N.R.S. Ganesan, J.M.: This appeal of assessee relates to asst. yr. 2000-01 against order of Administrative Commissioner passed under s. 263 of IT Act. Mr. V.S. Jayakumar, learned counsel for assessee submitted that assessee is partnership firm. As per partnership deed, advance made by partners towards capital contribution and balance in current account are entitled to interest at rate of 18 per cent per annum or any other rate subject to provisions of IT Act. learned counsel for assessee further submitted that cl. 5 contained in deed is enabling provision for charging interest on advance made to partners. learned counsel further submitted that partners have decided not to charge interest in meeting held on 1st April, 1998 on advance made to partners, after considering business necessity. AO called for partnership deed and details of loan and advance by his notice dt. 7th Feb., 2002. learned counsel further submitted that assessee has furnished all details called for by AO with respect to advance made to partners. AO, according to learned counsel, considered details furnished by assessee and accepted explanation of assessee. According to learned counsel, AO has examined details of advances and loans given by assessee to partners and thereafter satisfied that no interest was accrued on such advances. learned counsel for assessee further submitted that CIT issued show-cause notice calling for explanation of assessee as to why interest o n loan and advances of Rs. 1,13,02,018 could not be included in total i n c o m e of assessee. According to learned counsel, CIT misunderstood cl. 5 of deed of partnership while issuing show-cause notice. learned counsel for assessee further submitted that assessee-firm has not borrowed any interest-bearing funds. funds advanced to sister-concerns and partners are from own funds of assessee. Therefore, question of payment of interest does not arise for consideration. According to learned counsel, assessee has made trade advances from interest-free funds available with assessee. Therefore, there is no compulsion on part of assessee for charging interest. learned counsel for assessee further submitted that details were called for by AO and it was examined and thereafter AO found that there was no error in not charging interest on advances. learned counsel for assessee placed his reliance on decision of Kolkata Bench of this Tribunal in case of Sigma Search Lights Ltd. vs. ITO (2004) 82 TTJ (Cal) 956 and submitted that since AO conducted proper enquiries with regard to advance and loan made by assessee, merely because there was no elaborate discussion in order of AO, it cannot be considered to be erroneous order which is prejudicial to interest of Revenue. learned counsel for assessee again placed his reliance on decision of Kolkata Bench of this Tribunal in case of Chroma Business Ltd. vs. Dy. CIT (2004) 82 TTJ (Cal) 540. learned counsel again placed his reliance on judgment of Madras High Court in case of CIT vs. Smt. D. Valliammal (1997) 140 CTR (Mad) 433: (1998) 230 ITR 695 (Mad) and submitted that CIT cannot set aside assessment order on ground that verification of accounts was needed. learned counsel again placed his reliance on judgment of Calcutta High Court in case of CIT vs. Duncan Brothers & Co. Ltd. (1994) 121 CTR (Cal) 492: (1994) 209 ITR 44 (Cal) and submitted that CIT proceeded on wrong presumption that AO has not examined chargeability of interest on advance and loans given by assessee. In fact, according to learned counsel, AO has specifically called for details regarding loans and advances and examined details. Merely because elaborate discussion was not made in assessment order, it does not mean that AO has committed error which is prejudicial to interest of Revenue. learned counsel for assessee again placed his reliance on judgment of Gujarat High Court in case of Garden Silk Mills Ltd. vs. CIT (1996) 135 CTR (Guj) 399: (1996) 221 ITR 861 (Guj) and submitted that since AO examined chargeability of interest on loans and advances, it cannot be said that decision taken by AO is prejudicial to interest of Revenue. substance of submission of learned counsel for assessee is that since AO has examined entire details with regard to loans and advances and accepted case of assessee, assessment order cannot be termed as erroneous and prejudicial to interest of Revenue merely because AO has made brief assessment order without discussion. On contrary, Mr. K. Anangapal, learned Departmental Representative submitted that even though AO called for details of loans and advances, he has not made any further enquiry with regard to chargeability of interest on loans and advances. According to learned Departmental Representative, AO is under obligation to make further enquiry whether assessee is liable to charge interest as per partnership deed on advances and loans. learned Departmental Representative placed his reliance on judgment of Delhi High Court in case of Gee Vee Enterprises vs. Addl. CIT 1975 CTR (Del) 61: (1975) 99 ITR 375 (Del) and submitted that since AO failed to make further enquiry, assessment order is erroneous and it is prejudicial to interest of Revenue. According to learned Departmental Representative, scheme of IT Act requires AO to make further investigation on facts disclosed by assessee. Since there was failure on part of AO to make further enquiry, assessment order becomes erroneous and prejudicial to interest of Revenue. We have considered rival submissions on either side, and also perused t h e material available on record. We have also carefully gone through partnership deed, copy of which was produced in paper book and also order of lower authorities. Clause 5 of partnership deed clearly provides for charging of 18 per cent interest on advance made by assessee-firm. notice issued by AO clearly shows that details regarding loans and advances were called for. assessee by his letter dt. 16th Feb., 2002 has furnished details called for by AO which includes account copies