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)

The Calcutta Tramways Company(1978) Limited, Kolkata vs. DCIT, Circle-4(2), Kolkata

In the result, the appeal filed by the assessee, is allowed for statistical purposes

ITA 1850/KOL/2016[2008-09]Status: DisposedITAT Kolkata30 Nov 2018AY 2008-09

Bench: Shri S.S.Godara & Shri, M. Balaganeshassessment Year :2008-09 The Calcutta Tramways V/S. Dcit, Circle-4(2), Company (1978) Ltd. 12 Aykar Bhavan, R.N. Mukherjee Road, 4Thfloor, P-7, Kolkata-700 001 Chowringhee [Pan No.Aabct 7674D] Square,Kolktaa-69 .. अपीलाथ" /Appellant ""यथ"/Respondent Shri A. Biswas, Fca अपीलाथ" क" ओर से/By Appellant Shri P.K. Srihari, Cit-Dr ""यथ" क" ओर से/By Respondent 15-11-2018 सुनवाई क" तार"ख/Date Of Hearing 30-11-2018 घोषणा क" तार"ख/Date Of Pronouncement आदेश /O R D E R Per S.S.Godara:- This Assessee’S Appeal For Assessment Year 2008-09 Arises Against The Commissioner Of Income Tax (Appeals)-2 Kolkata’S Order Dated 05.08.2011, Passed In Case No.928/Cit(A)-2/14-15 U/S 147/154143(3) Of The Income Tax Act, 1961; In Short ‘The Act’. Heard Both The Parties. Case File Perused. 2. The Assessee Raises Following Substantive Ground In It Instant Appeal:- “1. For That The Learned Commissioner Of Income Tax (Appeal) Wrongly & Arbitrarily Did Not Consider In The Order Under Appeal The Contention Of The Appellant As To The (A) Issuance Of Notice Under Section 148 Dated 22.03.2013 (B) Non-Furnishing Of The Date Of Recording Of The Reason For Issuance Of The Notice (C) Non-Disposal Of The Objection Of The Re-Assessment Proceedings Filed By The Appellant & (D) The ‘Change Of Opinion On The Issues”

Section 145(2)Section 147Section 148Section 44ASection 619(4)