Section 145(3) of the Income Tax Act

Income-tax Act, 2025: s.276

Section 145(3) 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(3) is CIT v. Jet Airways (I) Ltd. (331 ITR 236), cited in 694 of the 3,640 judgments on BharatTax that turn on this section.

Leading authorities on Section 145(3)

CIT v. Jet Airways (I) Ltd.
331 ITR 236 · 2011 · High Court
694
citing judgments

The Assessing Officer loses jurisdiction and the entire reassessment becomes invalid if no addition is made in respect of the income that formed the basis of the reopening. Explanation 3 to Section 147 does not permit assessing other escaped income unless an addition is made for the original income forming the reason to believe.

Vijay Proteins Ltd. v. Asst. CIT
58 ITD 428 · 1996 · ITAT
430
citing judgments

Where purchases are found to be non-genuine or fictitious, a reasonable disallowance of 25% of such purchases or the peak credit, whichever is higher, can be made. This is applied to address unexplained expenditure under Section 69C when actual goods are likely procured from the grey market.

Kachwala Gems v. JCIT
288 ITR 10 · 2007 · Supreme Court
332
citing judgments

In a best judgment assessment, some guesswork is inherent, but the estimate must be fair and not arbitrary. Books of account can be rejected under Section 145(3) if the assessee fails to substantiate entries or prove the genuineness of transactions, leading to estimation of income.

CIT v. Simit P. Seth
38 Taxmann.com 385 · 2013 · High Court
278
citing judgments
CIT v. Devi Prasad Vishwanath Prasad
72 ITR 194 · 1969 · Supreme Court
272
citing judgments

If there is an unexplained cash credit, the Assessing Officer can treat it as the assessee's income, even when the income is finalized on an estimation basis, without proving its specific source. The onus then shifts to the assessee to prove that the income represented by the cash credit has already been taxed.

Commissioner of Sales Tax v. H.M. Esufali H.M. Abdulali
90 ITR 271 · 1973 · Supreme Court
232
citing judgments

The Supreme Court established principles for best judgment assessments, stating that some guesswork is inevitable but the assessment must be bona fide, rational, and free from bias or capriciousness. An appellate authority cannot substitute its judgment for that of the Assessing Officer unless the AO's assessment is shown to be biased, irrational, vindictive, or capricious, especially when the assessee fails to provide proper accounts or counter-evidence.

CIT v. Balchand Ajit Kumar
263 ITR 610 · 2003 · High Court
212
citing judgments

When making an addition for unaccounted receipts, on-money, or non-genuine purchases/sales, the addition should be restricted to the estimated profit element embedded in such transactions, rather than the entire gross amount, particularly when evidence of corresponding expenditure is incomplete. This estimation often involves applying a net profit rate.

CIT v. Bilahari Investment (P) Ltd.
299 ITR 1 · 2008 · Supreme Court
206
citing judgments

The project completion method and the percentage of completion method are both recognized methods for recognizing income from real estate contracts.

CIT v. British Paints India Ltd.
188 ITR 44 · 1991 · Supreme Court
204
citing judgments

The Assessing Officer has a duty to examine whether an assessee's books of account truly disclose the correct income and is not bound to accept the accounting system regularly employed by the assessee or methods followed in earlier years. Each assessment year is a distinct and self-contained unit for tax purposes.

Harigopal Singh v. CIT
258 ITR 85 · 2002 · High Court
203
citing judgments

Penalty under section 271(1)(c) cannot be levied when an addition to income is made on an estimated basis without concrete evidence of concealment or furnishing inaccurate particulars of income. The provisions of section 271(1)(c) are not attracted to cases where income is assessed on an estimate basis.

