ASSISTANT COMMISSIONER OF INCOME TAX, JHANDEWALAN vs. M/S MALWA PACKAGING, MADHYA PRADESH

1 ITA No. 5757 & 7587/Del/2025 Malwa Packaging IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘C’ NEW DELHI) BEFORE YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER

ITA No. 5757/DEL/2025 (A.Y. 2023-24) Malwa Packaging Vs DCIT 36/1/2, Talawali Chanda Near Central Circle-19 Panchwati, Colony, Indore, E-2 ARA Centre, Jhandewalan, Madhya Praedesh-452010 Delhi PAN: ABMFM6177H Appellant Respondent ITA No. 7587/DEL/2025 (A.Y. 2023-24) ACIT Vs Malwa Packaging Central Circle-19 36/1/2, Talawali Chanda Near E-2 ARA Centre, Jhandewalan, Panchwati, Colony, Indore, Delhi Madhya Praedesh-452010 PAN: ABMFM6177H Appellant Respondent

Assessee by Sh.Amit Goel, CA & Sh. Pranav Yadav, Adv Revenue by Sh. Dayainder Singh Sidhu, CIT DR Date of Hearing 24/03/2026 Date of Pronouncement 22/05/2026

ORDER PER YOGESH KUMAR, U.S. JM: The Appeal in ITA No. 5757/Del/2025 is filed by the Assessee

and ITA No. 7587/Del/2025 filed by the Revenue against the order of

Ld. Commissioner of Income Tax (Appeals)-27, New Delhi (‘Ld. CIT(A)’

for short), dated 26/08/2025 pertaining to Assessment Year 2023-24.

conducted u/s 132 of the Act on 03/08/2022 against the Assessee

2 ITA No. 5757 & 7587/Del/2025 Malwa Packaging and an assessment order came to be passed u/s 143(3) of the Act by

making certain additions. Aggrieved by the above said assessment

order dated 31/03/2024, Assessee preferred an appeal before the Ld.

CIT(A). The Ld. CIT(A) vide order dated 26/08/2025, partly allowed

the appealof the Assessee. As against the order of the Ld. CIT(A) dated

26/08/2025, both the Assessee and the Revenue have filed the

captioned Appeals on following grounds.

ITA No. 5757/Del/2025 (Assessee)

“1. On the facts and circumstances of the case and in law, the order passed by the Ld. A.O and the addition made there in is bad in law and Ld. CIT(A) erred in not holding so.

ITA No. 7587/Del (Revenue)

“1. Whether on the facts and in the circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 18,58,454/- made by the Assessing Officer under Section 69C of the Income-tax Act, 1961, towards unexplained expenditure on account of cash payment of wages, without appreciating that statements recorded under Section 132(4) of the Act from the partners, labour

3 ITA No. 5757 & 7587/Del/2025 Malwa Packaging supervisor, and workers of the assessee firm categorically admitted that substantial wage payments were made in cash outside the regular books of account?

4 ITA No. 5757 & 7587/Del/2025 Malwa Packaging 12,02,11,656/- to Rs. 2,35,60,719/-, without appreciating that ti Assessing Officer had computed such sales after conducting a detailed and scientific analysis of multiple production and operational factors?

9.

(a) The order of the Ld. CIT(A) is erroneous and not tenable in law and on facts.

(b) The appellant craves to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”

5 ITA No. 5757 & 7587/Del/2025 Malwa Packaging 3. The Ld. Counsel for the Assessee submitted that the Assessee wishes not to press Ground No. 1 of the Assessee, accordingly Ground No. 1 of the Assessee is dismissed.

of the Revenue’s Appealare against confirming the addition of Rs.

2,35,60,719/- on account of enhancement of gross profit u/s 28 of the

Act.

times of books sales and applied GP rate 27.25% thereon. In the first

appeal, the Ld. CIT(A) held that the estimation of unaccounted sales

as well as profit rate adopted by the A.O. is higher in side.

