Income-tax Act,1961
Act No : 43
Section :
Method of accounting1
145. Method of accounting1 (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall be computed in accordance with the method of accounting regularly employed by the assessee: Provided that in any case where the accounts are correct and complete to the satisfaction of the 2[Assessing] Officer but the method employed is such that, in the opinion of the 4[Assessing] Officer, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the 4[Assessing] Officer may determine: 5[Provided further that where no method of accounting is regularly employed by the assessee, any income by way of interest on securities shall be chargeable to tax as the income of the previous year in which such interest is due to the assessee:] 6[Provided also that nothing contained in this sub-section shall preclude an assessee from being charged to income-tax in respect of any interest on securities received by him in a previous year if such interest had not been charged to income-tax for any earlier previous year.] (2) Where the 7[Assessing] Officer is not satisfied about the correctness or the completeness of the accounts of the assessee, or where no method of accounting, has been regularly employed by the assessee, the 8[Assessing] Officer may make an assessment in the manner provided in section 144. ----------------------------------------------------------------------- -> -> (4) shall be binding on the Assessing Officer. (6) For the purposes of sub-section (1), the Board, may, having regard to the proper and efficient management of the work of assessment, by order, fix, from time to time, such amount as it deems fit: Provided that different amounts may be fixed for different areas: Provided further that the amount fixed under this sub-section shall, in no case, be less than twenty-five thousand rupees. (7) Nothing in this section shall apply to a case where a Deputy Commissioner exercises the powers or performs the functions of an Assessing Officer in pursuance of an order made under section 125 or section 125A." 2 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 3 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 4 Ibid. 5 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 6 Inserted by the Finance Act, 1990, w.r.e.f. 1-4-1989. 7 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 8 Ibid. ----------------------------------------------------------------------- 1.546 The following section 145 is being substituted for the above section by the Finance Act, 1995, w.e.f. 1-4-1997: "145. Method of accounting.-(1) 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. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) 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) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144."
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