- Income chargeable under the head “ Profit and Gains of Business or Profession” or “ Income from other sources” shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee.
- The Central Government may notify,in the Official Gazette from time to time, Income Computation Disclosure Standards (ICDS) to be followed by any class of assessee or in respect of any class of Income.
- The AO may make an assessment in the manner provided in Section 144 as under
- Where the AO is not satisfied about the correctness or completeness of the accounts of the assessee.
- Where the method of accounting provided in section 145(1) has not been regularly followed by the assess.
- Where income has not been computed in accordance with the Accounting Standard notified U/s 145(2).
Method of Accounting in Certain Cases U/s 145A
For the purpose of determining the income chargeable under the head “Profits and gains of business or profession”, the following valuation rules are applicable with effect from the assessment year 2017-18 —
- The valuation of inventory shall be made at lower of actual cost or net realizable value computed in the manner provided in ICDS.
- 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 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.
- Inventory (being securities not listed, or listed but not quoted, on a recognised stock exchange) shall be valued at actual cost initially recognised in the manner provided in ICDS.
- Inventory (being securities held by a scheduled bank or financial institution) shall be valued in accordance with ICDS after taking into account extant guidelines issued by the RBI.
- Inventory (being listed securities) shall be valued at lower of actual cost or net realisable value in the manner provided in ICDS and for this purpose the comparison of actual cost and net realisable value shall be done category-wise.
- 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 of such payment for the purposes of the said section.