ITO, WARD-1, GANDHINAGAR, GANDHINAGAR vs. NAWABKHAN IMAMKHAN BALOCH, GANDHINAGAR

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ITA 2687/AHD/2025Status: DisposedITAT Ahmedabad24 April 2026AY 2016-177 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to delete the addition. It found that the AO failed to establish a nexus between the assessee and the alleged accommodation entry provider with specific material, and lacked cogent evidence to support the addition.

What were the facts?

The Assessing Officer (AO) reopened the assessee's case based on information that the assessee engaged in share transactions to obtain accommodation entries for bogus long-term capital gains. The AO made an addition of Rs. 26,56,595/- under Section 69A, stating the assessee failed to provide supporting evidence.

What were the issues?

Whether the addition made by the AO on account of alleged accommodation entries in the nature of bogus long-term capital gains is sustainable in law without specific material and independent inquiry.

Which sections of the Income-tax Act were involved?

Section 69A,Section 147,Section 148,Section 144,Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL

For Respondent: Shri Girish Parihar, Sr. DR
Hearing: 24.03.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.2687/Ahd/2025 (Assessment Year: 2016-17) Income Tax Officer, Vs. Nawabkhan Imamkhan Baloch, Ward-1, Kuner Nagar, At & Post Vavol, Gandhinagar Gandhinagar-382016 [PAN No.AZMPB1715G] (Appellant) .. (Respondent) Appellant by : None Respondent by: Shri Girish Parihar, Sr. DR Date of Hearing 24.03.2026 24.04.2026 Date of Pronouncement O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Department 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 order dated 13.10.2025 passed for A.Y. 2016-17.

2.

The Department has raised the following grounds of appeal:

“(a) The Ld. CIT(A) erred in law as well as on facts in following the appeal of the assessee and treating the addition made of Rs.26,56,595/- baseless and unwarranted. (b) The Ld. CIT(A) erred in law as well as on facts in not appreciating the information received in the respect of Shri Naresh Jain and others contained details that he was operating with his several associates to rig the stock market and to provide accommodation entries (in the form of bogus LTCG, bogus short- term loss/gain) to various beneficiaries who intended to bring their unaccounted income into their books of account without paying taxes and thereby not appreciating that the assessee failed to give any cogent explanation and provide any supporting documentary evidences with respect to the said accommodation entries. (c) The Ld. CIT(A) erred in law as well as on facts that the assessee had not declared any transactions with respect to the sale and purchases of the shares and

ITA No. 2687/Ahd/2025 ITO vs. Nawabkhan Imamkhan Baloch Asst.Year –2016-17 - 2– securities in the original return of income but had declared the same in the return of income filed in response to notice under section 148 of the Act issued to him. (d) The appellant craves leave to add, alter and / or to amend all or any the ground before the final hearing of the appeal.” 3. The brief facts of the case are that the assessee is an individual whose case was reopened under section 147 of the Income-tax Act, 1961 ("the Act") on the basis of information received from a third party stating that the assessee had entered into share transactions amounting to Rs. 37,64,413/- through entities such as Swastika Investment Ltd., Yamini Investment Company Ltd. and one Shri Naresh Manakchand Jain, who were supposedly engaged in providing accommodation entries in the nature of bogus long-term capital gains and short-term losses/gains. Based on this information, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment and accordingly issued notice under section 148 of the Act and proceeded to complete assessment under section 147 read with section 144/144B of the Act.

4.

During the course of reassessment proceedings, the Assessing Officer examined the transactions undertaken by the assessee in the scrips of Goenka Business and Finance Ltd. and Ejecta Marketing Ltd. The Assessing Officer himself noted from the available records that the assessee had traded in these scrips and had earned a nominal short-term capital gain of Rs. 1,766.60 (after considering a small loss in one scrip and profit in another), which had already been duly offered to tax by the assessee in the return of income. However, by placing reliance upon the investigation report, the Assessing Officer held that the assessee had obtained accommodation entries in the garb of long-term capital

ITA No. 2687/Ahd/2025 ITO vs. Nawabkhan Imamkhan Baloch Asst.Year –2016-17 - 3– gains/losses amounting to Rs. 26,56,595/- through Shri Naresh Manakchand Jain. The Assessing Officer held that such entries were part of a larger modus operandi involving rigging of stock prices and routing of unaccounted money through layered bank accounts. According to the Assessing Officer, the assessee failed to furnish satisfactory documentary evidence such as contract notes or complete details of transactions purportedly linked to the said accommodation entry provider. On this basis, the Assessing Officer held that the amount of Rs. 26,56,595/- was the unexplained money brought into the books through fictitious transactions and accordingly made an addition under section 69A of the Act, assessing the total income at Rs. 29,45,275/-.

5.

Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(Appeals), contending that the reopening was based on borrowed satisfaction without independent application of mind and that no tangible material was brought on record to establish any nexus between the assessee and the alleged accommodation entry provider. The assessee specifically submitted that he did not know Shri Naresh Manakchand Jain and had never entered into any transaction with him. The assessee submitted that that all share transactions were duly recorded, they were supported by broker statements, bank statements and other evidences, and that no adverse inference could be drawn without providing an opportunity of cross-examination of the said entry operator.

6.

