In this instance, the official was correct to deny the sub's entry into the game at that time. While I can't provide rule # citation (others in this forum will certainly do that in a little bit), all sub's must report to the official scorer prior to the first horn signaling the end of the time out. Once the horns sounds, all subs must wait until the next stoppage of play.
At the end of a time-out, the horn is to sound twice (Full TO - :60 and :75). The first horns signals the end of the time-out; the second horn signals "ready for play". Teams are to break the huddle after the 1st horn and be on the court and "ready for play" when the 2nd horn sounds.
Hope that helps.
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