Accordingly, A.O. computed the unaccounted sales to be 1.27 times of

books sale and applied estimated profit rate of 10%. As against the

confirmation of partial addition, Assessee raised Ground No. 2 and as

against deletion of partial addition, Revenue raised Ground No. 3, 6 to

8.

addition confirmed by the Ld. CIT(A) applying profit rate of 10% is

erroneous and in any case highly excessive and submitted that

instead of applying GP rate, A.O. should have applied NP rate.

Further submitted that the GP rate applied by the Ld. CIT(A) is higher

than GP rate declared by the Assessee in the Audited Books of

6 ITA No. 5757 & 7587/Del/2025 Malwa Packaging Account and in the ITR which have been accepted by the A.O. The Ld.

Counsel has also submitted a Chart of NP rate declared by the

Assessee in the books of accounts and ITR which reads as under: -

Assessment NP declared by Year Assessee 2023-24 1.43%

have applied only NP rate, because, as per the seized material itself,

there were evidence found of not only direct expenses by way of

purchase, but also the indirect expenses such as salary and other

expenses were in exist. The Ld. Counsel has also relied on several

judicial precedents in support of his contention and sought for

allowing Ground No. 2 of the Assessee and also sought for dismissal of

Grounds No. 3,6 to 8 of Revenue’s Appeal.

submitted that the Ld. A.O. has rightly applied GP rate of 27.25% as it

was clearly established that the Assessee was making unaccounted

sales purchases and also unaccounted salary expenses. Therefore,

submitted that the Ld. CIT(A) committed error in deleting the partial

addition by applying estimated profit rate of 10%. Thus, sought for

dismissal of Ground No. 2 of the Assessee and allowing Ground No. 3,

6 to 8 the Revenue’s Appeal.

7 ITA No. 5757 & 7587/Del/2025 Malwa Packaging 9. We have heard both the parties and perused the material

available on record. The Ld. A.O. made the addition on alleged

unaccounted sales by applying GP rate at 27.25%. However, the Ld.

CIT(A) was of the opinion that estimation of unaccounted sales as well

as profit rate is higher side, accordingly, computed the unaccounted

sales to be 1.27 times of the books sale and applied estimated profit

rate of 10%. The Assessee has declared NP rate of 1.43%. As per the

seized material, there were evidence found not only direct expenses i.e.

purchase, but also indirect expenses such as salary and other

expenses, which can be corroborated from the assessment order.

Therefore, the Ld. CIT(A) should have applied the net profit rate only.

Ltd Vs. Commissioner of Income Tax [2012] 26 taxmann.com 244, the

Hon'ble High Court held as under:-

“14. In the present case, the AO and, to a certain extent, the CIT (A) appear to have proceeded inter alia, to disallow heads of expenditure towards commission payments, sundry expenses (termed „R‟) and green box expenses. As far as the "green box" expenses are concerned, the assessee had relied on the books relied on by the revenue to assess the income, to urge that these constituted expenses entitled to deduction. The AO held these expenses to be excessive. The assessee argues that once the revenue seeks to draw a presumption, by relying on Section 132 (4A) of the Act that presumption has to be given full effect. In other words, if the correctness of the contents of books and other materials is to be presumed, such a deemed state of affairs would have to be assumed in respect of all entries in the books, and not merely the entries of income (or receipts). 15. Section 132 (4A) reads as follows:

