Section 145 of Income Tax Act for AY 2023-24

Updated notes on Method of accounting section 145 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962.

Amended and updated notes on section 145 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to method of accounting.

Chapter XIV (Sections 139 to 158) of the Income Tax Act 1961 deals with the provisions related to procedure for assessment. Section 145 of IT Act 1961 provides for method of accounting.

Recently, we have discussed in detail section 144C (Reference to dispute resolution panel) of IT Act 1961. Today, we learn the provisions of section 145 of Income-tax Act 1961. The amended provision of section 145 is effective for financial year 2022-23 relevant to the assessment year 2023-24.

In this article, you will learn detail of the provisions of section 145 of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962 as provided by Ministry of Law and Justice, Government of India.

Section-145: Method of accounting

Section 145(1) of Income Tax Act

Income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee.

Section 145(2) of Income Tax Act

The Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of assessees or in respect of any class of income.

Section 145(3) of Income Tax Act

Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144.

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