Binding tax circulars must be followed in pending assessments; surcharge levy could not stand once the Commissioner's instruction applied.

Administrative circulars issued by the competent authority under a taxing statute are binding on subordinate assessing officers in its administration. Applying section 17(5) of the Karnataka Agricultural Income-tax Act and the settled approach to circulars under section 119 of the Income-tax Act, the Commissioner's instruction had to be followed even if it went beyond a strict legal construction. Because the circular expressly covered pending assessments, the assessing authorities were required to give effect to it, and surcharge could not be levied in those pending matters. The impugned levy was therefore unsustainable to that extent and was quashed.

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Issues: Whether the circular issued by the Commissioner of Agricultural Income-tax was binding on the assessing authorities, and whether surcharge could be levied in pending assessments despite the lapse of the Ordinance.

Analysis: Section 17(5) of the Karnataka Agricultural Income-tax Act requires officers and persons executing the Act to observe and follow the orders, instructions and directions of the Commissioner. The circular issued by the Commissioner therefore operated as a binding direction on subordinate authorities. The Court applied the settled principle, drawn from the treatment of circulars under section 119 of the Income-tax Act, 1961, that circulars issued by the competent administrative authority bind the Revenue even if they depart from a strict legal construction. Since the Commissioner's circular covered pending assessments, the assessing authorities were bound to give effect to it.

Conclusion: The circular was binding on the assessing authorities, and surcharge could not be levied in pending assessments.

Final Conclusion: The levy of surcharge under the Ordinance could not be sustained in pending assessments, and the impugned orders were quashed to that extent.

Ratio Decidendi: Administrative circulars issued by the competent authority under a taxing statute are binding on subordinate officers in its administration, and they must be given effect in pending assessments unless set aside in appropriate proceedings.

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