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13. Mr. Poddar next contended that, in the instant case, where it was established that the assessee had changed its regular method from mercantile to cash, the Revenue was not in any event entitled to treat the mercantile system as the assessee's regular method of accounting and assess the interest income of the assessee on accrual. Section 145(2) of the I. T. Act provided that where there was no regular method of accounting, assessment had to be made on best judgment basis.

14. Mr. Poddar next contended that the Tribunal had erred in taking into account that there was no resolution of the board of directors or the shareholders of the assessee deciding to change the method of accounting. He submitted that every decision of the board of directors of the company was not required to be recorded in resolutions. The directors were empowered under Section 291 of the Companies Act, 1956, to change the method of accounting of the company and under Section 292 of the said Act such a decision need not be recorded formally in a resolution. A decision of this nature could be inferred from conduct and, in the instant case, the conduct of the assessee in continuing the change in the method in subsequent assessment years established and confirmed its initial decision.

Beaumont C.J. observed in his judgment that an assessee was entitled to change his method of accounting from a definite point of time but the Revenue had to be satisfied on proper evidence that the regular method of accounting had been changed. Whether a regular method of accounting had been changed or not was purely a question of fact. Rangnekar J. observed that there was nothing in the Act to prevent an assessee from changing his method of accounting provided he satisfied the Revenue authorities that he was doing so in good faith and if the Revenue was not likely to be defrauded, the ITO ought to accept the changed method.

"When an assessee bona fide changes his method of accounting and satisfies the Department that he intends to adopt the changed method of accounting thereafter or that he has in fact adopted it thereafter, that satisfies the requirement of Section 13...... Neither principle nor authority bars an assessee from substituting one method of accounting for another at his choice...... In other words, while the assessee can exercise more than once his option to choose his method of accounting......provided, of course, the change is bona fide and he further satisfies the statutory requirement of Section 13 that the new or changed system......is for regular adoption and not merely for purposes of assessment in the year in question."

(2) Where the Income-tax 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 Income-tax Officer may make an assessment in the manner provided in Section 144. "

33. The said section and the corresponding Section 13 of the earlier Act have been considered in the courts of India in a large number of decisions. The law appears to be settled that in the event the assessee regularly employs a method of accounting its income has to be computed in accordance with such regular method. The assessee is, however, entitled to change his regular method of accounting by another regular method. An assessee is also entitled to follow one method of accounting in respect of income from one source and another method in respect of other sources.