DEVI LAL CHOUDHARY,NAGAUR vs. ITO WARD-1, NAGAUR

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA No. 1178/Jodh/2025 SA No. 01/Jodh/2026 (A/o ITA No. 1178/Jodh/2025) (Assessment Year – 2018-19) Devi Lal Choudhary ITO Ward-1/National Faceless Devi Lal Choudhary village Appeal Centre, Delhi Untwaliy (Nagaur) PAN No. ABJPJ 2752 N Assessee by Shri B.L. Khatri, Advocate (Physical) & Shri C.P. Birla Tax Practitioner (Physical) Smt. Swapnil Parihar, JCIT (Virtual) Revenue by Date of Hearing 30 / 04 / 2026. Date of Pronouncement 21 / 05 /2026. ORDER DR. MITHA LAL MEENA, A.M.: This appeal is filed by assessee against the order of National Faceless Appeal Centre, Delhi [hereinafter referred to as NFAC/CIT(A)] dated 04.12.2025 with respect to Assessment Year 2018-19.

 “That on the facts and in the circumstances of the case the learned CIT(Appeal) has erred in upholding the addition u/s.68 and 69c and also Application of the Tax rate u/s.115BBE of the Act vide order dt. 04-12-2025 without considering our reply is not according to the provisions of low. Hence addition be deleted.

2 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19  That on the facts and in the circumstances of case learned CIT(A) has erred in sustaining addition u/s. 68 of Rs. 4,86,06,110/- only accepting the order of assessing officer and CIT(A) without considering the provisions of low and intention of legislatures has passed order is contrary to provision of law, hence request your honor to delete the addition in interest of justice.  That on the facts and in the circumstances of case, additions u/s. 68 of Rs. 4,86,06,110/- which is part of opening balance of wages payable A/c After making payment of Rs.1,19,86,690/- opening balance of Wages payable A/c Rs.6,05,92,800/- and closing balance of 31.3.2017, evident from details filed before Ld. CIT(A) not accepted is highly unjustified, hence order be quashed.  That on the facts and in the circumstances of case Ld. CIT(A) has sustained addition u/s. 68 Rs.4,86,06,110/-, without considering the submissions filed before Assessing authority and CIT(A), and not examine the additions made by AO on surmises and conjectures and also given in warding, there is no scope to believe the fact as given in Para 8 and 8.1 of A O's order or booked bogus expenses,, order passed by A O is arbitrary and without any positive finding, which is not permissible in low, and Ld. CIT(A) has accepted the AO's order and rejected the submissions of assesse is highly illegal, and ground be accepted.  That on the facts and in the circumstance of the case Ld. CIT(A) has Erred in sustaining the addition of Rs. 1,19,86,690/- wages paid to labors out of Opening balance of wages payable A/c without considering the written submission of assesse because out Rs.1,19,86,690/- Rs 50,86,690/- by neft(Bank) and reaming Rs. 69,00,000/- by cash and ignoring the complete name and address of laborers and only simply issue raised without P.A. No, is highly unjust and bad in law.  That on the facts and in the circumstances of case Ld. CIT(A) has only Confirmed the order of A O which was passed without application of Provision of Law because list of Creditors of Rs. 4,86,06,110/- with complete address filed but A O has not examine any creditor and without any evidence against the statement of assessee arbitratory added in total income of Rs. 1,19,86,900/- and Ld. CIT(A) has only copying the written submission of assesse and, has accepted the contention of A O without any reasoning and not considered the submissions of assesse is highly unjust and bad in low.

