Judgment Ajit K. Sengupta, J. 1. THIS reference at the instance of the Commissioner under Section 256(1) of the Income-tax Act, 1961, relates to the assessment year 1981-82. The assessment in this case was completed by the Inspecting Assistant Commissioner of Income-tax (Assessment), Range-III, Calcutta, on February 28, 1985, computing the total income at "nil". Subsequently, on examination of the assessment records, the Commissioner of Income-tax found that interest of Rs. 49,15,435 was not taxed by the Inspecting Assistant Commissioner 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 Commissioner (Assessment) was erroneous and prejudicial to the interests of the Revenue on this issue. 2. THE assessee's counsel urged that, when the Inspecting Assistant Commissioner (Assessment) completed the assessment, only the CBDT circular was available which was binding upon the Inspecting Assistant Commissioner (Assessment). Consequently, in view of that circular, the interest was not subjected to tax. He further contended that the decision of the Supreme Court, in State Bank of Travancore v. CIT [1986] 158 ITR 102, came in 1986 and this decision was not available before the Inspecting Assistant Commissioner (Assessment). Therefore, the assessee's counsel urged that the order passed by the Inspecting Assistant Commissioner (Assessment) was neither erroneous nor prejudicial to the interests of the Revenue. THE Departmental representative, on the other hand, supported the order of the Commissioner of Income-tax. After hearing both the parties, the Tribunal concluded the matter as follows : "7. Therefore, the assessee's counsel urged that the order passed by the Inspecting Assistant Commissioner (Assessment) was neither erroneous nor prejudicial to the interests of the Revenue. THE Departmental representative, on the other hand, supported the order of the Commissioner of Income-tax. After hearing both the parties, the Tribunal concluded the matter as follows : "7. The action under Section 263 of the Act has been taken by the Commissioner of Income-tax on the ground that interest for which there was no recovery for three consecutive years should have been taxed and that the Inspecting Assistant Commissioner was not justified in accepting the plea of the assessee placing reliance on CBDT Circular No. F.201/21/ 84.ITA-II, dated October 9, 1984. The contention of the assessee appears to be correct. The assessment for the year under appeal was made on February 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 (supra). 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 dated October 9, 1984. Therefore, it cannot be said that the assessment made was erroneous and prejudicial to the interests of the Revenue." 3. ON these facts, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in cancelling the Commissioner of Income-tax order under Section 263 of the Income-tax Act holding that when the assessment was completed, the only paper available was the Board's circular dated October 9, 1984, and, therefore, it cannot be said that the Inspecting Assistant Commissioner's order of assessment in not taxing the interest suspense of Rs. 49,15,435 in view of that circular was erroneous and prejudicial to the interests of the Revenue ?" 4. AT the hearing before us, Mr. 49,15,435 in view of that circular was erroneous and prejudicial to the interests of the Revenue ?" 4. AT the hearing before us, Mr. Sukumar Bhattacharyya, learned counsel, has contended that the Commissioner of Income-tax has no jurisdiction to pass an order under Section 263 in view of the circular dated October 9, 1984. He contends that the Income-tax Officer was justified in making the assessment as he did and inasmuch as the said circular is binding on the income-tax authorities, the Income-tax Officer had no option but to complete the assessment in terms of the said circular. If an authority has completed the assessment on the basis of a mandatory direction contained in the circular, it cannot be said that the assessment made pursuant thereto is erroneous and prejudicial to the interests of the Revenue. Mr. Bhattacharyya 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. 5. 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 event, the assessment which has been made pursuant to such circular must also be held to be erroneous and prejudicial to the interests of the Revenue. There is no dispute that the Supreme Court delivered the judgment on January 8, 1986, in State Bank of Travancore [1986] 158 ITR 102 after considering all the circulars of the Board including the circular dated October 9, 1984. In view of the decision of the Supreme Court, it appears that the order passed by the Income-tax Officer in not taxing the amount of Rs. 49,15,435 as and by way of interest on sticky advances was erroneous and prejudicial to the interests of the Revenue and, accordingly, in our view, the Commissioner of Income-tax rightly assumed jurisdiction by invoking Section 263. 49,15,435 as and by way of interest on sticky advances was erroneous and prejudicial to the interests of the Revenue and, accordingly, in our view, the Commissioner of Income-tax rightly assumed jurisdiction by invoking Section 263. The law laid down by the Supreme Court is binding on the authorities and, if the law as laid down by the Supreme Court shows that any of the orders of the authorities is contrary to or inconsistent with the decision of the Supreme Court, in that event, such order must be held to be bad and illegal and to that extent it is erroneous and prejudicial to the interests of the Revenue. 6. MR. Bhattacharyya has relied on several decisions of the Supreme Court in support of his contention that the circulars are binding on the authorities concerned. It is not necessary for us to consider the aforesaid decisions as the question before us is whether in view of the subsequent law laid down by the Supreme Court, the assessment made on the basis of the circular 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 I. T. Ref. No. 76 of 1987, where the judgment was delivered on March 12, 1991. 7. 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. 8. THERE will be no order as to costs.