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)

Classone Exports Pvt. Ltd., New Delhi vs. ITO Ward -6(2), New Delhi

In the result, the appeal of the assessee is allowed

ITA 5142/DEL/2019[2014-15]Status: DisposedITAT Delhi20 Mar 2025AY 2014-15

Bench: Shri Satbeer Singh Godara & Shri Manish Agarwalito, Ward-6(2) Class One Exports New Delhi. Pvt. Ltd. Vs. Flat No.10, C ½ Model Town, Delhi-110009 Pan: Aaacc3806H (Appellant) (Respondent) Assessee By Sh. Ajay Kumar, Employee Of Company Department By Sh. Rajesh Kumar Dhanesta, Sr. Dr Date Of Hearing 25/02/2025 Date Of Pronouncement 25/02/2025 O R D E R Per Manish Agarwal, Am: This Appeal Is Filed By The Assessee Against The Order Passed U/S 250 Of The Income Tax Act, 1961 (The Act, In Short) By The Ld. Commissioner Of Income Tax (Appeals)-2 In Appeal No.10647/16-17 Dated 12.03.2019 For Assessment Year 2014-15. 2. Brief Facts Of The Case Are That The Assessee Is Private Limited Company & Engaged In The Business Of Trading In Shares & Securities. The Return Of Income Was Filed On 30.09.2014 Declared Nil Income Which Stood Processed. Thereafter, The Case Was Selected For Class One Exports Pvt. Ltd. Vs. Ito Scrutiny Through Cass & The Assessment Was Completed Vide Order Dated 30.12.2016 Wherein The Income Under The Head Of Business In Profession Was Estimated On The Turnover Of Rs.31,28,79,852/- By Applying Profit Rate Of 2% & Net Addition Of Rs.62,57,597/- Was Made In The Hands Of The Assessee. Against Such Order The Appeal Was Filed Before Ld. Cit(A) Who Dismissed The Appeal Of The Assessee. Thus, The Assessee Has Preferred The Appeal Before The Tribunal By Taking Following Grounds Of Appeal:- “That On The Facts & Circumstances Of The Case The Assessment Order & The Appeal Order Passed By Cit As Well As By Ito Is Bad Both On Facts & In The Eyes Of Law & Deserves To Be Quashed.

Section 133(6)Section 143(3)Section 250

D.C.I.T., Range-3, Lucknow vs. Shri Manoj Gupta, Lucknow

In the result, both appeals of the department and the assessee are partly allowed

ITA 444/LKW/2020[2015-16]Status: DisposedITAT Lucknow19 Mar 2025AY 2015-16

Bench: Shri Kul Bharat & Shri Nikhil Choudharyassessment Year: 2015-16 Manoj Gupta Acit, Range-3 V. B-1/76, Sector K, Aliganj, 27/2, P.K. Complex, Raja Lucknow-226024. Ram Mohan Rai Marg, Lucknow-226001. Pan:Aeopgg7740K (Appellant) (Respondent) Assessment Year: 2015-16 Dcit, Range-3 V. Manoj Gupta 27/2, Raja Ram Mohan Rai B-1/76, Sector K, Aliganj, Marg, P. K. Complex, Lucknow- Lucknow-226024. 226001. Pan: Aeopgg7740K (Appellant) (Respondent) Appellant By: None Respondent By: Shri Sanjeev Krishna Sharma, Addl. Cit(Dr) Date Of Hearing: 18.02.2025 Date Of Pronouncement: 19.03.2025 O R D E R Per Nikhil Choudhary, A.M.: Both These Appeals Arise Out Of The Order Of The Ld. Commissioner Of Income Tax Appeals-1, Lucknow [Hereinafter Referred As To “Ld. Cit(A)”] Passed Under Section 250 Of The Income Tax Act, 1961 [Hereinafter Referred As To “The Act”] Dated 18.09.2020 For The Assessment Year 2015-16. While Ita. No.355/Lkw/2020 Has Been Filed By The Assessee, Ita. No.444/Lkw/2020 Has Been Filed By The Department. As The Issues Involved In Both These Appeals Are Similar & Arise Out Of The Same Orders, The Appeals Are Taken Up For Disposal Together. The Grounds Of Appeal In Ita. No.355/Lkw/2020 Are As Under: -

For Appellant: NoneFor Respondent: Shri Sanjeev Krishna Sharma, Addl
Section 133(6)Section 143(3)Section 145(3)Section 194CSection 250Section 68

Shri Manoj Gupta, Lucknow vs. ACIT, Range-3, Lucknow

In the result, both appeals of the department and the assessee are partly allowed