8 ITA No. 5757 & 7587/Del/2025 Malwa Packaging "(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting ITA-1620 & 1622/2010 Page 12 of, any particular person, are in that person' s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested." As to the nature of the presumption, the Kerala High Court, in Income Tax Officer, B-Ward, Ernakulam v. T. Abdul Majeed, [1988] 169 ITR 440, held as follows: - "It is true that section 132(4A) of the Act enables the court to presume the truth of the contents of such books. However, it is a presumption which can be rebutted. Moreover, the presumption envisaged therein is only a factual presumption. It is in the discretion of the court, depending upon other factors, to decide whether the presumption must be drawn. The expression used in the sub-section is "may be presumed" as is used in section 114 of the Evidence Act, 1872. It is not a mandate that whenever the books of account are seized, the court shall necessarily draw the presumption, irrespective of any other factors which may dissuade the court from doing so." 16. In P.R. Metrani v. Commissioner of Income Tax, Bangalore (2007) 1 SCC 789 the Supreme Court elaborated upon the nature of presumption under Section 132 (4A) and the scheme of the provision, in the following words: "Sub-section (4A) was inserted by Taxation Law (Amendment) Act, 1975 with effect from 1.10.1075 to permit a presumption to be raised in the circumstances mentioned therein. Before the insertion of sub-section (4A) the onus of proving that the books of account, other documents, money bullion, jewellery etc. found in possession or control of a person in the course of a search belonged to that

9 ITA No. 5757 & 7587/Del/2025 Malwa Packaging person was on the Income Tax Department. Sub-section (4A) enables an assessing authority to raise a rebuttable presumption that such books of account, ITA-1620 & 1622/2010 Page 13 money, bullion etc. belonged to such person; that the contents of such books of account and other documents are true, and, that the signatures and every other part of such books of account and other documents are signed by such person or are in the handwriting of that particular person. Raising of such presumption has been enacted by the Legislature to enable the assessing authority to make a provisional adjudication within the time frame prescribed under Section 132. Otherwise it may not be possible to do so. The object of introduction of Section 132 is to prevent the evasion of tax, i.e., to unearth the hidden or undisclosed income or property and bring it to assessment. It is not merely an information of undisclosed income but also to seize money, bullion etc. representing the undisclosed income and to retain them for the purposes of realization of taxes, penalties etc. Search and seizure is a serious invasion in the privacy of the person. Section 132 which is a complete code by itself provides that the money, bullion or the books of account etc. should not be retained unnecessarily and that the provisional assessment made under Section 132 for the purpose of retention of the books is passed within a specified time in accordance with law. It provides that the books of account, money and bullion which are not required are not retained unnecessarily thereby causing harassment to the person concerned. In order to see that the assessment order is framed within the time frame provided under Section 132, legislature provided for a rebuttable presumption to be raised against the person from whose possession and control the books of account, money, bullions etc. are seized so that the order can be passed within the time frame provided under Section 132. A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume" and (iii) "conclusive proof". "May presume" leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. ITA-1620 & 1622/2010 Page 14 In this sense such presumption is also rebuttable. "Conclusive proof" gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced

10 ITA No. 5757 & 7587/Del/2025 Malwa Packaging with a view to combating that effect. In this sense, this is irrebuttable presumption. The words in sub-section (4) are "may be presumed". The presumption under sub-section (4A) therefore, is a rebuttable presumption. The finding recorded by the High Court in the impugned judgment that the presumption under sub-section (4A) is a irrebuttable presumption in so far as it relates to the passing of an order under sub-section (5) of Section 132 and rebuttable presumption for the purpose of framing a regular assessment is not correct. There is nothing either in Section 132 or any other provisions of the Act which could warrant such an inference or finding. Presumption under sub-section (4A) would not be available for the purpose of framing a regular assessment. There is nothing either in Section 132 or any other provision of the Act to indicate that the presumption provided under Section 132 which is a self contained code for search and seizure and retention of books etc. can be raised for the purposes of framing of the regular assessment as well." If the revenue was of the opinion that the expenses claimed towards "green boxes" was inadmissible or was excessive, or not genuine, in order to reject the entries in the books of account and other documents of the assessee, seized during the search, it ought to have relied on other materials. Having once drawn the presumption that the contents of the documents (of the assessee) taken into possession during the search were true, the revenue could not have, consistently with that presumption, proceeded to require the assessee to produce materials in support of the expenditure entries. Such an inconsistent approach in respect of the contents of the same book appears to have been founded only on suspicion that they were not genuine. However, suspicion ITA-1620 & 1622/2010 Page 15 cannot replace proof. Moreover, the full effect of the presumption should be given effect to, whenever the statute directs a particular non- existent state of affairs to be assumed. (Ref State of Bombay v. Pandurang Vinayak, AIR 1953 SC 244; Karnataka State Road Transport v B.A. Jayaram & Ors, AIR 1984 SC 790). In these circumstances, the effect of the presumption (which bade the revenue, when it chose to invoke it, to presume that the "contents of such books of account and other documents are true..". Therefore, in the absence of any materials, in the form of documents, the revenue could not have denied the benefit of any expenses which would otherwise have inured to the assessee, as an allowable deduction under Section 37 (1).”