Judgments on Section 145(3)

M/S. M.D.Infra Developers, Surat vs. The Deputy Commissioner of Income Tax, Central Circle-2, Surat

In the result, Assessee’s appeal, in ITA No

ITA 3085/AHD/2016[2013-14]Status: DisposedITAT Surat06 May 2022AY 2013-14

Bench: Shri Pawan Singh, Jm & Dr. A. L. Saini, Am आयकरअपीलसं./Ita Nos.3058 To 3059/Ahd/2016 & आयकरअपीलसं./Ita No.3085/Ahd/2016 ("नधा"रणवष" / Assessment Years: (2011-12 To 2012-13 & 2013-14) (Physical Court Hearing) M/S. M. D. Infra Developers, Vs. The Dcit, Central Circle-2, 128, Mamta Park Society, Kapodra, Surat. Varachha Road, Surat. "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aasfm7357A (Assessee) (Respondent) आयकरअपीलसं./Ita Nos.3093 To 3094/Ahd/2016 ("नधा"रणवष" / Assessment Years: (2012-13 To 2013-14) (Physical Court Hearing) The Dcit, Central Circle-2, Vs. M/S. M. D. Infra Developers, Surat. 128, Mamta Park Society, Kapodra, Varachha Road, Surat. "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aasfm7357A (Assessee) (Respondent) Assessee By Shri Mitish S. Modi, C.A & Shri Akshay Modi, Ca Shri H. P. Meena, Cit(Dr) Respondent By Date Of Hearing 25/03/2022 Date Of Pronouncement 06/05/2022 आदेश / O R D E R Per Bench: Captioned Five Appeals Filed By The Assessee & Revenue, Pertaining To Assessment Years (Ay) 2011-12, 2012-13 & 2013-14 Are Directed Against The Separate Orders Passed By The Learned Commissioner Of Income Tax (Appeals)-4, Surat [In Short “The Ld. Cit(A)”], Which In Turn Arise Out Of Separate Assessment Orders Passed By The Assessing Officer Under Section 144 R.W.S 153A Of The Income Tax Act, 1961 (Hereinafter Referred To As “The Act”).

Section 144Section 40A(3)Section 69B

M/S. M.D.Infra Developers, Surat vs. The Deputy Commissioner of Income Tax, Central Circle-2, Surat

In the result, Assessee’s appeal, in ITA No

ITA 3059/AHD/2016[2012-13]Status: DisposedITAT Surat06 May 2022AY 2012-13

Bench: Shri Pawan Singh, Jm & Dr. A. L. Saini, Am आयकरअपीलसं./Ita Nos.3058 To 3059/Ahd/2016 & आयकरअपीलसं./Ita No.3085/Ahd/2016 ("नधा"रणवष" / Assessment Years: (2011-12 To 2012-13 & 2013-14) (Physical Court Hearing) M/S. M. D. Infra Developers, Vs. The Dcit, Central Circle-2, 128, Mamta Park Society, Kapodra, Surat. Varachha Road, Surat. "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aasfm7357A (Assessee) (Respondent) आयकरअपीलसं./Ita Nos.3093 To 3094/Ahd/2016 ("नधा"रणवष" / Assessment Years: (2012-13 To 2013-14) (Physical Court Hearing) The Dcit, Central Circle-2, Vs. M/S. M. D. Infra Developers, Surat. 128, Mamta Park Society, Kapodra, Varachha Road, Surat. "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aasfm7357A (Assessee) (Respondent) Assessee By Shri Mitish S. Modi, C.A & Shri Akshay Modi, Ca Shri H. P. Meena, Cit(Dr) Respondent By Date Of Hearing 25/03/2022 Date Of Pronouncement 06/05/2022 आदेश / O R D E R Per Bench: Captioned Five Appeals Filed By The Assessee & Revenue, Pertaining To Assessment Years (Ay) 2011-12, 2012-13 & 2013-14 Are Directed Against The Separate Orders Passed By The Learned Commissioner Of Income Tax (Appeals)-4, Surat [In Short “The Ld. Cit(A)”], Which In Turn Arise Out Of Separate Assessment Orders Passed By The Assessing Officer Under Section 144 R.W.S 153A Of The Income Tax Act, 1961 (Hereinafter Referred To As “The Act”).

