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)

Sumanta Kumar Das, Bhubaneswar vs. ACIT, Circle-1(2), Bhubaneswar

In the result, appeal of the assessee is partly allowed

ITA 36/CTK/2019[2011-12]Status: DisposedITAT Cuttack06 Dec 2019AY 2011-12

Bench: Shri C.M. Garg, Jm & Shri L.P. Sahu, Am आयकर अपीऱ सं./Ita No.36/Ctk/2019 (नििाारण वषा / Assessment Year :2011-2012) Sumanta Kumar Das, Vs. Acit, Circle-1(2), Plot No.-Lb-118, Stage-Iv, Bhubaneswar Budheswari, Laxmisagar, Bhubaneswar-751006 स्थायी लेखा सं./Pan No. : Adypd 8979 L (अऩीलाथी /Appellant) (प्रत्यथी / Respondent) .. ननधाारिती की ओर से /Assessee By : Shri K.K.Bal, Advocate िाजस्व की ओर से /Revenue By : Shri Subhendu Dutta, Dr सुनवाई की तािीख / Date Of Hearing : 26/11/2019 घोषणा की तािीख/Date Of Pronouncement : 06/12/2019 आदेश / O R D E R Per L.P.Sahu, Am: This Is An Appeal Filed By The Assessee Against The Order Of Cit(A)-1, Bhubaneswar, Dated 27.10.2015 For The Assessment Year 2011-2012. 2. As Per The Office Note, There Is A Delay Of Three Years Three Months & Five Days In Filing The Appeal Of Assessee. The Assessee Has Filed An Application For Condonation Of Delay Along With Affidavit Stating Therein That Due To Prolonged Illness & Negligence Of The Previous Counsel, He Could Not File The Appeal In Time. On The Other Hand, Ld. Dr Did Not Object To Condone The Delay. We Have Also Gone Through The Said Application Along With The Affidavit Filed By The Assessee Explaining

For Appellant: Shri K.K.Bal, AdvocateFor Respondent: Shri Subhendu Dutta, DR

ACIT-25(3), Mumbai vs. M/S.Thana Acid & Chemical Company, Mumbai

In the result, the appeal of the Revenue is dismissed and CO of the assessee is also dismissed

ITA 6709/MUM/2018[2015-16]Status: DisposedITAT Mumbai29 Nov 2019AY 2015-16

Bench: Sri Mahavir Singh, Jm & Sri Waseem Ahmed, Am आयकर अपील सुं./ Ita No. 6709/Mum/2018 (यिर्ाारण वर्ा / Assessment Year 2015-16) The Asst. Commissioner Of M/S Thana Acid & Chemical Income Tax-25(3) Company 310, Shyam Kamal Bldg. 6Th Floor, C-10, Prtayakshkar बनाम/ Agrawal Market, Vile Parle Bhawan, Bandra Kurla Vs. (East), Mumbai-400 057 Complex, Bandra (East), Mumbai-400 051 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा सुं./Pan No. Aaaft0627K प्रत्याक्षेप सुं./ Co No. 248/Mum/2019 (Arising Out Of Ita No.6709/Mum/2018 For Ay 2015-16) M/S Thana Acid & Chemical The Asst. Commissioner Of Company Income Tax-25(3) 6Th Floor, C-10, Prtayakshkar 310, Shyam Kamal Bldg. Agrawal बनाम/ Bhawan, Bandra Kurla Market, Vile Parle (East), Vs. Complex, Bandra (East), Mumbai-400 057 Mumbai-400 051 (आपत्ति करनेवाला / Cross Objector) (प्रत्यर्थी/ Respondent/Org. Appellant) अपीलार्थी की ओर े / Appellant By : Shri Amit Pratap Singh, Dr प्रत्यर्थी की ओर े / Respondent By : Shri Ajay R Singh, Ar ुिवाई की तारीख / Date Of Hearing: 13.11.2019 घोर्णा की तारीख / Date Of Pronouncement : 29.11.2019

For Appellant: Shri Amit Pratap Singh, DRFor Respondent: Shri Ajay R Singh, AR
Section 143(3)