As per case facts, the assessee bank, UCO Bank, credited interest from loans with doubtful recovery to a suspense account, thereby excluding it from its taxable income for the assessment ... year 1981-82, aligning with a mixed accounting method. Initially, the Income-tax department accepted this, but later the Commissioner of Income-tax deemed the exclusion erroneous and prejudicial to revenue, adding the amount back to the bank's income. The Income-tax Appellate Tribunal subsequently allowed the bank's appeal. The revenue then referred the matter to the High Court, challenging the Tribunal's decision. The question arose whether the Tribunal was justified in cancelling the CIT's order under Section 263 of the Income-tax Act, specifically whether the Income-tax Officer's initial decision not to tax the interest in the suspense account, based on a Central Board of Direct Taxes (CBDT) circular, was erroneous and prejudicial to the revenue. The core legal query revolved around the taxability of interest on doubtful loans kept in a suspense account, which had not been recovered for three previous years, especially considering the binding nature of CBDT circulars under Section 119 of the Income-tax Act. Finally, the Supreme Court allowed the appeal, ruling in favor of UCO Bank. The Court emphasized that CBDT circulars, issued under Section 119, are binding on income-tax authorities and are meant to properly administer the Act, mitigate the rigour of the law, and benefit assessees in specific situations. It highlighted that the Circular of 9th October 1984, applicable to the relevant assessment year, provided a clear test: if interest on a doubtful debt had not been recovered for three consecutive years, it should not be subjected to tax in the fourth year and onwards until it is actually received. The Court found the bank's practice of maintaining a suspense account for such interest to be in accordance with accounting principles and Section 145 of the Income-tax Act, concluding that notional income should not be taxed until realized. The judgment clarified that earlier contrary rulings had not fully considered the scope and binding effect of such circulars.