Section 145 of Income Tax Act "Method of accounting"
145. (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 income computation and disclosure
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) 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.
145A. For the purpose of determining the income
chargeable under the head "Profits and gains of business or
profession",-
(i) the valuation of inventory shall be made at lower of
actual cost or net realisable value computed in accordance
with the income computation and disclosure standards
notified under sub-section (2) of section 145;
(ii) the valuation of purchase and sale of goods or services
and of inventory shall be adjusted to include the amount of
any tax, duty, cess or fee (by whatever name called)
actually paid or incurred by the assessee to bring the goods
or services to the place of its location and condition as on
the date of valuation;
(iii) the inventory being securities not listed on a
recognised stock exchange, or listed but not quoted on a
recognised stock exchange with regularity from time to time,
shall be valued at actual cost initially recognised in
accordance with the income computation and disclosure
standards notified under sub-section (2) of section 145;
(iv) the inventory being securities other than those
referred to in clause (iii), shall be valued at lower of
actual cost or net realisable value in accordance with the
income computation and disclosure standards notified under
sub-section (2) of section 145:
Provided that the inventory being securities held by a
scheduled bank or public financial institution shall be
valued in accordance with the income computation and
disclosure standards notified under sub-section (2) of
section 145 after taking into account the extant guidelines
issued by the Reserve Bank of India in this regard:
Provided further that the comparison of actual cost and net
realisable value of securities shall be made category-wise.
Explanation 1.-For the purposes of this section, any tax,
duty, cess or fee (by whatever name called) under any law
for the time being in force, shall include all such payment
notwithstanding any right arising as a consequence to such
payment.
Explanation 2.-For the purposes of this section,-
(a) "public financial institution" shall have the meaning
assigned to it in clause (72) of section 2 of the Companies
Act, 2013 (18 of 2013);
(b) "recognised stock exchange" shall have the meaning
assigned to it in clause (ii) of Explanation 1 to clause (5)
of section 43;
(c) "scheduled bank" shall have the meaning assigned to it
in clause (ii) of the Explanation to clause (viia) of
sub-section (1) of section 36.
What is Disclosure of information respecting assessees? Section 138 of Income Tax Act 1961
What is Return of income? Section 139 of Income Tax Act 1961
What is Permanent account number? Section 139A of Income Tax Act 1961
What is Assessment? What is Best judgment assessment? Section 143 and 144 of Income Tax Act 1961
What is Reference to dispute resolution panel? Section 144C of Income Tax Act 1961