Private diaries are not books of account under concealment penalty protection when they record undisclosed transactions.

Private diaries used to record undisclosed and clandestine transactions are not "books of account" maintained for any source of income within Explanation 5 to section 271(1)(c). The provision protects an assessee only where the relevant income or transaction is entered in books kept for determining taxable income and preparing credible tax accounts before the search, or where another statutory exception applies. Regular or contemporaneous diary entries do not satisfy that requirement when the records are not maintained for income computation under the Act. The later statutory definition of books of account did not change the position for the assessment years in question, so penalty immunity was unavailable and concealment penalty remained applicable.

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Issues: Whether seized private diaries could be treated as books of account maintained for any source of income within Explanation 5 to section 271(1)(c) of the Income-tax Act, 1961, so as to protect the assessee from penalty for concealment.

Analysis: Explanation 5 deems concealment where, in a search under section 132, undisclosed money, bullion, jewellery or other valuable assets are found, unless the recorded income or the transaction resulting in such income is entered before the search in books of account maintained for any source of income, or the other statutory exceptions are satisfied. The phrase "books of account" in this setting was held to mean books maintained for the purposes of determining taxable income and preparing credible accounts for tax reporting. Private diaries, even if regularly kept and contemporaneously written, do not answer that description when they are used to secretly record unaccounted and clandestine transactions and are not maintained for computing income under the Act. The later statutory definition of books of account was also not treated as altering the position for the assessment years in question.

Conclusion: The diaries were not books of account within Explanation 5, and the assessees were not entitled to immunity from penalty. The penalty under section 271(1)(c) was rightly upheld.

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