Binding judicial precedent governs provisional surtax assessment despite pending appeal or special leave challenge.

Section 7 of the Companies (Profits) Surtax Act, 1964 was construed as allowing the Income-tax Officer to go beyond the return, but not to disregard the legal position then binding on him. A Supreme Court ruling and the decision of the jurisdictional High Court remain binding during assessment even if an appeal or special leave petition is pending, so the officer cannot ignore them merely because they are under challenge. Where there is a conflict between High Courts and no binding jurisdictional ruling applies, the view favourable to the assessee may be adopted; only plainly untenable claims may be rejected.

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Issues: Whether, in making a provisional assessment under section 7 of the Companies (Profits) Surtax Act, 1964, the Income-tax Officer is bound by the decision of the Supreme Court and of the High Court having jurisdiction over him, even if an appeal or special leave petition is pending against that decision, and whether he may disregard such binding legal position while making the assessment.

Analysis: Section 7 of the Companies (Profits) Surtax Act, 1964 was construed as differing from section 141 of the Income-tax Act, 1961 only to the extent that the officer is not confined to the return as filed, but not so as to permit rejection of the return or refusal to accept the factual or legal position then prevailing. The legal position declared by the Supreme Court and by the jurisdictional High Court binds the assessing officer, and the pendency of an appeal or special leave application does not suspend that binding force. In case of conflict between High Courts, the view favourable to the assessee is to be preferred where the assessing officer is not bound by a decision of his own jurisdictional High Court; clearly untenable claims alone may be rejected.

Conclusion: The Income-tax Officer is bound by the prevailing judicial decision applicable within his jurisdiction and cannot ignore it merely because it is under challenge; the construction adopted by the assessee was accepted.

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