Section 145(2) of the Income Tax Act

Income-tax Act, 2025: s.276

Section 145(2) falls under section 145 of the Income-tax Act, 1961, which corresponds to section 276 (Method of accounting) of the Income-tax Act, 2025.

Read section 276 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 145(2) is CIT v. Birla Gwalior (P.) Ltd. (89 ITR 266), cited in 83 of the 258 judgments on BharatTax that turn on this section.

Leading authorities on Section 145(2)

CIT v. Birla Gwalior (P.) Ltd.
89 ITR 266 · 1973 · Supreme Court
83
citing judgments

The Supreme Court holds that income tax is levied on real income, not on hypothetical or notional accrual. For income to be taxable, it must genuinely accrue or be received, taking into account the realistic probability of its realization.

DCIT v. Bank of Bahrain & Kuwait
41 SOT 290 · 2010 · ITAT
81
citing judgments

Mark-to-Market (MTM) losses on forward contracts and forex derivatives are allowable as a revenue deduction under Section 37(1) where a binding obligation is created against the assessee. This is provided the assessee consistently follows the same accounting method for both profits and losses.

Bright Enterprises Pvt. Ltd. v. CIT
381 ITR 107 · 2016 · High Court
64
citing judgments

No disallowance of interest expenditure can be made under Section 36(1)(iii) merely on the presumption of diversion of borrowed funds, if the assessee possesses sufficient interest-free own funds to cover interest-free advances.

Mcorp Global P. Ltd. v. CIT
309 ITR 434 · 2009 · Supreme Court
56
citing judgments

The Income Tax Appellate Tribunal cannot enhance an assessment or take back a benefit granted to an assessee by the Assessing Officer. The Tribunal's power under section 254(1) is not to enhance the assessment.

Dhoomketu Builders & Development (P.) Ltd. v. ACIT
368 ITR 680 · 2014 · High Court
41
citing judgments

A real estate development business is considered 'set up' when the assessee is in a position to undertake activities for the acquisition, development, and exploitation of real estate. Expenses incurred between the setting up and commencement of such a business are allowable, even if no revenue is generated or land is classified as a non-current investment.

State of Orissa v. Maharaja Shri B.P. Singh Deo
76 ITR 690 · 1970 · Supreme Court
40
citing judgments

An assessment order enhancing income without disclosing the basis of enhancement and relying on mere suspicion is not sustainable. Best judgment assessment must be based on relevant material and cannot be arbitrary.

CIT v. Anil Kumar
392 ITR 552 · 2017 · High Court
40
citing judgments

When there is nothing on record to establish the financial capacity, creditworthiness, or relationship of a donor with the assessee, an addition to income can be justified.

CIT v. Ansal Housing and Construction
389 ITR 373 · 2016 · High Court
37
citing judgments

Income from unsold flats in the closing stock of a real estate developer is taxable under the head 'Income from house property' based on their annual letting value, even if the developer is engaged in business.

Prestige Estate Projects (P) Ltd. v. DCIT
33 DTR 514 · 2010 · ITAT
28
citing judgments

A real estate developer adopting the completed contract method of accounting cannot be forced to follow the percentage completion method under AS-7 if AS-7 has not been specified by the Central Government under section 145(2). The Assessing Officer cannot reject accounts under section 145(3) solely on this ground.

N.R. Paper & Boards Ltd. v. Dy. CIT
234 ITR 733 · 1998 · High Court
22
citing judgments

Block assessments for undisclosed income are independent of regular assessments and operate in a separate field. Undisclosed income under Chapter XIV-B is classified and assessed separately at a higher tax rate.

Judgments on Section 145(2)

Mayfair Properties, Kolkata vs. DCIT, Cir. 32, Kolkata

In the result, the appeal of the assessee stands allowed

ITA 395/KOL/2024[2018-19]Status: DisposedITAT Kolkata06 Aug 2024AY 2018-19

Bench: Shri Sanjay Garg & Shri Sanjay Awasthii.T.A. No.395/Kol/2024 Assessment Year: 2018-19 Mayfair Properties….…………….....……………………....………....Appellant 194, Hossenpur, Mayfair Tower, C N Roy Road, East Kolkata Township, West Bengal-700107. [Pan: Aagfm2513C] Vs. Dcit, Circle-32, Kolkata…...................................................…..…..... Respondent Appearances By: Shri Manish Kumar Mundra, Ar, Appeared On Behalf Of The Appellant. Md. Ghayansuddin, Cit-Dr, Appeared On Behalf Of The Respondent. Date Of Concluding The Hearing : May 20, 2024 Date Of Pronouncing The Order : August 06, 2024 आदेश / Order संजय गग", "या"यक सद"य "वारा / Per Sanjay Garg: The Present Appeal Has Been Preferred By The Assessee Against The Order Dated 13.02.2024 Of The National Faceless Appeal Centre [Hereinafter Referred To As ‘Cit(A)’] Passed U/S 250 Of The Income Tax Act (Hereinafter Referred To As The ‘Act’). 2. The Assessee In This Appeal Is Aggrieved By The Action Of The Ld. Cit(A) In Confirming The Addition Made By The Assessing Officer Of Rs.16,47,19,380/- By Making Assessment Of The Income Of The Assessee Applying Percentage Completion Method As Against The Plea Of The Assessee That It Has Been Regularly Following Project Completion Method.

