TMI Blog1991 (6) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner on the basis of the Central Board of Direct Taxes Circular No. 201/20/84, dated October 9, 1984, wherein it was provided that the interest on the advance which could not be recovered for three consecutive years may not be subjected to tax. The Commissioner of Income-tax found that the Inspecting Assistant Commissioner (Assessment ) was not justified in not taxing the said interest amount in view of the decision of the Supreme Court in the case of State Bank of Travancore v. CIT [1986] 158 ITR 102. The Commissioner of Income-tax thereby set aside the assessment dated February 28, 1985, holding that the final state of law as pronounced by the Supreme Court in the above case showed that the order of the Inspecting Assistant Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruary 28, 1985, when, on the subject, only the Board circular was available according to which interest in respect of accounts where there was no recovery for three consecutive accounting years should not be subjected to tax. The Supreme Court decision in State Bank of Travancore v. CIT [1986] 158 ITR 102 came much later in 1986. However, the observations of their Lordships have been considered again by the Patna and Kerala High Courts . There is difference of opinion on the issue. Therefore, it cannot be said that the Inspecting Assistant Commissioner was wrong in following the Board circular and that his order is prejudicial to the interests of the Revenue. When the assessment was completed, the only paper available was the Board circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttacharyya has, however, fairly submitted that he has nothing to say on the merits of the case in view of the decision of the Supreme Court in the case of State Bank of Travancore v. CIT [1986] 158 ITR 102. Mr. Mitra, on the other hand, supported the order passed by the Commissioner of Income-tax. We have considered the rival contentions. It is no doubt true that the income-tax authority is bound by the circular issued by the Board under section 119 of the Income-tax Act, 1961. The authority has to complete the assessment in accordance with such direction. But the question is if, subsequently, a decision is rendered by the Supreme Court which shows that the direction contained in the circular is erroneous and contrary to law, in that ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar is rendered invalid or erroneous and whether the Commissioner can still invoke his revisional jurisdiction, particularly when, on merits, the validity of the assessment is not challenged. A Division Bench of this court has considered the decision of the Supreme Court in the case of State Bank of Travancore [1986] 158 ITR 102 as well as the relevant circular in Grindlays Bank v. CIT in 1. T. Ref. No. 76 of 1987, where the judgment was delivered on March 12, 1991 ([1993] 201 ITR 148 (Cal)). For the reasons aforesaid, we are unable to accept the contention of Mr. Bhattacharyya. We, therefore, answer the question in the negative and in favour of the Revenue. There will be no order as to costs. SHYAMAL KUMAR SEN J. -I agree. - - T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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