of loans and advances. CIT found that since interest was not considered to be assessed in assessment order, it is erroneous and prejudicial to interest of Revenue. Therefore, he issued show-cause notice calling upon assessee to explain why interest on advances and loan made by assessee should not be included in total income. assessee has also filed reply to show-cause notice explaining that advances are trade advances and it is not advance to partners. According to assessee, partnership deed does not provide for charging of interest on those trade partnership deed does not provide for charging of interest on those trade advances. It was also further explained that assessee-firm has not borrowed any interest-bearing funds. Therefore, there is no claim of interest in P&L a/c to any person. According to assessee, no interest-bearing funds were diverted towards non-interest bearing advances. After considering this explanation of assessee, CIT found that loans and advances made b y assessee are nothing but made to sister-concerns and partners with whom assessee has no trading activity. Therefore, CIT concluded that these advances could never be termed as trade advances. Accordingly, CIT set aside order of AO and directed AO to reconsider issue afresh. main contention of assessee before this Tribunal is that AO called for details of loans and advances made and had elaborate discussion with representative of assessee. Therefore, order of AO cannot be termed as erroneous merely because there is no elaborate discussion in assessment order. We are unable to accept this contention of assessee. claim of assessee before CIT is that advances are trade advances and there was no provision in partnership deed for charging interest on trade advance. CIT, found that parties to whom advances and loans were made have no trading activity with assessee. Therefore, it is nothing but advances and loans as enumerated in cl. 5 of partnership deed. AO has not examined whether persons to whom advances were made have any trading relationship or not. If assessee has no trading activity with persons to whom advances were made, then such advance cannot be termed as trade advance. Therefore, it has to be examined whether assessee is liable to charge interest on advances made to sister- concerns and partners who have no trading activity with assessee. We have also carefully gone through order of Kolkata Bench of this Tribunal in case of Sigma Search Lights Ltd. (supra). In case before Kolkata Bench, assessment order was passed in brief manner without m u c h discussion on details of expenses claimed by assessee for business promotion and marketing. There was no discussion regarding decline in GP. However, there is reference in assessment order that he discussed t h e details furnished by assessee. On those factual circumstances, Kolkata Bench of this Tribunal found that AO completed assessment after calling for details and making enquiries with regard to expenses claimed by assessee but passed brief assessment order without making further discussion. Tribunal specifically found that expenses claimed by assessee to same parties in earlier year and subsequent year was allowed by Department and no attempt was made to invoke power of CIT under s. 263 in earlier year and subsequent year. In view of above factual situation, Tribunal held that order of CIT in setting aside order of assessment for de novo enquiry is not sustainable. In case on our hand, facts are entirely on different footing. partnership deed specifically provides for charging of interest on advances and loans given to partners. assessee explained before CIT that no advances or loans were given to partners but advance given is only trade advance. CIT found that persons to whom advances were made have no trading activity with assessee. In those factual circumstances, it is very difficult to hold that AO has examined details furnished by assessee. In fact, AO has not made any enquiry to find out whether advances are trade advances or not. In absence of material to establish trading activity, advances made to sister-concerns and partners cannot be construed as trading advance. Therefore, in our opinion, decision of Kolkata Bench of this Tribunal in case of Sigma Search Lights Ltd. is not applicable to facts of this case. We have also carefully gone through decision of Kolkata Bench of this Tribunal in case of Chroma Business Ltd. (supra). facts are almost identical as it was in case of Sigma Search Lights Ltd. (supra) which was decided by Kolkata Bench. Therefore, for reasons discussed at para 9 above, this decision of Kolkata Bench is also not helpful to assessee. We have also carefully gone through judgment of Gujarat High Court in case of Garden Silk Mills Ltd. (supra). In case before Gujarat High Court, AO allowed claim of assessee with regard to depreciation o n basis of decision of Tribunal and High Court. CIT in exercise of his power under s. 263 sought to withdraw depreciation on ground that decision of Tribunal and jurisdictional High Court has not attained finality and it is subject-matter of revision and appeal before higher forum. In those factual circumstances, Gujarat High Court held that law declared by highest Court of State is binding on authorities and Tribunal. Therefore, it cannot be ignored. Since AO allowed claim of depreciation on basis of law laid down by highest Court in State, it could not be revised by CIT on ground that subject-matter was pending in appeal or revision. Gujarat High Court observed that if such attitude is permitted, it would introduce nothing but judicial, indiscipline which is not called for. In case on our hand, issue is not with regard to revision of assessment order during pendency of appeal before High Court or Supreme Court. In this case, assessee claimed that advances and loans were made as trading advance. CIT found that parties to whom advance was made has no trading activity with assessee. Therefore, assessee has to explain why interest was