Section 145(2)Section 250

New Balance It Services India Pvt. Ltd., Pune vs. Income Tax Officer(1)- Circle 2, Punepune, Pune

ITA 246/PUN/2024[2022-23]Status: DisposedITAT Pune05 Jun 2024AY 2022-23

Bench: Hon’Ble Shri S. S. Godara & Shri G. D. Padmahshaliआयकर अपऩल सं. / Ita No. 0245 & 0246/Pun/2024 निर्धारण वषा / Assessment Year : 2020-21 & 2022-23 New Balance It Services India Pvt. Ltd. Level-1, Wing-A, Tower-06, Cybercity, Magarpatta, Pune-411013. Pan : Aaccn5091R . . . . . . . अपीलार्थी / Appellant बिधम / V/S. Income Tax Officer-1, Circle-2, Pune . . . . . . . प्रत्यर्थी / Respondent द्वधरध / Appearances Assessee By : Mr Rajendra Agiwal [‘Ld. Ar’] Revenue By : Mr Ramnath Murkunde [‘Ld. Dr’] सुनवाई की तारीख / Date Of Conclusive Hearing : 28/05/2024 घोषणा की तारीख / Date Of Pronouncement : 05/06/2024 आदेश / Order Per G. D. Padmahshali, Am; This Twin Appeals Are Instituted U/S 253(1)(Aa) Of The Income Tax Act [‘The Act’] By The Assessee Challenging The Respective First Appellate Orders Dt. 19/12/2023 Passed U/S 250 Of The Act By The Commissioner Of Income Tax Appels [‘Cit(A)’] For The Assessment Years 2020-21 & 2022-23 [‘Ay’] Which In Turn Arisen Out Of Separate Orders Of Intimation Passed U/S 143(1) Of The Act.

For Appellant: Mr Rajendra Agiwal [‘Ld. AR’]For Respondent: Mr Ramnath Murkunde [‘Ld. DR’]
Section 139(1)Section 143(1)Section 143(1)(a)Section 145Section 145(2)Section 250Section 253(1)(aa)Section 28

New Balance It Services India Pvt. Ltd., Pune vs. Income Tax Officer(1)- Circle 2, Pune

ITA 245/PUN/2024[2021-22]Status: DisposedITAT Pune05 Jun 2024AY 2021-22

Bench: Hon’Ble Shri S. S. Godara & Shri G. D. Padmahshaliआयकर अपऩल सं. / Ita No. 0245 & 0246/Pun/2024 निर्धारण वषा / Assessment Year : 2020-21 & 2022-23 New Balance It Services India Pvt. Ltd. Level-1, Wing-A, Tower-06, Cybercity, Magarpatta, Pune-411013. Pan : Aaccn5091R . . . . . . . अपीलार्थी / Appellant बिधम / V/S. Income Tax Officer-1, Circle-2, Pune . . . . . . . प्रत्यर्थी / Respondent द्वधरध / Appearances Assessee By : Mr Rajendra Agiwal [‘Ld. Ar’] Revenue By : Mr Ramnath Murkunde [‘Ld. Dr’] सुनवाई की तारीख / Date Of Conclusive Hearing : 28/05/2024 घोषणा की तारीख / Date Of Pronouncement : 05/06/2024 आदेश / Order Per G. D. Padmahshali, Am; This Twin Appeals Are Instituted U/S 253(1)(Aa) Of The Income Tax Act [‘The Act’] By The Assessee Challenging The Respective First Appellate Orders Dt. 19/12/2023 Passed U/S 250 Of The Act By The Commissioner Of Income Tax Appels [‘Cit(A)’] For The Assessment Years 2020-21 & 2022-23 [‘Ay’] Which In Turn Arisen Out Of Separate Orders Of Intimation Passed U/S 143(1) Of The Act.

For Appellant: Mr Rajendra Agiwal [‘Ld. AR’]For Respondent: Mr Ramnath Murkunde [‘Ld. DR’]
Section 139(1)Section 143(1)Section 143(1)(a)Section 145Section 145(2)Section 250Section 253(1)(aa)Section 28