Income Tax--Books of Account

Diaries as Books of Account Under Section 2(12A) : When Informal Records Can Trigger Additions/Formal Tax Consequences Can Follow

CS. Ayush Rathi

The evolving dynamics of business practices and financial record-keeping in India have forced courts to revisit the scope of what constitutes 'books of account' under the Income Tax Act, 1961. A particularly contentious issue is whether the handwritten diaries or informal registers often recovered during search and seizure proceedings can be treated as books of account, particularly when they contain financial entries not reflected in the formal accounts of the assessee. In Om Sai Infrapromoters (P.) Ltd. v. DCIT, [ITA Nos. 163 to 169/2025 & ITA No. 172/2025, dated 22 May, 2025) : 2025 TaxPub(DT) 4197 (Del-HC) the Delhi High Court affirmed that such diaries, when systematic and corroborative, can attract addition under the Act. This article explores the implications of the judgment, the statutory definition under section 2(12A), and other aligned judicial pronouncements.

1. Introduction: The contested identity of 'books' in the age of informality

The emergence of informal financial records such as the handwritten diaries, slips, and soft copies as potential sources of tax liability has been an area of increasing dispute. These records typically come to light during search operations under section 132 of the Act and are often dismissed by assessees as 'dumb documents' or 'non-authentic.'

The key question for the tax authorities and courts alike is: Can such documents form the basis for additions under sections like 68, 69, or 69A of the Act, even if they are not part of the audited accounts? More precisely, do these diaries qualify as 'books of account' within the meaning of section 2(12A) of the Act?