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)

Income Tax Officer-42(1)(4), Mumbai vs. Ravindra G Chitalia, Mumbai

In the result, the appeal of the revenue is dismissed

ITA 2565/MUM/2023[2010-11]Status: DisposedITAT Mumbai06 Mar 2024AY 2010-11

Bench: Shri Kuldip Singh & Shri Amarjit Singhincome Tax Officer - Vs. Ravindra G. Chitalia, 42(1)(4), A/604, Saileela, Above Room No. 718, Kautilya Vijaya Bank, Anand Bhavan, Bkc, Nagar, Dahisar (East) Mumbai – 400051 Maharashtra – 400068 स्थायी लेखा सं./जीआइआर सं./Pan/Gir No:Aaepc4939Q Appellant .. Respondent Appellant By : S. Arunkumar Respondent By : Debiz Bhusal Date Of Hearing 28.02.2024 Date Of Pronouncement 06.03.2024 आदेश / O R D E R Per Amarjit Singh (Am): This E-Appeal Filed By The Revenue Is Directed Against The Order Passed By The Ld. Cit(A) For A.Y. 2010-191. The Assessee Has Raised The Following Grounds Before Us: “1. On The Facts & Circumstances Of The Case & In Law, The Learned Cit(A) Erred In Facts & In Law By Giving Partial Relief To The Assessee By Reducing The Addition / Disallowance To 5% Of The Impugned Non-Genuine / Bogus Purchases As Against The Addition / Disallowance @12.5% Made By The Assessing Officer By Relying On. 2. On The Facts & Circumstances Of The Case & In Law, The Learned Cit(A) Erred In Facts & In Law By Reducing The Disallowance @ 5% Of The Impugned Bogus Purchases By Relying On The Judgment Dated 06 02 2019 Of The Jurisdictional Itat In The Case Of The This Assessee For The A.Y 2009- 10 Which Was Not Accepted By The Revenue & Further Appeal Was Filed It Is Submitted In This Regard That In The Said Itat Judgment On Identical Facts It Was Held By Hon'Ble Tribunal That Disallowance @12.5% Was At Higher Rale Going By The Nature Of Business Of The Assessee (Trading In Various Products Of Iron & Steel) & Also For The Reason That The Assessee Has Also Paid Vat Element On The Impugned Bogus Purchases Without

For Appellant: S. ArunkumarFor Respondent: Debiz Bhusal
Section 133(6)Section 143(1)Section 145(3)Section 147Section 148

Anil Kumar Paik, Kolkata vs. ACIT, Cir-8(1), Kol, Kolkata

In the result, appeal of the assessee is allowed

ITA 492/KOL/2023[2017-18]Status: DisposedITAT Kolkata29 Feb 2024AY 2017-18

Bench: Shri Sanjay Garg, Hon’Ble & Dr. Manish Borad, Hon’Blei.T.A. No. 492/Kol/2023 Assessment Year: 2017-18 Anil Kumar Paik Acit, Circle-8(1), Kolkata C/O S.N. Ghosh & Associates, Advocates Vs 2, Garstin Place, 2Nd Floor Suite No. 203 Off Hare Street Kolkata - 700001 [Pan : Aflpp6567R] अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : Shri Somnath Ghosh, Advocate Revenue By : Shri B.K. Singh, Jcit, Sr. D/R सुनवाई क" तारीख/Date Of Hearing : 01/12/2023 घोषणा क" तारीख /Date Of Pronouncement: 29/02/2024 आदेश/O R D E R Per Dr. Manish Borad: The Present Appeal Is Directed At The Instance Of The Assessee Against The Order Of The National Faceless Appeal Centre, Delhi (Hereinafter The “Ld. Cit(A)”) Dt. 15/03/2023, Passed U/S 250 Of The Income Tax Act, 1961 (“The Act”) For The Assessment Year 2017-18. 2. The Assessee Has Raised The Following Grounds Of Appeal:- “1. For That The Ld. Commissioner, Of Income Tax (Appeals)- N.F.A.C. Acted Unlawfully In Impliedly Sustaining; The Purported Addition Of Rs. 1,67.44,907/- Made The Ld. Assistant Commissioner, Of Income Tax, Circle 8(1) Kolkata By Invoking The Mischief U/S. 43Ca Of The Income Tax Act, 1961 Without Satisfying The Parameters Thereof & The Adverse Conclusion Reached On That Behalf In Violation Of The Statutory Prescription Is Completely Unfounded, Unjustified & Untenable In Law. 2. For That The Specious Approach Of The Ld. Commissioner Of Income Tax (Appeals)-N.F.A,C. Of Misreading Evidence, Considering Improper Facts

For Appellant: Shri Somnath Ghosh, AdvocateFor Respondent: Shri B.K. Singh, JCIT, Sr. D/R
Section 145Section 250Section 43C