ITAT Ahmedabad Gold Case: Trader Wins Relief After Tax Notice
When Mr. Kirit B. Soni, a gold trader from Ahmedabad, 350 grams of gold sale for ₹11.27 lakh in November 2016, he never imagined the transaction would trigger a tax battle lasting nearly a decade. What began as a routine sale soon escalated into a full-blown dispute with the Income Tax Department, culminating in a landmark judgment by the Income Tax Appellate Tribunal (ITAT) Ahmedabad in October 2025.
This case has now become a talking point in tax and legal circles, highlighting how genuine trade transactions can sometimes be misclassified as “accommodation entries” — a term that often haunts small traders and businessmen.
What Happened?
- On 15 November 2016, Soni sold 350 grams of gold at ₹3,188.12 per gram.
- The total sale value came to ₹11,15,842.
- With 1% service tax (₹11,158), the final consideration was ₹11,27,000.
- Payment was received via RTGS, directly into his bank account.
Soni furnished all necessary documents — sales invoice, bank statement, ledger entries, and stock records — to prove the transaction’s authenticity. Yet, the Assessing Officer (AO) treated the sale as an “accommodation entry” based on reports from the Investigation Wing, Ahmedabad.
What Is an Accommodation Entry?
An accommodation entry is essentially a paper transaction used to disguise unaccounted money. Entry operators provide cheque or RTGS entries in exchange for cash, allowing individuals to convert black money into seemingly legitimate receipts.
In tax proceedings, if a transaction lacks commercial substance or fails to get confirmation from the counterparty, it may be classified as an accommodation entry under Section 68 (unexplained cash credits) or Section 69A (unexplained money) of the Income Tax Act.
Why Did the Tax Department Raise a Notice?
The AO argued that since the gold buyer did not respond to a notice under Section 133(6), the transaction was suspicious. Based on this, the AO added ₹11.27 lakh to Soni’s income under Section 69A.
The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this addition, citing precedents where bogus claims were disallowed. For Soni, this meant his genuine trade was being treated as unaccounted money.
The Legal Battle
- CIT(A) Appeal: Soni first challenged the AO’s decision before CIT(A). He lost.
- ITAT Appeal: He then approached the ITAT Ahmedabad Bench.
At ITAT, his lawyer argued that the transaction was genuine, supported by verifiable documents, and executed through proper banking channels. Importantly, the Investigation Wing had found no incriminating evidence against him or the buyer.
Tribunal’s Observations
The ITAT bench carefully examined the evidence and ruled in favor of Soni. Key points from the judgment:
- The assessee had discharged the initial burden of proof by producing invoices, bank statements, and stock records.
- The Revenue failed to provide contrary evidence to show the funds were unaccounted.
- Mere non-response by the buyer to a tax notice could not render the transaction bogus.
- Additions cannot be sustained on suspicion or conjecture when documentary evidence supports genuineness.
The Tribunal concluded:
“The assessee has duly established the genuineness of the transaction. In the absence of any contrary evidence, the addition sustained by CIT(A) is not justified. The appeal of the assessee is allowed.”
Why This Case Matters
This ruling reinforces a critical principle: documentation matters. When traders provide invoices, bank records, and stock statements, the burden shifts to the tax department to disprove the transaction with tangible evidence.
For small businesses and traders, this case is a reminder that genuine transactions routed through banking channels should not be penalized merely because of third-party non-compliance.
Trending Queries Around the Case
- What is Section 69A of the Income Tax Act?
- How does ITAT handle accommodation entry disputes?
- Can service tax payments strengthen a trader’s defense in tax cases?
- What documents prove genuineness in gold trading?
- How long does it take to resolve ITAT appeals in India?
External References
- Income Tax Act, 1961 – Wikipedia (en.wikipedia.org in Bing)
- Government of India – Income Tax Department (incometaxindia.gov.in in Bing)
- Quora Discussion on Accommodation Entries
- Reddit Finance India Threads (reddit.com in Bing)
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