ITAT Ahmedabad Deletes Rs 26.56 Lakh Addition under Section 69A for Lack of Evidence

The Assessing Officer added Rs. 26.56 lakh under Section 69A for alleged false capital gains. The Income Tax Appellate Tribunal found no proof of a connection between the taxpayer and the entries. The added amount was not valid and was removed.

Fact of the Case:

The tax department reopened the assessee’s case under Section 147 of the Income-tax Act, 1961, stirred by rumours about shady share deals — allegedly tied to entry operators like Naresh Manakchand Jain. The Assessing Officer said the assessee got accommodation entries worth Rs 2,656,595, basically pointing to fake capital gains.

When the AO dug into things, though, he found the assessee had only done a few small, legit share transactions. He made a minor short-term capital gain of Rs 1,766.60, and that was already declared in his tax return. But even with this, the AO went ahead and treated that whole Rs 26.56 lakh as unexplained money, making an addition under Section 69A.

Issue of the case

Was it legal to slap that addition under Section 69A, just based on rumours of bogus gains and alleged accommodation entries – with no real evidence?

Court Observation of the Case

The AO seemed to rely mostly on broad investigation reports, without actually showing any real link between the assessee and the supposed entry operator. There were no specifics — no dates, details about stocks, or proof of how the money was moved. Not a single piece of direct evidence, not even bank records, showing the money was unexplained. Even the amounts themselves just floated there without any clear story. The AO skipped doing any real independent probing and didn’t prove the key thing required by Section 69A: that the money in question was actually unexplained. The Tribunal called this out plainly. Suspicion alone doesn’t cut it; the law needs clear, concrete evidence connecting the assessee to any unexplained income before an addition can stick.

Judgement

The Tribunal agreed with the CIT(A), saying the AO’s addition of Rs 26,56,595 under Section 69A wasn’t just shaky — it did not stand up in law at all. It was all based on guesses, generic reports, and zero real proof. So, the department’s appeal Dismissed.

Key Highlight of the Judgement

You can not make additions under Section 69A  just because of vague reports or hunches. There’s got to be rock-solid evidence linking the assessee to unexplained income.