3 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19  That on the facts and in the circumstance of case A O has only seen Wages payable A/c in balance sheet, and not seen Bank O.D and sundry creditors as well as Outstanding payment of S.D. and misc. Debtors which is relevant to Considers the facts of case and has not considered practical problems of Contactor, no comment in A O's order and only arbitrary view taken and CIT(A) has accepted the view A O without any comment or report from A O is highly unjust and against the decided judgment of courts.  That on the facts and in the circumstances of case CIT(A) has accepted the addition made by A O u/s. 69C Rs. 94,52,640/- rejecting the submissions of assesse ignoring the name and address of labors and without any positive evidence arbitrary order of A O, accepting of order is highly unjust and contrary to decided judgment of courts, we request for award justice.  That on the facts and in the circumstances of the case, learned A O has Not rejected the books of accounts or system of accounting and not properly see the past history of case and standing creditors and Debtors in including the payment due has made addition u/s.68 and 69C and learned CIT(A) has without considering Para wise reply filed arbitrary Order of A O and order of CIT(A) is without reasoning be quiche the order in interest of justice.  That on the facts and in the circumstances of case A O has charged tax on deemed and estimated income rate 155BBE on additions u/s. 68 and 69C which is computed on the opinion of A O only and provision of charging section 4 of income tax Act, and concept of real income without any positive finding and learned CIT(A) has accepted the order of A O is serious matter in eye of law, hence request for award justice.  That on the facts and in the circumstances of the case the Ld.CIT(A) has erred in not deleting the interest charged u/s. 234B, 234C and 234D And allowing interest u/s. 244A(3) be awarded in interest of justice.  That on the facts and in the circumstances of the case the tribunal. May kindly please to allow.  The appeal fees of Rs. 10,000/- paid by the assessee to the credit of the Government.  The advocate fees.

4 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19  The compensation for mental torture for the years due to high Pitched addition and resultant demand and be directed to recover Such amount from the concerned official.” 3. Briefly the facts of the case as per record are that the appellant is an individual engaged in the business of execution of Government road contract works. The assessee has e-filed its return of income on 26.10.2018 declaring total income of Rs. 47,20,200/- for the year under consideration. During the course of assessment proceedings, the AO has noted that appellant has shown gross contract receipts of Rs. 14,17,03,452/- and net profit of Rs. 45,96,059/- giving a net profit rate of about 3.24% as against 4.65% in the preceding year. The AO has further stated on examination of the wage ledgers and list of 249 persons to whom wages were allegedly payable. The AO observed that (i) the PAN was stated as “NA” for all persons, (ii) each person’s dues exceeded Rs. 2,50,000/- and (iii) addresses were incomplete and not verifiable. Thus the AO was not satisfied with the reply filed by the assessee and computed that liability for wages payable was not proved to be genuine as the assessee appellant has failed to substantiate the identity of the payees, genuineness of the transactions and commercial rationale for keeping huge wage dues outstanding over years. Accordingly, the AO has stated the closing liability of Rs. 4,86,06,110/- as a bogus liability and added it as unexplained cash credit u/s 68 and treated the payments of Rs. 1,19,86,690/-

5 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 towards outstanding wages and the current year wages of Rs. 94,52,640/- as unexplained expenditure u/s 69C.

 It is an admitted position that as on 01.04.2017, the books of the appellant reflected a brought-forward liability on account of wages payable of Rs. 6,05,92,800 and that after making payments of Rs. 1,19,86,690 during the previous year, the closing wages payable as on 31.03.2018 stood at Rs. 4,86,06,110, which has been added by the AO under section 68. The appellant's principal plea is that no fresh credits were recorded during the year, and hence section 68 cannot be applied in A.Y. 2018-19, relying on Usha Stud Agricultural Farms Ltd.  However, it is equally an admitted fact that the AO specifically called upon the appellant to furnish complete particulars of the 249 persons comprising this large liability - including full names, correct and verifiable addresses, and PAN and the appellant has admittedly furnished a list where the PAN of every single person is stated as "NA", despite each person allegedly having dues exceeding Rs. 2,50,000. Further, the addresses

