Mr. Soni from Ahmedabad, Gujarat, received a tax notice after selling 350 grams of gold to another party on November 15, 2016. He argued that he is in the business of trading in gold bars and ornaments and received the payment of Rs 11.27 lakh via RTGS in his bank account.
Additionally, his lawyer mentioned that during the period of his gold sale, service tax was applicable and he paid this service tax on this transaction as well. He also gave a copy of the bank statements, sales invoices and ledger, among others to the income tax assessment unit.
However, following an enquiry by the investigation wing, Ahmedabad with the buyer of this god, the transaction was treated as an ‘accommodation entry’ by the assessment wing of the income tax department. However, the Investigation Wing find any incriminating evidence or document against Soni from the gold buyer.
This prompted Sony to file a case against the income tax department. He claimed that despite presenting all the required legitimate evidence of the sales transaction and the absence of any incriminating documents against him, the tax department still categorised the transaction as accommodation entry.
At first he filed a case with CIT (A). After losing the case in CIT(A), Soni filed an appeal in income tax appellate tribunal Ahmedabad bench. He won the case in ITAT Ahmedabad on October 15, 2025. Kirit B. Soni represented him.
Summary of the judgement
Chartered Accountant Suresh Surana said to ET Wealth Online: “In the given case (I.T.A. No.1462/Ahd/2025), the assessee was engaged in the business of trading in gold bars and ornaments.
Surana says that during the Assessment Year 2017-18, he sold 350 grams of gold to a buyer on November 15, 2016, for a total consideration of Rs 11,27,000 (inclusive of 1% service tax). The payment for this sale was received through RTGS and duly reflected in the assessee’s bank account. To substantiate the genuineness of this transaction, the assessee furnished the following documents before the Assessing Officer (AO):
- Copy of the sales invoice issued to gold buyer;
- Bank statement showing receipt of sale consideration;
- Ledger account of the purchaser; and
- Stock statement corroborating the sale.
Surana says that despite these evidences, the Assessing Officer treated the transaction as an accommodation entry based solely on information from the Investigation Wing, Ahmedabad, which had categorised certain transactions of gold buyer as accommodation entries.
According to Surana, since the purchaser of gold did not respond to a notice under section 133(6) of the Income-tax Act, 1961, the AO made an addition of Rs 11,27,000 under section 69A (unexplained money). The Commissioner of Income Tax (Appeals) CIT(A) upheld the addition, relying on judicial precedents where entire amounts of bogus claims were disallowed, without appreciating the factual distinctions of this case.
Tribunal’s Analysis and Rationale
Surana says that before the Income Tax Appellate Tribunal (ITAT), the assessee reiterated that the transaction was genuine and fully supported by documentary evidence. The sale was executed through proper billing, supported by stock records, and the consideration was received via verifiable banking channels. The Revenue failed to produce any incriminating material or independent evidence to establish that the transaction was fictitious or that the assessee had introduced unaccounted income in the guise of sales. The Tribunal oberved that:
- The assessee had satisfactorily discharged the initial onus of proving the genuineness of the transaction through contemporaneous records and bank documentation.
- The Revenue did not bring any contrary evidence to rebut the assessee’s claims or to show that the funds received were in fact his own unaccounted money.
- Mere non-response to notice under section 133(6) by the purchaser could not, by itself, render a transaction bogus when other verifiable evidences were on record.
Surana says that accordingly, the ITAT held that the addition under section 69A was unjustified, as there was no material to suggest that the amount represented unexplained income. The principle of law applied was that additions cannot be sustained merely on suspicion, conjecture, or third-party statements, especially where the assessee’s documentation establishes bona fide trade activity.
According to Surana, the Tribunal’s decision was guided by the settled legal position that once the assessee furnishes prima facie evidence of genuineness, identity, and creditworthiness (in this case, through verifiable banking and stock records), the burden shifts to the Department to disprove the same with tangible evidence.
According to Surana, in the absence of any such rebuttal, reliance on general investigation reports or non-responsive parties is insufficient to make an addition under sections 68 or 69A.
Surana says: “The ITAT thus concluded that the sale transaction was genuine, the payment was through recognised banking channels, and no incriminating material existed to support the Revenue’s allegation of accommodation entry.”
The addition made by the AO and sustained by the CIT(A) was, therefore, deleted, and the appeal of the assessee was allowed.
ITAT Ahmedabad said this
Soni’s lawyer said that he had sold the gold weighing 350 grams to the buyer having address at Ahmedabad, vide Bill No. 1/4 dated November 15, 2016.
Soni’s lawyer said that the gold was sold at the rate of Rs 3,188.12 per gram, amounting to Rs 11,15,842. During that period, service tax was applicable, and therefore, 1% service tax amounting to Rs 11,158 was charged, aggregating to a total sale consideration of Rs 11,27,000/-.
Soni furnished all relevant documents substantiating the genuineness of the transaction.
ITAT Ahmedabad said that they have perused the material available on record and considered the submissions of Soni’s lawyer.
ITAT Ahmedabad judgement: “It is observed that the assessee (Soni) has duly established the genuineness of the transaction. The transactions have been routed through banking channels, and the genuineness has been satisfactorily explained. In the absence of any contrary evidence brought on record by the Revenue, we are of the considered opinion that the addition sustained by the Ld. CIT(A) is not justified. In the result, the appeal of the assessee is allowed. The order was pronounced in the open Court on October 15, 2025.”
What is accommodation entry?
Surana says that an accommodation entry typically involves a paper transaction created to route unaccounted or unexplained money through banking channels. Such entries are arranged by intermediaries (commonly known as “entry operators”), who provide cheque or RTGS entries in exchange for cash, thereby converting unaccounted income into ostensibly legitimate receipts.
However, the actual economic substance of the transaction is absent i.e. the entry exists only to accommodate the assessee’s objective of giving colour to undisclosed income.
Surana says: “In income-tax proceedings, when the Investigation Wing or Assessing Officer finds that a transaction lacks commercial substance or genuine counterpart confirmation, it may be categorised as an “accommodation entry”, and the sum credited is liable to be added under sections such as Section 68 (unexplained cash credits) or Section 69A (unexplained money) of the Income-tax Act, 1961.”
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