer’s reliance on circumstantial evidence and the theory of preponderance of probabilities, holding that the surrounding facts, including seized digital records and statements of entry operators, sufficiently demonstrated that the transactions were not genuine. The contention of the assessee regarding lack of cross-examination and reliance on third-party material was not accepted, and the CIT(A) held that the evidences on record were adequate to sustain the addition. Accordingly, CIT(Appeals) confirmed the addition of ₹1,28,02,297/- made under section 69A of the Act and the appeal of the assessee was dismissed.
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
We have carefully considered the rival submissions, perused the assessment order, the order of the CIT(Appeals), the reasons recorded for reopening, and the material placed in the paper-book, including the specific submissions of the assessee. The primary issue which arises for our adjudication is twofold, namely, whether the assumption of jurisdiction under section 147 of the Act is valid in law, and secondly, whether the addition made under section 69A of the Act can be sustained on merits.
At the outset, we find that the very foundation of the reassessment proceedings is the information received from the Investigation Wing alleging that the assessee was a beneficiary of accommodation entries provided by certain concerns controlled by Jignesh Shah. The reasons
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 15– recorded, as reproduced in the assessment records, set out the general modus operandi of the entry operator group and make an allegation that the assessee is one of the beneficiaries who had availed accommodation entries. However, on a careful perusal of the reasons, it is evident that there is no specific, tangible or independent material brought on record by the Assessing Officer to demonstrate a live nexus between the assessee and the alleged accommodation entry transactions. The reasons are couched in general terms and lack specificity as to the exact nature of transaction, its characterization, and its linkage with the books of account of the assessee.
More importantly, the assessee, at page 161 of the paper-book, has categorically and unequivocally denied having carried out any transaction whatsoever with the entities or persons referred to in the reasons recorded. The assessee has further corroborated this denial by placing reliance on audited financial statements, tax audit report, and complete details of unsecured loans, none of which reflect any transaction with the alleged entry-providing entities. This factual assertion has not been controverted by the Assessing Officer with any cogent material. It is a settled position of law that where the very factual premise on which the reopening is based is demonstrated to be incorrect, the reopening cannot be sustained.
In the present case, the Assessing Officer has merely reproduced the investigation findings and has not carried out any independent enquiry to establish that the assessee had indeed entered into the alleged transactions. Even during the course of reassessment, no material has been brought on record to rebut the assessee’s categorical denial. Thus, the reasons recorded suffer from vagueness, lack of application of mind, and absence of tangible material, thereby vitiating the assumption of jurisdiction under section 147 of the Act.
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 16– 31. Even otherwise, on merits, we find that the addition made under section 69A of the Act is unsustainable. The entire addition is based on third-party statements, affidavits of alleged dummy directors, and digital data seized from the premises of Jignesh Shah. Admittedly, no opportunity of cross-examination of such persons has been provided to the assessee. In the present case, the addition is fundamentally based on such third-party material, and in absence of cross-examination, the same cannot be relied upon against the assessee.
Further, the assessee has placed on record documentary evidences demonstrating that the transactions were carried out through banking channels, duly recorded in books of account, and supported by invoices and exchange-based records. The Assessing Officer has not pointed out any defect in these evidences. It is well settled that suspicion, however strong, cannot take the place of evidence.
We also find that the Assessing Officer has invoked section 69A without establishing the essential ingredients of the said provision, namely that the assessee was found to be the owner of unexplained money not recorded in the books of account. In the present case, the transactions are admittedly routed through duly disclosed bank accounts and reflected in the books of account. Therefore, we are of the considered view that invocation of section 69A of the Act is misconceived in the instant facts.
The reliance placed by the Assessing Officer and the CIT(A) on the theory of human probabilities and circumstantial evidence is also misplaced in the absence of primary evidence establishing the alleged accommodation entries. While such principles may supplement evidence, they cannot substitute the requirement of proving the basic facts.
ITA Nos. 1746&1747/Ahd/2025 Amitkumar Amulakhray Shah vs. DCIT Asst.Years –2014-15 & 2015-16 - 17–
In view of the foregoing discussion, we are of the considered opinion that the reassessment proceedings are vitiated both on account of invalid assumption of jurisdiction under section 147 as well as on merits. The reasons recorded are vague and based on incorrect and unverified assumptions, and the addition made under section 69A is not supported by convincing evidence.
Accordingly, we hold that the addition of ₹1,28,02,297/- made under section 69A of the Act is deleted.
In the result, the appeal of the assessee is allowed.
In the combined result, both appeals are filed by the assessee are allowed. This Order pronounced in Open Court on 24/04/2026
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 24/04/2026 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad
Date of dictation 22.04.2026 (Dictated over dragon software) 2. Date on which the typed draft is placed before the Dictating Member 22.04.2026 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 23.04.2026 5. Date on which the fair order is placed before the Dictating Member for pronouncement 24.04.2026 6. Date on which the fair order comes back to the Sr.P.S./P.S 24.04.2026 7. Date on which the file goes to the Bench Clerk 24.04.2026 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order……………………………………
More judgments on Section 147
- ACIT Central Bilaspur, Bilaspur vs Arun Kumar Agrawal, SaktiITSSA 26/RPR/2025[2018-19]Status: Disposed21 Oct 2026AY 2018-19
- Vinod Agrawal, Kawardha vs Assisstant Commissioner of Income Tax…ITA 666/RPR/2026[2019-20]Status: Heard21 Oct 2026AY 2019-20
- Sar Business Tradelink Private Limited… vs Income Tax Officer, Ward - 1(2), RaipurITA 599/RPR/2026[2014-15]Status: Heard21 Oct 2026AY 2014-15
- Tarunaben Maganlal Bhut, Navagam vs ITO Ward 2(2)(1), RajkotITA 673/RJT/2026[2024-25]Status: Disposed21 Oct 2026AY 2024-25
- Neo Incorporation, Rajkot vs DCIT Circle- 1(2), RajkotITA 471/RJT/2026[2012-2013]Status: Disposed21 Oct 2026AY 2012-2013
Recent GST High Court judgments
Search GST case law →- Sh Umang Uniyal vs. Commissioner Department Of Central Goods And Services TaxUttarakhand · 16 Oct 2026
- Shivaraj M S vs. The Union Of INDIAKarnataka · 15 Oct 2026
- Paresh Textiles Prop Paresh Gudhka vs. Superintendent Range Iv Div VBombay · 15 Oct 2026
- M/S Palladium Constructions PVT LTD. vs. Principal Commissioner Of Central TaxKarnataka · 15 Oct 2026
- M/S. Vk Construction vs. The Deputy State Tax Officer - IiMadras · 15 Oct 2026
