ITAT Ahmedabad Quashes Reassessment As AO Shifts From Bogus Loan To LTCG From Penny Stocks

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) on 7 April 2026 quashed reassessment proceedings against taxpayer Pinkal Rajeshbhai Patel in a case involving alleged bogus loans.

A Bench of Vice-President Dr. B.R.R. Kumar and Judicial Member Suchitra R. Kamble held that the Assessing Officer (AO) made the addition on a completely different issue of alleged bogus long-term capital gains from penny stocks. It observed:

“The reason recorded for reopening and the addition ultimately made are entirely different,”

The AO reopened the assessment on the allegation that Patel received accommodation entries in the form of fictitious loans amounting to Rs. 49.74 lakh from entities allegedly controlled by Jignesh Shah and Sanjay Shah.

During reassessment, however, the AO changed the basis of addition and treated Rs. 49.19 lakh arising from the sale of shares of Naisargik Agritech (India) Ltd. as unexplained cash credit under Section 68 of the Income Tax Act, alleging bogus long-term capital gains from penny stock transactions.

The Tribunal held that the reassessment could not survive since the basis of reopening and the final addition did not match.

Accordingly, the ITAT quashed the reassessment order dated 30 March 2022 and did not examine the merits of the addition.