11 ITA No. 5757 & 7587/Del/2025 Malwa Packaging 11. In the case of Commissioner of Income Tax Vs. Balchand Ajit

Kumar, 2003 (4) TMI-76 Madhya Pradesh High Court wherein it was

held as under: -

“We are in respectful agreement with the aforesaid opinion inasmuch as the total sale cannot be regarded as the profit of the assessee. The net profit rate has to be adopted and once a net profit rate is adopted, it cannot be said that there is perversity of approach. Whether the rate is low or high, it would depend upon the facts of each case. In the present case net profit rate of five per cent. has been applied. We do not think it appropriate that the same requires to be enhanced. We are also inclined to think that it is high. In any case, it cannot be said that there has been perversity of approach”.

Industries 1999 (4)TMI 8-Gujarat High Court wherein it was held as

under: -

“3. Having perused the assessment order made by the AO, the order made by the CIT(A) and the Tribunal, we are satisfied that the Tribunal was justified in rejecting the application under s. 256(1). It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold have been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether entire sum of undisclosed sale proceeds can be treated income of the relevant assessment year answers by itself in negative. The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales.

12 ITA No. 5757 & 7587/Del/2025 Malwa Packaging 4. We are, therefore, of the opinion that no question of law which requires to be referred to this Court arise out of Tribunal's appellate order. The order of Tribunal under s. 256(1) is not erroneous in reaching such conclusion”.

Commissioner of Income Tax 2000 (1) TMI 146-ITAT Delhi, wherein it

was held as under: -

“The Tribunal found as an admitted fact that unaccounted sales totalling Rs. 4,22,14,428 existed for the relevant block period. The Assessing Officer applied a gross profit (g.p.) rate of 7% on those sales, relying on admissions recorded during search and postsearch enquiries. The assessee, after receiving copies of seized documents and statements, sought deduction of revenue expenses (seed cleaning, warehousing, packing etc.) shown in the seized annexures. The Tribunal majority held that admissions are substantive but not conclusive and that, where seized material itself demonstrates deductible expenses relating to the unaccounted sales, those expenses must be considered. On the material before it the Tribunal concluded that allowing the claimed adjustment of expenses recorded in the seized papers reduced the appropriate net profit rate to 1.5%, a rate consistent with the assessee's historical net profit disclosure. The AO was therefore directed to recompute the net profit on the unaccounted sales on the basis of 1.5%.”

down in the above judicial precedents, we deem it fit to apply the NP

rate of 2%, accordingly, we modify the order of the Ld. CIT(A) by partly

allowing Ground No. 2 of the Assessee.

and sustained the addition by applying NP rate of 2%, the Appeal of

13 ITA No. 5757 & 7587/Del/2025 Malwa Packaging the Ground No. 3, 6 to 8 of the Revenue’s Appeal are dismissed for

having become in-fructuous.

Ld. CIT(A) in confirming the addition of Rs. 13,00,000/- on account of

unexplained money u/s 69A r.w. Section 115BBE of the Act.

Assessee that certain additions were made and confirmed in the year

under appeal as well as in preceding assessment years on account of

estimation of income and such income has not been applied

elsewhere. The Revenue has also not disputed this fact and therefore,

the claim of the assessee was that the benefit of telescoping should be

given against the cashfound during the course of search.

observed that certain income has been upheld in the hands of the

Assessee and application of the same elsewhere has not been

established by the revenue, therefore, it could be safelypresumed that

such cash found were available with the assessee. Though no

explanation was tendered by the Assessee with respect to the source

cash found thereof, by allowing the benefit of telescoping, the addition

made by the A.O. which has been confirmed by the Ld. CIT(A) is

hereby deleted. Accordingly, Ground No. 3 of the Assessee is allowed.