Section 144Section 40A(3)Section 69B

Dy CIT, Circle-4(3)(1), Mumbai vs. M/S. Jefferies India P. Ltd., Mumbai

In the result, the appeal filed by the revenue is hereby dismissed and cross objection filed by the assessee is hereby partly allowed

ITA 457/MUM/2021[2014-15]Status: DisposedITAT Mumbai11 Apr 2022AY 2014-15

Bench: Shri Amarjit Singh, Jm & Gagan Goyal, Am आयकर अपील सं/ I.T.A. No.457/Mum/2021 (निर्धारण वर्ा / Assessment Year: 2014-15) Dcit, Cir 4(3)(1) बिधम/ M/S. Jefferies India Pvt. Ltd. Room No.649, 6Th Floor, 42 & 43, 2 North Avenue, Vs. Aayakar Bhavan, M. K. Bandra-Kurla Complex, Bandra (E), Mumbai- Road, Mumbai-400020. 400051. & Cross Objection No.151/Mum/2021 आयकर अपील सं/ I.T.A. No. 457/Mum/2021 (निर्धारण वर्ा / Assessment Year: 2014-15) M/S. Jefferies India Pvt. Ltd. बिधम/ Dcit, Cir 4(3)(1) Room No.649, 6Th Floor, 42 & 43, 2 North Avenue, Vs. Bandra-Kurla Complex, Aayakar Bhavan, M. K. Bandra (E), Mumbai- Road, Mumbai-400020. 400051. स्थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aabcj7850R (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Revenue By: Shri Achal Sharma Assessee By: Shri M.P. Lohia/Nikhil Tiwari सुनवाई की तारीख / Date Of Hearing: 24/02/2022 घोषणा की तारीख /Date Of Pronouncement: 11/04/2022 आदेश / O R D E R Per Amarjit Singh, Jm: The Revenue As Well As Assessee Have Filed The Above Mentioned Appeal As Well As Cross-Objection Against The Order Dated 05.02.2020 Passed By The Commissioner Of Income Tax (Appeals)-22, Mumbai [Hereinafter Referred To As The “Cit(A)”] Relevant To The A.Y.2014-15. C.O. No.151/Mum/2021 A.Y.2014-15

For Appellant: Shri M.P. Lohia/Nikhil TiwariFor Respondent: Shri Achal Sharma
Section 143(2)Section 145(1)

M/S R.G. Colonizers Pvt. Ltd., Jaipur vs. DCIT, Circle-3, Jaipur

In the result, this appeal of the assessee stands allowed

ITA 136/JPR/2021[2014-15]Status: DisposedITAT Jaipur04 Apr 2022AY 2014-15

Bench: Shri Sandeep Gosain, Jm & Shri Rathod Kamlesh Jayantbhai, Am Vk;Dj Vihy La-@Ita No. 136/Jp/2021 Fu/Kzkj.K O"Kz@Assessment Year :2014-15 M/S R.G. Colonizers Pvt. Ltd., Cuke D.C.I.T., 4, Tirupati Trade Centre, S.C. Vs. Circle-3, Road, Jaipur. Jaipur. Lfkk;H Ys[Kk La-@Thvkbzvkj La-@Pan/Gir No.: Aaacr 8269 D Vihykfkhz@Appellant Izr;Fkhz@Respondent Fu/Kzkfjrh Dh Vksj Ls@ Assessee By : Shri P.C. Parwal (Ca) Jktlo Dh Vksj Ls@ Revenue By : Smt. Monisha Choudhary (Jcit) Lquokbz Dh Rkjh[K@ Date Of Hearing : 14/02/2022 Mn?Kks"K.Kk Dh Rkjh[K@ Date Of Pronouncement : 04/04/2022 Vkns'K@ Order Per: Sandeep Gosain, J.M. This Is An Appeal Filed By The Assessee Against The Order Of Ld. National Faceless Appeal Centre (Nfac), Delhi Dated 06/08/2021 For The A.Y. 2014-15, Wherein Following Grounds Have Been Taken. “1. The Ld. Cit(A), Nfac Has Erred On Facts & In Law In Upholding The Rejection Of Books Of Account By Applying The Provisions Of Sec. 145(3). 2. The Ld. Cit(A), Nfac Has Erred On Facts & In Law In Upholding The Action Of Ao In Applying N.P. Rate Of 8% On Total Receipts Of Rs. 18,63,73,549/-, Thereby Computing The Business Income At Rs. 78,42,549/- (18,63,73,549*8%-70,67,877 Depreciation) As Against Net Loss Of Rs. 68,43,810/- Computed By The Assessee)

For Appellant: Shri P.C. Parwal (CA)For Respondent: Smt. Monisha Choudhary (JCIT)
Section 145(3)Section 2Section 44A