6 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 were found to be vague and non-verifiable. No confirmations from the purported creditors/labourers were filed. There is also no contemporaneous wage register/muster roll or any documentary trail to show how the liability has actually arisen over the years.  The magnitude and pattern of the liability also raise serious doubts. The appellant is a contractor executing Government works where labour is typically paid on a daily or weekly basis; yet a wage liability of several crores is stated to have accumulated and remained unpaid over years. No rational business or social reason has been established as to why low-income wage earners would repeatedly forego actual payment of wages and allow such large surns to remain outstanding. The explanation that workers "treat the employer as a safe custodian of their savings" is wholly uncorroborated and does not inspire confidence,  The appellant's reliance on CIT v. Usha Stud Agricultural Farms Ltd. is misplaced. In that case, the finding of fact was that the credit balances did not pertain to the year under consideration and that the identity and genuineness of the creditors were established; the question was limited to the year of taxability. In the present case, the very existence and genuineness of the wage liability itself is under serious doubt. The appellant has failed to discharge even the primary onus of proving the identity of the creditors (labourers), their capacity, and the genuineness of the underlying transactions. Therefore, the factual matrix is materially different from Usha Stud Agricultural Farms Ltd., and that  Section 68 mandates that where any sum is found credited in the books of an appellant and no satisfactory explanation as to nature and source is offered, the same may be charged to income-tax as income of the appellant for that year. Here, the AO has demonstrated on the basis of the very details filed by the appellant that the liability is not borne out by verifiable evidence and appears to have been built up in a manner that conveniently avoids TDS provisions and external verification. Once the genuineness of the liability itself is not proved, the AO is justified in treating the amount as unexplained credit.  In the facts of the present case, when the appellant has failed to prove the genuineness of the outstanding liability of Rs. 4,86,06,110 and has not produced confirmations, PAN or verifiable addresses of the alleged creditors, the AO was fully justified in treating the

7 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 said amount as unexplained within the meaning of section 68. The mere fact that the credit may have first appeared in earlier years does not grant immunity where the appellant has never discharged the basic onus and the liability is found to be non- genuine. Accordingly, Ground No. 1 is dismissed, and the addition of Rs. 4,86,06,110 is confirmed.  The AO has directed that the additions made under sections 68 and 69C aggregating to Rs. 7,00,45,440 be taxed in accordance with section 115BBE of the Act. For A.Y. 2018- 19, the law as amended by the Finance Act, 2016 provides that income determined under sections 68, 69, 69A, 69B, 69C and 69D is liable to tax at the rate prescribed in section 115BBE.  Once it is held, as above, that the additions under sections 68 and 69C are legally and factually sustainable, the consequential application of section 115BBE is automatic and not a matter of discretion. The appellant's alternative plea that such income should be treated as normal business income and not as deemed income under the aforesaid provisions cannot be accepted, because the very basis of the additions is the failure to explain the nature and source of the credits and expenditure to the satisfaction of the AO, squarely attracting sections 68 and 69C.

8 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 from the last year and hence these amounts are not related to the assessment year under consideration. The AR further submitted that the persons to whom the amount outstanding payable are regular workers engaged with the appellant assessee for last so many years. The appellant has further submitted that all the details of the persons, such as name of the person, address of the person, details and particulars of their bank account which is fully available with the AO during the assessment proceedings. He contended that under the facts and circumstances identities of all such persons were stands verified and there was no persons in fake were proved or establish as a fake or dummy by the Department. Ld. AR further submitted that such workers are working with the present assessee’s for number of years and the amount payable was never exceeding the amount which are above the taxable limits of particular year and as such the same was not liable for TDS in any of the assessment year and particularly the assessment year under consideration. Therefore, the appellant has not demanded or called for their PAN Numbers although many of them may be having PAN but as it was not required and so it was not produced and it should not be interpreted otherwise. The AR contended that the amounts payable to the workers as outstanding carry forward were payable as per the books of account maintained

9 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 by the assessee over the years under the head wage payable to their workers and that whatever amounts are debited to their accounts and outstanding on a particular date remained credited in their account. The AR further stated that all such persons are available with the assessee and they can be called for examination to confirm their outstanding balances. However, the AO has not made any attempt to conduct any enquiry or make verification or issue any summon or asked the appellant assessee to produce any specific worker for such verification of the outstanding liabilities. The AR further submitted that the appellant maintained an appropriate and perfect system of accounting for each assessment year which is subject to audit. The AR further submitted that it is very important to note that whatever wages were payable to such persons for the assessment year under consideration the appellant has fully paid to them directly from bank accounts which are amounting to Rs. 94,52,640/- and some amount only has been claimed as wages to the P&L Account for the relevant financial year to the assessment year under consideration. The Ld. AR further submitted with regards to the opening balances as on 01.04.2017 amounting to Rs. 6,05,92,800/-, the appellant has paid total amount of Rs. 1,18,86,690/- out of which an amount of Rs. 69,00,000/- were paid in cash and balance of Rs. 50,86,690 were paid by

