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)

Satish Kumar Mailik, New Delhi vs. ITO Ward 52(3), New Delhi

In the result, appeal of the assessee is partly allowed

ITA 4307/DEL/2025[2017-18]Status: DisposedITAT Delhi16 Jan 2026AY 2017-18

Bench: Shri Satbeer Singh Godara & Shri Manish Agarwalsatish Kumar Malik, Income Tax Officer, 2/31, Ansari Road, Darya Ganj, Ward-52(3), New Delhi-110002. Vs. Delhi. Pan-Adrpm7097D (Appellant) (Respondent) Assessee By Shri R.M. Mehta, Ca & Shri J.P. Chawla, Ca Department By Shri Jitender Singh, Cit-Dr Date Of Hearing 24/11/2025 Date Of Pronouncement 16/01/2026 O R D E R Per Manish Agarwal, Am: The Present Appeal Is Filed By The Assessee Against The Order Of Learned Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre (Nfac), Delhi Dated 28.05.2025 In Appeal No. Cit(A), Delhi-18/10299/2019-20 Arising Out Of The Order Passed U/S 143(3) Of The Income Tax Act, 1961 (‘The Act’ In Short) Dated 30.12.2019 For Assessment Year 2017-18. 2. Brief Facts Of The Case Are That The Assessee Is An Individual & Engaged In The Business Of Trading Of Goods. The Return Of Income For The Year Under Appeal Was Filed On 02.11.2017 Declaring Total Income Of Rs.26,19,530/- & The Case Of The Assessee Was Selected Under Complete Scrutiny Under Cass For The Reason “Abnormal Increase In Cash Deposit During The Demonetization”. Thereafter, Notice U/S 143(2) Satish Kumar Malik Vs. Ito Followed By Notices U/S 142(1) Were Issued From Time To Time, In Response To Which Assessee Filed Written Submissions. After Considering The Submissions Filed By The Assessee The Ao Was Of The Opinion That Assessee Had Deposited Cash Of Rs.44,44,750/- In Bank During Demonetization Period In Sbn Source Of Which Was Not Explained And, Therefore, Made The Addition Of The Said Cash As Unexplained Credits U/S 68 Of The Act & Further Invoked The Provisions Of Section 115Bbe Of The Act & Charge Tax At The Higher Rate.

Section 115BSection 142(1)Section 143(2)Section 143(3)Section 145(3)Section 68

Income Tax Officer, Ward-I, Mandi Gobindgarh vs. Rohit, Mandi Gobindgarh

The appeal stands dismissed

ITA 905/CHANDI/2025[2021-22]Status: DisposedITAT Chandigarh13 Jan 2026AY 2021-22

Bench: Hon’Ble Shri Rajpal Yadav & Hon’Ble Shri Manoj Kumar Aggarwal, Am आयकर अपील सं. / Ita No.905/Chandi/2025 (िनधा"रण वष" / Assessment Year: 2021-22) Ito-Ward-1 Shri Rohit Mandi Gobindgarh Shop No.308, Sec-26A बनाम/ At Sirhind, New Libra Kothi Amloh Road, Gobindgarh Vs. Railway Road, Sirhind Fatehgarh Sahib - 147301 Fatehgarh Sahib – 147301 "थायीलेखासं./जीआइआरसं./Pan/Gir No. Asopr-3001-Q (अपीलाथ"/Appellant) : (""थ" / Respondent) Assessee By : Shri Ashok Goyal (Ca) – Ld. Ar Revenue By : Shri Bharat Bhushan Garg (Cit) – Ld. Dr (Virtual) सुनवाईकीतारीख/Date Of Hearing : 10-11-2025 घोषणाकीतारीख /Date Of Pronouncement : 13-01-2026 आदेश / O R D E R Manoj Kumar Aggarwal () 1. Aforesaid Appeal By Revenue For Assessment Year (Ay) 2021-22 Arises Out Of An Order Of Learned Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre (Nfac), Delhi [Cit(A)] Dated 12-06- 2025 In The Matter Of An Assessment Framed By Ld. Assessing Officer [Ao] U/S. 143(3) R.W.S 144B Of The Act On 24-12-2022. The Sole Grievance Of The Revenue Is Deletion Of Addition Of Rs.1509.90 Lacs As Made By Ld. Ao On Account Of Alleged Bogus Purchases While Framing The Assessment. The Sole Ground Of Appeal Read As Under: - Whether On The Facts & In The Circumstances Of The Case, The Cit(A) / Nfac Was Right In Law In Deleting The Addition Of Rs.15,09,90,967/- As Shown Purchases Expenses Claimed By The Assessee & Nefac Has Added To The Total Income & Taxed As Income From Other Sources U/S 69C Of The Act?

For Appellant: Shri Ashok Goyal (CA) – Ld. ARFor Respondent: Shri Bharat Bhushan Garg (CIT) – Ld. DR (Virtual)
Section 133(6)Section 143(3)Section 145(3)Section 69C