14 ITA No. 5757 & 7587/Del/2025 Malwa Packaging 19. Ground No. 1 of the Revenue is against action of the Ld. CIT(A)

in deleting the addition of Rs. 18,58,454/- made by the A.O. u/s 69C

of the Act and Ground No. 4 & 5 of the Revenue are against action of

the Ld. CIT(A) in deleting the addition of Rs.7,47,71,656/- of the Act

made by the A.O.

above additions ignored the statements made by the partners, labour

supplier and workers of the Assessee and ignored the fact that the

Assessee failed to establish any direct nexus between the unaccounted

income and such expenditure. Thus, sought for allowing Ground No.

1, 4 & 5 of the Revenue.

applicability of provision of Section 69C of the Act as the expenses are

business expenses and source thereof is self-explanatory being out of

unaccounted sales. Once the profit is estimated applying any profit

rate, no separate addition can be made of the expenses. Thus, sought

for dismissal of Ground No. 1, 4 & 5 of the Revenue.

estimated the profit of the Assessee by applying GP rate. It is well

settled law that once the profit is estimated after applying any profit

rate, no separate addition can be made of the expenses. Therefore,

15 ITA No. 5757 & 7587/Del/2025 Malwa Packaging the addition made by the A.O. would amounts to double addition i.e.

once as expense and again as estimated profit on sales.

Airways (P.) Ltd Vs. Commissioner of Income Tax [2012] 26

taxmann.com 244, the Hon'ble High Court held as under:-

“14. In the present case, the AO and, to a certain extent, the CIT (A) appear to have proceeded inter alia, to disallow heads of expenditure towards commission payments, sundry expenses (termed „R‟) and green box expenses. As far as the "green box" expenses are concerned, the assessee had relied on the books relied on by the revenue to assess the income, to urge that these constituted expenses entitled to deduction. The AO held these expenses to be excessive. The assessee argues that once the revenue seeks to draw a presumption, by relying on Section 132 (4A) of the Act that presumption has to be given full effect. In other words, if the correctness of the contents of books and other materials is to be presumed, such a deemed state of affairs would have to be assumed in respect of all entries in the books, and not merely the entries of income (or receipts). 15. Section 132 (4A) reads as follows: "(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting ITA-1620 & 1622/2010 Page 12 of, any particular person, are in that person' s handwriting, and in the case of a document stamped, executed or

16 ITA No. 5757 & 7587/Del/2025 Malwa Packaging attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested." As to the nature of the presumption, the Kerala High Court, in Income Tax Officer, B-Ward, Ernakulam v. T. Abdul Majeed, [1988] 169 ITR 440, held as follows: - "It is true that section 132(4A) of the Act enables the court to presume the truth of the contents of such books. However, it is a presumption which can be rebutted. Moreover, the presumption envisaged therein is only a factual presumption. It is in the discretion of the court, depending upon other factors, to decide whether the presumption must be drawn. The expression used in the sub-section is "may be presumed" as is used in section 114 of the Evidence Act, 1872. It is not a mandate that whenever the books of account are seized, the court shall necessarily draw the presumption, irrespective of any other factors which may dissuade the court from doing so." 16. In P.R. Metrani v. Commissioner of Income Tax, Bangalore (2007) 1 SCC 789 the Supreme Court elaborated upon the nature of presumption under Section 132 (4A) and the scheme of the provision, in the following words: "Sub-section (4A) was inserted by Taxation Law (Amendment) Act, 1975 with effect from 1.10.1075 to permit a presumption to be raised in the circumstances mentioned therein. Before the insertion of sub-section (4A) the onus of proving that the books of account, other documents, money bullion, jewellery etc. found in possession or control of a person in the course of a search belonged to that person was on the Income Tax Department. Sub-section (4A) enables an assessing authority to raise a rebuttable presumption that such books of account, ITA-1620 & 1622/2010 Page 13 money, bullion etc. belonged to such person; that the contents of such books of account and other documents are true, and, that the signatures and every other part of such books of account and other documents are signed by such person or are in the handwriting of that particular person. Raising of such presumption has been enacted by the Legislature to enable the assessing authority to make a provisional adjudication within the time frame prescribed under Section 132. Otherwise it may not be possible to do so. The object of introduction of Section 132 is to prevent the evasion of tax, i.e., to unearth the hidden or undisclosed income or property and bring it to assessment. It is not merely an information of undisclosed income but also to seize money, bullion etc. representing the undisclosed income and to retain them for the purposes of realization of taxes, penalties etc. Search and seizure is