10 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 bank account that too through NEFTs. The AR contended that in all the earlier years whatever the wages claimed under the P&L Account has been in the ratio of the volume of the work executed and it was more reasonable and genuine accepted by the Department. The AR has objected to the applicability of Section 68 for the addition made by the AO and sustaining by the Ld. CIT(A). He stated that from the books of account, it is apparently clear that amount of Rs. 4,86,04,110/- represents the amount payable out of the opening balances only which is carry forward balance and outcome of initial opening balances payable of Rs. 6,05,92,800/- as on 01.04.2017 less amounts paid during the period 01.04.2017 to 31.03.2018 of Rs. 1,19,86,690/- as such this amount does not represents the amount credited in the books of account during the previous year under consideration i.e. relevant to assessment year 2018-19. The Ld. AR has referred to Section 68 of the IT Act which reads and provides that “where the sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the sum so credited may be charged to income-taxes as the income of the assessee of that previous year.” Thus, the AR has argued that from the

11 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 provision of Section 68, it is evident that there should be a sum credited in the books of assessee maintained for any previous year (i.e. 01.04.2017 to 31.03.2018).

12 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 outstanding balanced liability from the earlier assessment years. The AR has argued that the true facts of the case is that out of the opening balances of liability of Rs. 6,05,92,800/- an amount of Rs. 1,19,86,690/- was paid during the year under consideration i.e. in the assessment year 2018-19 and thereafter the remaining closing liability has been Rs. 4,86,06,110/- and the whole amount of said liability of Rs. 4,59,06,110/- has been pertaining to assessment year 2017-18 and earlier years. The AR contended that as per the principles of accounting, no question arises by any stretch of imagination that the said amount can be added during the assessment year under consideration. The addition made by the AO and confirmed by the CIT(A) is incorrect, invalid and bad in law. He pleaded that the addition confirmed by the Ld. CIT(A) may be deleted.

13 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 stated to be outstanding liability under the head current liability as wages outstanding to be treated as bogus and that same used to be treated cash credit in the meaning of Section 68 of the Act is factually incorrect and absurd observation made by the lower authorities. Infact, the disputed amount of Rs. 4,86,06,110/- is part of the opening balance of wages payable account after making payment of Rs. 1,19,86,600/- out of the total opening wages payable of Rs. 6,05,92,800/- as on 01.04.2017. Thus, the amount of disputed liability of Rs. 4,86,06,110/- is not related to the current year relevant to the assessment year under consideration i.e. assessment year 2018-19. It is noted that the lower authorities has failed to point out any discrepancy in the books of account of the assessee or bring on record any corroborated evidence to prove that the disputed outstanding liability of Rs. 4,86,06,110/- or part of these liability has not been forming part of the outstanding carry forward wages or as related by any means to the assessment year under consideration.

14 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 thereafter the balance of closing liability remained to the extent of Rs. 4,86,06,110/-. Thus, the whole amount of the disputed wage liabilities is pertaining to the earlier assessment years and not the assessment year under consideration. Meaning thereby, the said disputed amount of Rs. 4,86,06,110/- cannot be brought to tax either as provision of wage liability/cash credit within the meaning of Section 68 of the Act.

15 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 assessee. The Ld. CIT(A) has confirmed the finding of the AO on the addition of Rs. 1,19,86,690/- by observing as under:

 The AO has brought to tax the amount of Rs. 1,19,86,690 paid during the year against the opening wages payable, treating the same as unexplained expenditure under section 69C, in view of the finding that the alleged wage liability itself is bogus and that the appellant has failed to satisfactorily explain the nature and source of these payments with supporting evidence.  The appellant's case is that these payments are made to the same workers whose liability stood in the books and that the source is fully explained out of business receipts. However, as discussed in para 5.2 above, the genuineness of the wage liability is not established. When the underlying liability is itself non- genuine, the payments ostensibly made towards such liability automatically become suspect, especially where: 1. A substantial part of the amount (Rs. 69,00,000) is paid in cash; 2. No independent confirmation from the recipients is produced; and 3. No bank statements, identity proofs or muster rolls are available for verification.  The explanation that payments have been made by NEFT and therefore stand proved is not acceptable in the absence of corresponding verifiable identity of the recipients, purpose of payment and any evidence that the recipients were actually performing work for the appellant. A banking trail by itself is only one element of proof; it cannot substitute for complete and credible documentation, especially where the overall narrative of large, long- outstanding wage dues is itself implausible.  In these circumstances, the AO has rightly treated the sum of Rs. 1,19,86,690 as unexplained expenditure within the meaning of section 69C. The appellant has not brought on record any new material at the appellate stage to rebut the detailed factual findings of the AO. Therefore, Ground No. 2 is dismissed, and the addition relating to Rs. 1,19,86,690 is confirmed.

