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)

Mohd. Naushad Ansari (Prop. Gulsan Sev Foods), Ahmedabad vs. The ITO, Ward-5(3)(3), Ahmedabad

In the result, the appeal filed by the assessee is allowed

ITA 620/AHD/2025[2017-18]Status: DisposedITAT Ahmedabad30 Jul 2025AY 2017-18

Bench: Ms.Suchitra R. Kamble & Shri Makarand V.Mahadeokarasstt.Year : 2017-18 Mohd Naushad Ansari The Ito, Ward-5(3)(3) Prop: Gulsan Sev Foods Vs. Anandnagar Road 51, Pujara Ni Chali Ahmedabad. Nr.Sarangpur Bridge Kamdar Medan – Gomtipur Ahmedabad 380 021 Pan: Aiwpa 6480 G (Applicant) (Responent) : Shri M.K. Patel, Ar Assessee By : Shri Amit Pratap Singh, Sr.Dr Revenue By सुनवाई क" तारीख/Date Of Hearing : 28/07/2025 घोषणा क" तारीख /Date Of Pronouncement: 30/07/2025 आदेश आदेश/O R D E R आदेश आदेश Per Makarand V.Mahadeokar, Am: This Appeal By The Assessee Is Directed Against The Order Dated 29.01.2025 Passed By The Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre (Nfac), Delhi [Hereinafter Referred To As “Cit(A)”], Under Section 250 Of The Income-Tax Act, 1961 [Hereinafter Referred To As “The Act”], Confirming The Addition Of Rs.28,54,000/- Made By The Assessing Officer Under Section 68 Of The Act In Respect Of Cash Deposits Made In The Bank Accounts Of The Assessee During The Demonetisation Period. The Assessment Was Completed Under Section 143(3) Of The Act By The Income Tax Officer, Ward 5(3)(3), Ahmedabad [Hereinafter Referred To As “Assessing Officer Or Ao”], Vide Order Dated 29.12.2019. 2. Facts Of The Case 2

For Appellant: Shri Amit Pratap Singh, Sr.DR
Section 115BSection 142(1)Section 143(2)Section 143(3)Section 145(3)Section 250Section 271ASection 68

Advance Lifespaces Private Limited, Ahmedabad vs. ACIT, Circle 1(1)(1), Ahmedabad

In the result, the appeal filed by the assessee is allowed

ITA 411/AHD/2025[2017-18]Status: DisposedITAT Ahmedabad28 Jul 2025AY 2017-18

Bench: Shri T.R. Senthil Kumar & Shri Narendra Prasad Sinhaassessment Year: 2017-18 Advance Lifespaces Pvt. Ltd., Assistant Commissioner Of S-202/B/4/205, City Centre, Income Tax, Vs Nr. Idgah Gate, Asarwa, Circle-1(1)(1), Ahmedabad-380016 Ahmedabad [Pan No.:Aajca2338M] अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Appellant By : Shri P. D. Shah, Ar & Shri Saiyam Shah, Ar Respondent By : Shri B.P. Srivastava, Sr. Dr सुनवाई की तारीख/Date Of Hearing: 22.07.2025 घोषणा की तारीख /Date Of Pronouncement: 28.07.2025 आदेश/O R D E R Per T.R. Senthil Kumar: This Appeal Is Filed By The Assessee Against The Appellate Order Dated 03.07.2024 Passed By Ld. Commissioner Of Income Tax (Appeals) (Hereinafter Referred To As “Ld. Cit(A)”), National Faceless Appeal Centre (In Short “Nfac”), Delhi Arising Out Of The Rectification Order Passed Under Section 154 Of The Income Tax Act, 1961 (Hereinafter Referred To As “The Act”) Relating To The Assessment Year 2017-18. 2. The Registry Has Noted That There Is A Delay Of 145 Days In Filing The Present Appeal. The Assessee Explained Vide Notarized Affidavit Stated Originally The Appeal Was Filed By The Assessee By Paying Appropriate Fees On 30.08.2024 By E-Filing. However, There Is Some Mistakes In Form No. 36 Which Was Required To Be Rectified, The Same Was Rectified & Filed On 21.02.2025 Thereby The Registry Has Noted That There Is A Delay Of 145 Days. In View A.Y. 2017-18. 2 Of The Explanation Offered By The Assessee, The Delay Of 145 Days In Filing Of The Above Is Hereby Condoned.

For Appellant: Shri P. D. Shah, AR & Shri Saiyam Shah, ARFor Respondent: Shri B.P. Srivastava, Sr. DR
Section 143(3)Section 145(3)Section 154