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)

Omkar Steels Private Limited, Sundargarh vs. ACIT, Rourkela Circle, Rourkela

In the result, the appeal of the assessee is partly allowed

ITA 512/CTK/2017[2007-08]Status: DisposedITAT Cuttack17 May 2018AY 2007-08

Bench: Shri N.S.Saini, Am & Shri Pavan Kumar Gadale, Jm Omkar Steels Private Limited Vs. Acit, Rourkela Circle, Kunjharia, Bijabahal, Rourkela Sundargarh, स्थायी लेखा सं./जीआइआर सं./ Pan/Gir No. : Aaaco 8886 H (अऩीलाथी /Appellant) (प्रत्यथी / Respondent) .. ननधाारिती की ओर से /Assessee By : Shri Ambika Prasad Mohanty, Ar िाजस्व की ओर से /Revenue By : Shri D.K.Pradhan, Dr सुनवाई की तािीख / Date Of Hearing : 03/05/2018 घोषणा की तािीख/Date Of Pronouncement 17/05/2018 आदेश / O R D E R Per Shri Pavan Kumar Gadale, Jm: The Assessee Has Filed This Appeal Against The Order Of Cit(A), Sambalpur, Dated 28.09.2017, Passed In I.T.Appeal No.0268/10-11, U/S.144/147/250 Of The I.T.Act For The Assessment Year 2007-2008. 2. As Per The Office Note, There Is A Delay Of 10 Days In Filing The Present Appeal. The Assessee Has Filed An Application For Condonation Of Delay Along With An Affidavit Explaining The Reasons For Delay. Considering The Application Of Assessee & Looking To The Facts & Circumstances Of The Case & Ld. Dr Has No Serious Objection, We Allow The Application & Condone The Delay Of 10 Days In Filing The Present Appeal & The Appeal Is Heard Finally. 3. The Sole Substantive Ground Raised By The Assessee Is That The Cit(A) Is Not Justified In Upholding The Rejection Of Books Of Accounts

For Appellant: Shri Ambika Prasad Mohanty, ARFor Respondent: Shri D.K.Pradhan, DR
Section 133(6)Section 142(1)Section 143(1)Section 143(2)Section 144Section 145Section 145(3)Section 145ASection 147Section 148

ITO, WD-39(4), Midnapore vs. Sri Tapan Singha, Paschim Medinipur

In the result, appeal of the revenue is dismissed

ITA 1232/KOL/2015[2010-2011]Status: DisposedITAT Kolkata16 May 2018AY 2010-2011

Bench: Sri J. Sudhakar Reddy & Sri S.S. Viswanethra Ravi] I.T.A. No. 1232/Kol/2015 Assessment Year: 2010-11 I.T.O. Ward-39(4) Midnapore…………………………………..……..…………………………….. Appellant Sahoo Bhawan Kshudiram Nagar Midnapore – 721 101 West Bengal Sri Tapan Singha……………….……..…………….…………………………………………….…….. Respondent C/O S.N. Ghosh Associates, Advocate Seven Brothers Lodge P.O. Buroshibtala P.S. Chinsurah Dist. Hooghly Pin – 712 105 [Pan : Atjps 3574 R] Appearances By: Shri Somnath Ghosh, Advocate, Appeared On Behalf Of The Assessee. Shri Saurabh Kumar, Addl. Cit, Sr. Dr, Appearing On Behalf Of The Revenue Date Of Concluding The Hearing : May 3Rd, 2018 Date Of Pronouncing The Order : May 16Th, 2018 O R D E R Per J. Sudhakar Reddy :- This Is An Appeal Filed By The Assessee Directed Against The Order Of The Commissioner Of Income Tax (Appeals)-Durgapur, (Hereinafter The ‘Ld. Cit(A)’), Dt. 31/07/2015, Passed U/S 250 Of The Income Tax Act, 1961 (Hereinafter The ‘Act’), Relating To Assessment Year 2010-11. 2. Brief Facts Of The Case:- The Assessee Is An Individual & Is In The Business Of Carrying Out Contracts. He Filed His Return Of Income On 06/09/2010, Declaring Total Income Of Rs.9,32,660/-. The Assessing Officer Completed Assessment U/S 143(3) Of The Act, Determining The Total Income At Rs.86,24,660/- Interalia Making Additions On Account Of Disallowance Of Expenditure & Undisclosed Investments. The Assessee Carried The Matter In Appeal.

Section 143(3)Section 145(3)Section 250