16 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 15. The Ld. AR has submitted that the Ld. CIT(A) has summarily rejected the appeal of the assessee by sustaining the addition of Rs. 1,19,86,690/- without appreciating the facts that wages were paid to the labours were outstanding balances as per the wage payable account. The Ld. AR has contended that the appellant has paid Rs. 50,86,690/- by NIFT and remaining balance amount of Rs. 69,00,000/- by way of cash totalling to Rs. 1,19,86,690/- ignoring the complete details furnished by the assessee with respect to the name and addresses of the wage/labour workers furnished by the appellant assessee. The Ld. AR contended that the AO failed to examine any specific creditor and without bringing any evidence on record against the assessee, made an addition in arbitrary manner amounting to Rs. 1,19,86,900/- which has been summarily endorsed by the Ld. CIT(A) without addressing the objections filed by the appellant with the support of documentary evidences which is highly unjustified and against the provisions of law. The AR has further submitted that the AO and the Ld. CIT(A) has only referred to the wage payable account and balance sheet without referring to the details furnished by the appellant in the form of bank OD, sundry debtors and outstanding payment of sundry debtors and miscellaneous debtors and they have not even commented on the contentions raised by the appellant assessee with

17 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 the support of the written submissions and documentary evidences before them. The appellant has filed written submissions containing index copy of the details APB Page no. 51-170 and documentary evidences from Page no. 171-361 before the Assessing Officer which has been placed on record as per paper book index hereunder:

SR. NO. Particular Paper Books No. 1 Additions made by Assessing Officer 00-02 2 Index of Paper Book 02-04 3. Observation of A.O. (Basis of Addition) 05-11 4. Reasons of Law N.P. 11-16 5. Addition U/s 68 wages Payable account Rs. 4,86,06,110/- 16-27 6. Addition U/s 68 Out of wages payable Rs.1,19,86,690/- 27-35 7. Addition U/s 69C Wages Paid 94,52,640/- 35-41 8. Application of Sec.115BBE 41 9. Finding of CIT (Appeals) 41-47 10. Our Submission 47-50 11. Index of Judgment with copy of judgments 50-171

18 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 the payments towards wages has been made by NIFT where the assessee has filed copy of the bank statement to the fact that the amount has paid and debited in the bank account of the assessee as part of its reply. It is also admitted fact on record that income of each labours or wage worker has been below the maximum amount chargeable to tax as payment has not been exceeded Rs. 2,50,000/- for the assessment year under consideration. The appellant assessee has maintained proper books of account which are audited and all copy of papers, reports, statements of account has been filed before the AO where no adverse comment or objection had been made by either of the lower authorities. In view of that matter, it is apparently clear that the AO has passed the order in arbitrary manner without application of mind and appreciating the merits of case.

19 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 recording statement of any of the such payment made to the workers under the head wage payables.

20 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 person. It is also noted that the payments were made to the persons whose total income during the relevant assessment year do not exceed the maximum taxable limits of Rs. 2,50,000/- and, therefore, the appellant has not obtained any PAN No. or not deducted any TDS on such payment made to these workers. The Ld. CIT(A) has rejected the issue summarily without appreciating the facts of the case and rebutting the appellants cogent and credible evidence furnished to justify the claimed of expenditure of Rs. 94,52,640/- towards the wage payments during the assessment year relevant.

21 ITA No. 1178/Jodh/2025 & SA No. 01/Jodh/2026 Asst. Year: 2018-19 24. The other grounds are consequential and general in nature which does not require adjudication.

Order pronounced in the open court on 21/05/2026.

Sd/- Sd/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 21/05/2026. Nimisha Sr. PS True Copy Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File