ITA 355/LKW/2020[2015-16]Status: DisposedITAT Lucknow19 Mar 2025AY 2015-16

Bench: Shri Kul Bharat & Shri Nikhil Choudharyassessment Year: 2015-16 Manoj Gupta Acit, Range-3 V. B-1/76, Sector K, Aliganj, 27/2, P.K. Complex, Raja Lucknow-226024. Ram Mohan Rai Marg, Lucknow-226001. Pan:Aeopgg7740K (Appellant) (Respondent) Assessment Year: 2015-16 Dcit, Range-3 V. Manoj Gupta 27/2, Raja Ram Mohan Rai B-1/76, Sector K, Aliganj, Marg, P. K. Complex, Lucknow- Lucknow-226024. 226001. Pan: Aeopgg7740K (Appellant) (Respondent) Appellant By: None Respondent By: Shri Sanjeev Krishna Sharma, Addl. Cit(Dr) Date Of Hearing: 18.02.2025 Date Of Pronouncement: 19.03.2025 O R D E R Per Nikhil Choudhary, A.M.: Both These Appeals Arise Out Of The Order Of The Ld. Commissioner Of Income Tax Appeals-1, Lucknow [Hereinafter Referred As To “Ld. Cit(A)”] Passed Under Section 250 Of The Income Tax Act, 1961 [Hereinafter Referred As To “The Act”] Dated 18.09.2020 For The Assessment Year 2015-16. While Ita. No.355/Lkw/2020 Has Been Filed By The Assessee, Ita. No.444/Lkw/2020 Has Been Filed By The Department. As The Issues Involved In Both These Appeals Are Similar & Arise Out Of The Same Orders, The Appeals Are Taken Up For Disposal Together. The Grounds Of Appeal In Ita. No.355/Lkw/2020 Are As Under: -

For Appellant: NoneFor Respondent: Shri Sanjeev Krishna Sharma, Addl
Section 133(6)Section 143(3)Section 145(3)Section 194CSection 250Section 68

ITO, Ward-3(1), Gaya vs. Shri Gauri Textiles Industries, Gaya

In the result, the appeal filed by the revenue is dismissed and corresponding cross-objection filed by the assessee is allowed

ITA 118/PAT/2020[2017-18]Status: DisposedITAT Patna18 Mar 2025AY 2017-18

Bench: Shri Sonjoy Sarma & Shri Rakesh Mishrai.T.A. No.118/Pat/2020 Assessment Year: 2017-18 Ito, Ward-3(1), Gaya…………….………………………………….…..……Appellant Vs. Shri Gauri Textile Industries, Gaya…………...........……........……...…..…..Respondent Buniadgaj Manpur, Gaya, Bihar-823003. [Pan: Aalfs4803J] C.O. No.5/Pat/2021 (Arising Out Of I.T.A. No.118/Pat/2020) Assessment Year: 2017-18 Shri Gauri Textile Industries, Gaya ……………….………………..….…..Cross-Objector Buniadgaj Manpur, Gaya, Bihar-823003. [Pan: Aalfs4803J] Vs. Ito, Ward-3(1), Gaya………….................................……........……....…..…..Respondent Appearances By: Shri Manish Rastogi, Advocate, Appeared On Behalf Of The Assessee. Shri Ashok Kumar, Cit, Appeared On Behalf Of The Revenue. Date Of Concluding The Hearing : January 30, 2025 Date Of Pronouncing The Order : March 18, 2025 Order Per Sonjoy Sarma: The Revenue Has Filed An Appeal Against The Order Dated 31.08.2020 By The Commissioner Of Income Tax (Appeals)-1, Patna [Hereinafter Referred To As The ‘Cit(A)’] & The Assessee Has Filed The Corresponding Cross-Objection Relating To Assessment Year 2017-18. 2. Brief Facts Of The Case Are That A Survey Was Conducted On 07.02.2017 In The Case Of The Assessee, A Partnership Firm Engaged In Trading Business Of Cotton Yarn & Hosiery Yarn. During The Survey, It Was Observed That The Assessee Has Made Substantial Deposits In Various Bank Accounts Linked With The Firm. However, The Assessee Disclosed

Section 143(2)

Assistant Commissioner of Income-Tax, Circle-2(1)(1), Ahmedabad vs. Jewel World, Ahmedabad

In the result, the appeal of the Revenue stands dismissed

ITA 63/AHD/2024[2017-2018]Status: DisposedITAT Ahmedabad07 Mar 2025AY 2017-2018

Bench: Ms. Suchitra Kamble & Shri Makarand V. Mahadeokarआयकर अपील सं /Ita No.63/Ahd/2024 िनधा"रण वष" /Assessment Year : 2017-18 Assistant Commissioner Of Jewel World बनाम/ Income-Tax 5, Balaji Heights V/S. Circle-2(1)(1) Swagat Cross Road Ahmedabad – 380 015 Nr. Lal Bungalows Cg Road, Ahmedabad-380 009 "थायी लेखा सं./Pan:Aajfj 5833 H अपीलाथ%/ (Appellant) &' यथ%/ (Respondent) Assessee By : Shri M.K. Patel, Advocate Revenue By : Shri Kavan Limbasiya, Sr.Dr सुनवाई की तारीख/Date Of Hearing : 05 /03/2025 घोषणा की तारीख /Date Of Pronouncement: 07 /03/2025 आदेश/O R D E R Per Makarand V. Mahadeokar, Am: This Appeal By The Revenue Is Directed Against The Order Of The Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre (Nfac), Delhi [Hereinafter Referred To As “The Cit(A)”], Dated 06.12.2023, For The Assessment Year (Ay) 2017-18, Whereby The Cit(A) Deleted The Addition Of Rs.5,61,85,000/- Made By The Assessing Officer (Ao) Under Section 69A Of The Income Tax Act, 1961 [Hereinafter Referred To As “The Act”]. Asst.Cit Vs. Jewel World Asst. Year : 2017-18

For Appellant: Shri M.K. Patel, AdvocateFor Respondent: Shri Kavan Limbasiya, Sr.DR
Section 143(1)Section 271ASection 69A