Unexplained payments and interest recorded in seized ledger assessed under section 69C, additions and taxability sustained.

Ledgers seized from a third party show the assessee acted as a financier making repeated payments with systematic interest computations; such unexplained payments are taxable as unexplained expenditure under section 69C, and additions in the assessee's hands are sustained. The method of computing incremental negative peak after granting intra-year telescoping is upheld to avoid duplication, and refusal to telescope opening balances of time-barred years is sustained. Application of the punitive tax provision 115BBE follows as a statutory consequence once additions under section 69C are sustained. Interest entries in the seized diaries represent real accrual and receipt and the Assessing Officer's addition for interest is restored.

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Issues: (i) Whether the running ledger titled "Mukesh Ratnajyot / Mukeshbhai RJ" found in third-party seized diaries represents real financial transactions of the assessee and justifies additions under section 69C of the Income-tax Act, 1961; (ii) Whether interest entries in the seized diaries represent real income chargeable under section 56 for Assessment Year 2020-21.

Issue (i): Whether the ledger "Mukesh Ratnajyot / Mukeshbhai RJ" pertains to the assessee and supports additions under section 69C of the Income-tax Act, 1961.

Analysis: The decision examines continuity, internal consistency and interest computation in the seized running ledger, admissions recorded under section 132(4), corroboration of specific diary entries with the assessee's disclosed investments and with banking records of related entities, the assessee's corporate linkage with group concerns, and absence of documentary rebuttal from the assessee. The authorities applied the net incremental peak method with intra-year telescoping and refused telescoping of time-barred opening years. The appellate findings in the connected proceedings were considered for consistency and for treatment of protective additions versus substantive additions.

Conclusion: The ledger is held to pertain to the assessee; additions under section 69C are sustained in favour of Revenue.

Issue (ii): Whether interest entries in the seized ledger for A.Y. 2020-21 represent notional entries or actual accrual/receipt taxable under section 56 of the Income-tax Act, 1961.

Analysis: The decision contrasts the character of purely notional accounting entries with systematic, periodic interest computations carried forward in a running account. It assesses whether the seized diaries, admissions and corroborative patterns indicate actual accrual/receipt of interest outside books of account and whether the appellate authority misapplied the principle of taxing only real income.

Conclusion: The interest entries for A.Y. 2020-21 are held to represent actual accrual/receipt and the deletion by the appellate authority is set aside; the Department's appeal on this point is allowed in favour of Revenue.

Final Conclusion: The impugned additions under section 69C are upheld and the consequential application of section 115BBE is sustained; the appeals by the assessee for the years under consideration are dismissed while the Department's appeal in respect of interest for A.Y. 2020-21 is allowed, resulting in an overall outcome favourable to Revenue.

Ratio Decidendi: Corroborated third-party seized running ledgers, supported by admissions under section 132(4) and independent matching with disclosed transactions and bank records, can constitute reliable evidence to attribute unexplained outflows to a person and sustain additions under section 69C; systematic periodic interest entries in such ledgers indicating recurring computation and corresponding liabilities constitute real income chargeable under section 56.

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