17 ITA No. 5757 & 7587/Del/2025 Malwa Packaging a serious invasion in the privacy of the person. Section 132 which is a complete code by itself provides that the money, bullion or the books of account etc. should not be retained unnecessarily and that the provisional assessment made under Section 132 for the purpose of retention of the books is passed within a specified time in accordance with law. It provides that the books of account, money and bullion which are not required are not retained unnecessarily thereby causing harassment to the person concerned. In order to see that the assessment order is framed within the time frame provided under Section 132, legislature provided for a rebuttable presumption to be raised against the person from whose possession and control the books of account, money, bullions etc. are seized so that the order can be passed within the time frame provided under Section 132. A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume" and (iii) "conclusive proof". "May presume" leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. ITA-1620 & 1622/2010 Page 14 In this sense such presumption is also rebuttable. "Conclusive proof" gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is irrebuttable presumption. The words in sub-section (4) are "may be presumed". The presumption under sub-section (4A) therefore, is a rebuttable presumption. The finding recorded by the High Court in the impugned judgment that the presumption under sub-section (4A) is a irrebuttable presumption in so far as it relates to the passing of an order under sub-section (5) of Section 132 and rebuttable presumption for the purpose of framing a regular assessment is not correct. There is nothing either in Section 132 or any other provisions of the Act which could warrant such an inference or finding. Presumption under sub-section (4A) would not be available for the purpose of framing a regular assessment. There is nothing either in Section 132 or any other provision of the Act to indicate that the presumption provided under Section 132 which is a self contained code for search and seizure and retention of books etc. can be raised for the purposes of framing of the regular assessment

18 ITA No. 5757 & 7587/Del/2025 Malwa Packaging as well." If the revenue was of the opinion that the expenses claimed towards "green boxes" was inadmissible or was excessive, or not genuine, in order to reject the entries in the books of account and other documents of the assessee, seized during the search, it ought to have relied on other materials. Having once drawn the presumption that the contents of the documents (of the assessee) taken into possession during the search were true, the revenue could not have, consistently with that presumption, proceeded to require the assessee to produce materials in support of the expenditure entries. Such an inconsistent approach in respect of the contents of the same book appears to have been founded only on suspicion that they were not genuine. However, suspicion ITA-1620 & 1622/2010 Page 15 cannot replace proof. Moreover, the full effect of the presumption should be given effect to, whenever the statute directs a particular non- existent state of affairs to be assumed. (Ref State of Bombay v. Pandurang Vinayak, AIR 1953 SC 244; Karnataka State Road Transport v B.A. Jayaram & Ors, AIR 1984 SC 790). In these circumstances, the effect of the presumption (which bade the revenue, when it chose to invoke it, to presume that the "contents of such books of account and other documents are true..". Therefore, in the absence of any materials, in the form of documents, the revenue could not have denied the benefit of any expenses which would otherwise have inured to the assessee, as an allowable deduction under Section 37 (1).”

Order pronounced in the open court on 22nd May, 2026

Sd/- Sd/- (MANISH AGARWAL) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER

19 ITA No. 5757 & 7587/Del/2025 Malwa Packaging

Date:-22 .05.2026 Reshma Naheed, Sr.P.S Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT, NEW DELHI