not charged when there is enabling provision in partnership deed for charging interest on advance made to partners. assessee appears to have passed resolution on 1st April, 1998 for not charging interest. This resolution was not brought to notice of AO. Therefore, in all fairness, in our opinion, AO has to re-examine issue in light of material available on record. In view of above, in our opinion, judgment of Gujarat High Court in case of Garden Silk Mills Ltd. (supra) is not applicable to facts of case. We have also carefully gone through judgment of Calcutta High Court in case of Duncan Brothers & Co. Ltd. (supra). In case before Calcutta High Court, issue is regarding cost of acquisition for purpose of computation of capital gain. assessee-company held 5000 shares of Duncan Brothers (Pakistan) Ltd. As result of separation of Bangladesh from Pakistan, company was renamed as Duncan Brothers (Bangladesh) Ltd. After Indo-Pakistan conflict, company came under control of Custodian of Enemy Property. Custodian made payment of Rs. 2,05,732 to assessee-company for compensation for 5000 shares. cost of acquisition of shares was Rs. 1,00,000. ITO while computing capital gain deducted cost of shares was Rs. 1,00,000. ITO while computing capital gain deducted cost of acquisition of Rs. 1,00,000 from compensation of Rs. 2,05,732. Accordingly, AO computed capital gain of Rs. 1,05,732. CIT by way of wrong presumption proceeded that deduction of Rs. 1,00,000 was granted by way of cost of acquisition on fair market value as on 1st Jan., 1964. This was factually found to be incorrect by Tribunal. On those factual circumstances, Calcutta High Court held that Tribunal was justified in quashing order of CIT passed under s. 263. In case on our hand, AO allowed claim of assessee on presumption that advances and loans were made to partners as trading advance. But fact remains that persons who received advance have n o trading activity with assessee. Therefore, it may not be construed as trading advance as contended by assessee before CIT. In those factual circumstances, in our opinion, judgment of Calcutta High Court was also not applicable to facts of case. We have also carefully gone through judgment of Madras High Court in case of Smt. D. Valliammal (supra). In case before Madras High Court, assessee was carrying on moneylending business. CIT found that Dhandayuthapani Films owed sum of Rs. 1,00,000 to assessee as disclosed in details given by it. But assessee had not disclosed this amount in balance sheet. CIT found that AO without verifying this investment, passed order. Therefore, it is erroneous and prejudicial to interest of Revenue. CIT after considering explanation of assessee accepted explanation with regard to investment of Rs. 1,00,000 in Dhandayuthapani Films. High Court found that CIT after enquiry has not given any categorical finding that order passed by AO was erroneous and prejudicial to interest of Revenue. Once explanation was accepted and there was no finding with regard to erroneous and prejudicial to interest of Revenue, High Court found that CIT cannot set aside order of AO on ground that verification of account is needed. In case on our hand, explanation offered by assessee was not accepted. In fact, explanation was found to be false. explanation of assessee before CIT is that advances are trading advances. CIT found that assessee has no trading activity with persons to whom advances were made. Therefore, in our opinion, this judgment of Madras High Court in case of Smt. D. Valliammal (supra) is also not applicable to facts of case. We find that identical issue was considered by Madras High Court in case of CIT vs. South India Shipping Corporation Ltd. (1998) 147 CTR (Mad) 433: (1998) 233 ITR 546 (Mad). assessee before Madras High Court claimed weighted deduction on commission paid to brokers, charterers through whom contract was finalised. case of assessee was that payment was made to foreign brokers through whom information was obtained in respect of cargo availability and freight rates. High Court found that assessee has taken conflicting standing in claim made before AO as well as before CIT which necessitated CIT to take view that expenses were allowed by ITO without properly verifying claim. His Lordship Mr. Justice N.V. Balasubramanian, speaking for Division Bench of Madras High Court, has observed as follows at p. 557: "However, in instant case, CIT, on examination of records, prima facie came to conclusion that payments of commission and brokerage did not appear to come under any of sub-clauses of s. 35B(1)(b) of Act and he also came to conclusion that ITO had, in perfunctory and mechanical manner, allowed claim of assessee and that order was erroneous n d prejudicial to interest of Revenue as ITO allowed claim without verifying under what sub-clause of s. 35B(1)(b) of Act, claim would fall. Therefore, when CIT prima facie came to conclusion that order passed by ITO was in accordance with and assessment records disclose that ITO had not undertaken enquiry which was expected of him before allowing claim of assessee for weighted deduction, we hold that Tribunal was not justified in holding that CIT lacked jurisdiction to exercise his power of revision." In case before us, when assessee claimed that advances were trading advances and no material is available on record to suggest any trading activity with assessee, in our opinion, AO ought to have conducted further enquiry before accepting claim of assessee. similar view was taken by Delhi High Court in case of Gee Vee Enterprises (supra). In view of judgment of Madras High Court in case of South India Shipping Corporation Ltd. (supra) and also judgment of Delhi High Court in case of Gee Vee Enterprises (supra), we do not find any infirmity in order of CIT. Accordingly we have no hesitation to confirm same. In result, appeal filed by assessee stands dismissed. However, there will be no order as to costs. *** SUPER CLOTH v. ASSISTANT COMMISSIONER OF INCOME TAX