The CIT(Appeals), after examining the assessment order and submissions of the assessee, held that the addition made by the Assessing Officer was devoid of any factual foundation. The

ITA No. 2687/Ahd/2025 ITO vs. Nawabkhan Imamkhan Baloch Asst.Year –2016-17 - 4– CIT(Appeals) observed that while the Assessing Officer had reproduced certain tabular details of share transactions, the same only reflected a minor short-term capital gain already offered to tax by the assessee. Insofar as the addition of Rs. 26,56,595/- was concerned, the CIT(Appeals) noted that there was a complete absence of basic details such as the nature of transactions, the specific scrips involved, the manner in which the alleged gains accrued to the assessee, or any statement or material linking the assessee to the alleged accommodation entry provider. The CIT(Appeals) further observed that even the bank statements of the assessee did not reveal any corresponding credit entries to substantiate the allegation of unexplained money.

7.

The CIT(Appeals) held that the origin and nature of the amounts of Rs. 1,97,600/, Rs. 9,10,218/- and Rs. 15,48,777/- forming part of the total addition remained unexplained and that the Assessing Officer had failed to bring any convincing material on record to justify the addition. In the absence of any supporting evidence or proper inquiry, the addition was held to be baseless and unwarranted. Accordingly, the CIT(Appeals) deleted the addition of Rs. 26,56,595/- and allowed the appeal of the assessee.

8.

The Department is in appeal before us against the order passed by CIT(Appeals) allowing the appeal of the assessee.

9.

We have heard the rival submissions and perused the material available on record, including the assessment order and the detailed findings recorded by the learned CIT(Appeals), particularly the observations contained in para 5 of the impugned order. The issue

ITA No. 2687/Ahd/2025 ITO vs. Nawabkhan Imamkhan Baloch Asst.Year –2016-17 - 5– which arises for our consideration is whether the addition of Rs. 26,56,595/- made by the Assessing Officer under section 69A of the Act on account of alleged accommodation entries in the nature of bogus long-term capital gains is sustainable in law.

10.

At the outset, we find that the entire edifice of the addition made by the Assessing Officer rests upon general information received from the Investigation Wing alleging that certain entities, including one Shri Naresh Manakchand Jain, were engaged in providing accommodation entries through penny stock transactions. However, as rightly observed by the learned CIT(Appeals) in para 5 of the order, the Assessing Officer has failed to bring on record any specific material to establish a live nexus between the assessee and the alleged accommodation entry provider. The assessment order is conspicuously silent on critical aspects such as the exact nature of the transactions attributed to the assessee, the specific scrips through which the alleged gains were generated, the dates and manner of such transactions, and the corresponding flow of funds.

11.

The learned CIT(Appeals) has recorded that even the basic details regarding the alleged amounts of Rs. 1,97,600/-, Rs. 9,10,218/- and Rs. 15,48,777/- are absent and their origin remains unexplained. It has further been noted that the bank statements of the assessee do not reveal any corresponding credit entries which could justify the invocation of section 69A of the Act. These findings of fact have not been controverted by the Revenue by bringing any cogent material on record.

ITA No. 2687/Ahd/2025 ITO vs. Nawabkhan Imamkhan Baloch Asst.Year –2016-17 - 6– 12. We further find that the Assessing Officer himself has accepted that the assessee had carried out certain share transactions in the scrips of Goenka Business and Finance Ltd. and Ejecta Marketing Ltd., resulting in a negligible short-term capital gain of Rs. 1,766.60, which has already been offered to tax. Beyond this, there is no independent inquiry or verification carried out by the Assessing Officer to substantiate the allegation that the assessee had earned any undisclosed income through accommodation entries. The addition has thus been made merely on the basis of generalised investigation reports and presumptions, without any direct evidence linking the assessee to such alleged activities.

13.

It is a settled principle of law that additions under section 69A of the Act can be made only when the Assessing Officer establishes, on the basis of cogent material, that the assessee is found to be the owner of money not recorded in the books of account and for which no satisfactory explanation is offered. The burden initially lies on the Assessing Officer to bring material on record to demonstrate such ownership. In the present case, this foundational requirement itself is not satisfied.

14.

Applying the aforesaid legal principles to the facts of the present case, we find ourselves in agreement with the findings recorded by the learned CIT(Appeals) that the addition made by the Assessing Officer is devoid of any factual or legal basis. The Assessing Officer has neither conducted independent inquiry nor brought any corroborative evidence on record to substantiate the allegation that the assessee introduced unaccounted money in the guise of bogus capital gains. The addition is

ITA No. 2687/Ahd/2025 ITO vs. Nawabkhan Imamkhan Baloch Asst.Year –2016-17 - 7–

thus based on mere suspicion, conjectures and surmises, which cannot take the place of evidence.

15.

In view of the foregoing discussion, and respectfully concurring with the well-reasoned findings of the learned CIT(Appeals), particularly those recorded in his order, we hold that the addition of Rs. 26,56,595/- made under section 69A of the Act is unsustainable in law and has rightly been deleted.

16.

Accordingly, the appeal of the Department is dismissed. 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

1.

Date of dictation 20.04.2026 (Dictated over dragon software) 2. Date on which the typed draft is placed before the Dictating Member 20.04.2026 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S .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……………………………………

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