No. Section 145(1) computes business income on either the cash or the mercantile system regularly employed by the assessee, and the Supreme Court in CIT v. Bilahari Investment (P.) Ltd. (2008) 299 ITR 1 held that an assessee may follow a method the department has earlier accepted, and that the department can insist on substitution only where it records a finding that the method results in distortion of profits. Two things cut that down: a proper rejection of books under s.145(3), and s.43CB, which now prescribes percentage of completion for construction and service contracts whatever the assessee would prefer.
Section 145(1) is the starting point and it is short. Income chargeable under 'Profits and gains of business or profession' or under 'Income from other sources' is, subject to sub-section (2), computed in accordance with "either cash or mercantile system of accounting regularly employed by the assessee". Two limits are built into those words: the choice is between two systems and no third, and whichever is chosen must be regularly employed. Sub-section (2) lets the Central Government notify standards for a class of assessees or a class of income, and sub-section (3) is the officer's power — where he is not satisfied about the correctness or completeness of the accounts, or where the method in sub-section (1) or the notified standards have not been regularly followed, he may assess in the manner provided in s.144.
What s.145 does not give the officer is a power to prefer a different method. That is the gap Bilahari Investment fills. In the passage from the judgment: "Every assessee is entitled to arrange its affairs and follow the method of accounting, which the Department has earlier accepted. It is only in those cases where the Department records a finding that the method adopted by the assessee results in distortion of profits, the Department can insist on substitution of the existing method." The itatonline article that carries that passage adds, in its own voice, that in every case of substitution of one method by another method the burden is on the Department to prove that the method in vogue is not correct and it distorts the profits of a particular year. That is the author's extrapolation from Bilahari and not the language of any court. The Mumbai Tribunal in Milan Theatres (P.) Ltd. v. DCIT, IT Appeal No. 5072 (Mum) of 2024, order dated 22 January 2026 for assessment year 2017-18, puts it more narrowly and reaches it through the preconditions in s.145(3): the law places the burden on the Assessing Officer to demonstrate that true profits cannot be deduced from the regularly employed method.
The department's own history therefore becomes evidence, not merely a plea for consistency. That is how the Karnataka High Court used it in CIT v. Banjara Developers and Constructions Pvt. Ltd. (2020) 425 ITR 673 / 272 Taxman 438 (Karn)(HC), where the assessee had consistently followed the completed contract method, the department had accepted it, and the officer's estimate was set aside. The freedom runs both ways: in CIT v. Prestige Estate Projects Pvt Ltd (2022) 440 ITR 343 (Karn)(HC) the same court upheld the assessee's own change from project completion to percentage completion, the change being revenue neutral and in line with the revised Accounting Standard 7.
There are three boundaries to keep in view.
First, s.145(3). Bilahari is not a shield against a rejection of books. If the officer establishes that the accounts are incorrect or incomplete, or that the method has not been regularly followed, he moves to a best judgment assessment and the argument becomes a different one — what the corpus covers at 'rejecting-the-books-and-estimating-the-income' and, for the limits on guesswork once the rejection stands, at 'kachwala-gems-v-jcit-honest-estimate'.
Second, s.43CB. For a construction contract and for a service contract, profits are now determined on the percentage of completion method, with the statutory exceptions the corpus sets out at 's-43cb-percentage-of-completion-and-the-ninety-day-service-contract'. Within that field the choice Bilahari protects has been taken away by Parliament, and quoting the case at an officer applying s.43CB will not help. Outside it — other trades, chit discount, the general question whether an accepted method may be displaced at all — the case runs unimpaired.
Third, the notified standards. The Court in Bilahari noted that accounting standards enacted by the Institute of Chartered Accountants of India had been adopted under s.211(2) of the Companies Act, expressly declined to express any opinion on them, and pointed out that the department had not invoked them in those appeals. So the case decides nothing for or against ICDS; on that, and on what a notification under s.145(2) can and cannot do, the corpus has 'chamber-of-tax-consultants-v-uoi-icds'.
On the Income-tax Act, 2025, the department's navigator to the new Act maps s.145 of the 1961 Act to s.276 and s.145A to s.277. The wording of those sections was not fetched for this entry, so nothing is said here about whether the freedom in s.145(1) is carried over in the same terms.
Most substitution orders do not contain a finding of distortion at all. They contain a preference — that percentage completion reflects income better, that the accounting standards have moved on, that another assessee in the trade does it differently. Once the practitioner knows that the statute confines the officer to two systems and that the case law confines him to a recorded finding of distortion, the reply writes itself, and the officer's own acceptance in earlier years stops being a weak plea and becomes part of the case.
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