Section 276: method of accounting

The basic rule

Income chargeable under "Profits and gains of business or profession" or "Income from other sources" must be computed on either the cash system or the mercantile system of accounting, whichever the assessee regularly employs, subject to sub-section (2).

Income computation and disclosure standards (ICDS)

The Central Government may notify income computation and disclosure standards to be followed by any class of assessees, or in respect of any class of income.

When the Assessing Officer can make a best-judgment assessment

The Assessing Officer may make an assessment in the manner provided in section 271 (best-judgment assessment) if:

• he is not satisfied about the correctness or completeness of the assessee's accounts; or
• the method of accounting under sub-section (1) has not been regularly followed by the assessee; or
• income has not been computed as per the standards notified under sub-section (2).

Frequently asked questions