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)

Deputy Commissioner of Income Tax Central Circle-3, Thane vs. Sonam Builders, Mumbai

In the result appeal filed by the revenue is hereby dismissed

ITA 2926/MUM/2019[2013-14]Status: DisposedITAT Mumbai21 Apr 2021AY 2013-14

Bench: Shri Shamim Yahya & Shri Amarjit Singhआयकर अपील सं/ I.T.A. No.2926/Mum/2019 (निर्धारण वर्ा / Assessment Year: 2013-14) बिधम/ Dcit, Cc-3 M/S. Sonam Builders Shanti Niwas, 1St Floor Room No.10, A-Wing, Vs. 6Th Floor, Ashar I.T.Park New Golden Road No.16-Z, Wagle Nest Phase Xiii, 100 Industrial Estate, Thane(W) Ft.Road, Opp. Hanuman Mandir, Bhayander(E), Dist.Thane-401 105 स्थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aacfs3498J (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Revenue By: Shri Purushottam Tripuri,Cit-Dr Assessee By: Shri Vimal Punmiya, Ar सुनवाई की तारीख / Date Of Hearing: 23/02/2021 घोषणा की तारीख /Date Of Pronouncement: 21/04/2021 आदेश / O R D E R Per Amarjit Singh, Jm: The Revenue Has Filed The Present Appeal Against The Order Dated 28/02/2019 Passed By The Commissioner Of Income Tax (Appeals) -11, Mumbai [Hereinafter Referred To As The “Cit(A)”] Relevant To The A.Y.2013- 14. 2. The Revenue Has Raised The Following Grounds: - 1. "On The Facts & Circumstances Of The Case & In Law Cit(A) Erred In Deleting The Addition Of Rs.8,17,50/- Made On Account Of Unaccounted Sales Of Car Parking Area, Not Included In The Sale Of Agreements Of The Flats. A.Y.2013-14 Ii) On The Facts & Circumstances Of The Case & In Law Cit(A) Erred In Deleting The Addition Of Rs.,50,000/- Made On Account Of Unaccounted Income On F.S.I Sale, Without Appreciating The Fact, That The Assessee Has Failed To Prove, The Sale Consideration Mentioned In The Seized Unsigned Agreement Is Not True.

For Appellant: Shri Vimal Punmiya, ARFor Respondent: Shri Purushottam Tripuri,CIT-DR
Section 132Section 143(3)Section 145Section 80GSection 80I

Shri Manoj Kumar Johari, Sikar vs. Assistant Commissioner of Income Tax, Circle, Sikar

In the result, this appeal of the assessee is dismissed

ITA 535/JPR/2018[2013-14]Status: DisposedITAT Jaipur12 Mar 2021AY 2013-14

Bench: Shri Sandeep Gosain, Jm & Shri Vikram Singh Yadav, Am Vk;Dj Vihy La-@Ita No. 535/Jp/2018 Fu/Kzkj.K O"Kz@Assessment Year: 2013-14 Manoj Kumar Johari, Cuke A.C.I.T. Vs. Prop. Of The Art Palace, Zee Circle-Sikar. Bhawan, Subhash Chowk, Ramgarh-Shekhawati, Sikar. Lfkk;H Ys[Kk La-@Thvkbzvkj La-@Pan/Gir No.: Adwpj 8870 A Vihykfkhz@Appellant Izr;Fkhz@Respondent Fu/Kzkfjrh Dh Vksj Ls@ Assessee By : Shri Vikash Rajvanshi (Ca) Jktlo Dh Vksj Ls@ Revenue By: Shri A.S. Nehra (Addl.Cit) Lquokbz Dh Rkjh[K@ Date Of Hearing : 17/12/2020 Mn?Kks"K.Kk Dh Rkjh[K@ Date Of Pronouncement : 12/03/2021 Vkns'K@ Order Per: Sandeep Gosain, J.M. This Appeal Has Been Filed By The Assessee Against The Order Of The Ld. Cit(A)-3, Jaipur Dated 16/02/2018 For The A.Y. 2013-14, Wherein Following Grounds Have Been Taken: “1. Ld. Cit(A) Has Erred In Law & Fact In Estimating 12.86% Gp Rate On The Basis Of 5 Year’S Average Assessed Gp Rate & Sustained Gp Addition Of Rs. 20,43,900/- Without Considering Actual Gp & Even Not Considering The Actual Average Of Last 5 Year Gp. 2. The Appellant Prays Your Honor To Add, Amend Or Alter All Or Any Of The Grounds Of The Appeal On Or Before The Date Of Hearing.”

For Appellant: Shri Vikash Rajvanshi (CA)For Respondent: Shri A.S. Nehra (Addl.CIT)
Section 143(3)Section 145(3)
Section 145(3) Income Tax Act (2025: s.276) — Case Laws | BharatTax