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TMI Blog2005 (8) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer called for the partnership deed and the details of loan and advance by his notice dated 7-2-2002. The learned counsel further submitted that the assessee has furnished all the details called for by the Assessing Officer with respect to advance made to the partners. The Assessing Officer, according to the learned counsel, considered the details furnished by the assessee and accepted the explanation of the assessee. According to the learned counsel, the Assessing Officer has examined the details of advances and loans given by the assessee to the partners and thereafter satisfied that no interest was accrued on such advances.\ 3. The learned counsel for the assessee further submitted that the Administrative Commissioner issued a show-cause notice calling for explanation of the assessee as to why interest on loan and advances of Rs. 1,13,02,018 could not be included in the total income of the assessee. According to the learned counsel, the Commissioner of Income-tax misunderstood the clause 5 of the deed of partnership while issuing the show-cause notice. The learned counsel for the assessee further submitted that the assessee-firm has not borrowed any interest bearing fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on the judgment of the Gujarat High Court in the case of Garden Silk Mills Ltd. v. CIT [1996] 221 ITR 861 and submitted that since the Assessing Officer examined the chargeabilily of interest on loans and advances, it cannot be said that the decision taken by the Assessing Officer is prejudicial to the interest of the Revenue. The substance of the submission of the learned counsel for the assessee is that since the Assessing Officer has examined the entire details with regard to loans and advances and accepted the case of the assessee, the assessment order cannot be termed as erroneous and prejudicial to the interest of the Revenue merely because the Assessing Officer has made a brief assessment order without discussion. 5. On the contrary, Mr. K. Anangapal, the learned Departmental Representative (D.R.) submitted that even though the Assessing Officer called for the details of loans and advances, he has not made any further enquiry with regard to the chargeability of interest on loans and advances. According to the learned D.R., the Assessing Officer is under an obligation to make further enquiry whether the assessee is liable to charge interest as per the partnership deed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing but made to sister concerns and partners with whom the assessee has no trading activity. Therefore, the Commissioner concluded that this advance could never be termed as trade advances. Accordingly, the Administrative Commissioner set aside the order of the Assessing Officer and directed the Assessing Officer to reconsider the issue afresh. 7. The main contention of the assessee before this Tribunal is that the Assessing Officer called for the details of loans and advances made and had an elaborate discussion with the representative of the assessee. Therefore, the order of the Assessing Officer cannot be termed as erroneous merely because there is no elaborate discussion in the assessment order. We are unable to accept this contention of the assessee. The claim of the assessee before the Commissioner is that the advances are trade advances and there was no provision in the partnership deed for charging interest on trade advance. The Administrative Commissioner found that the parties to whom the advances and loans were made have no trading activity with the assessee. Therefore, it is nothing but advances and loans as enumerated in the clause 5 of the partnership deed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he absence of material to establish the trading activity, the advances made to sister concerns and partners cannot be construed as trading advance. Therefore, in our opinion, the decision of the Kolkata Bench of this Tribunal in the case of Sigma Search Lights Ltd. is not applicable to the facts of this case. 10. We have also carefully gone through the decision of the Kolkata Bench of this Tribunal in the case of Chroma Business Ltd. The facts are almost identical as it was in the case of Sigma Search Lights Ltd. which was decided by the Kolkata Bench. Therefore, for the reasons discussed at para 9 above, this decision of the Kolkata Bench is also not helpful to the assessee. 11. We have also carefully gone through the judgment of the Gujarat High Court in the case of Garden Silk Mills Ltd. In the case before the Gujarat High Court, the Assessing Officer allowed the claim of the assessee with regard to depreciation on the basis of the decision of the Tribunal and the High Court. The Commissioner in exercise of his power under section 263 sought to withdraw the depreciation on the ground that the decision of the Tribunal and the jurisdictional High Court has not attained the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Officer while computing capital gain deducted cost of acquisition of Rs. 1,00,000 from the compensation of Rs. 2,05,732. Accordingly, the Assessing Officer computed capital gain of Rs. 1,05,732. The Administrative Commissioner by way of wrong presumption proceeded that deduction of Rs. 1,00,000 was granted by way of cost of acquisition on the fair market value as on 1-1-1964. This was factually found to be incorrect by the Tribunal. On those factual circumstances, the Calcutta High Court held that the Tribunal was justified in the quashing order of the Commissioner passed under section 263. 14. In the case on our hand, the Assessing Officer allowed the claim of the assessee on the presumption that the advances and loans were made to partners as trading advance. But the fact remains that the persons who received the advance have no trading activity with the assessee. Therefore, it may not be construed as trading advance as contended by the assessee before the Commissioner. In those factual circumstances, in our opinion, the judgment of the Calcutta High Court was also not applicable to the facts of the case. 15. We have also carefully gone through the judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were allowed by the Income-tax Officer without properly verifying the claim. His Lordship Mr. Justice N.V. Balasubramanian, speaking for the Division Bench of the Madras High Court, has observed as follows at page 557 of the ITR. "However, in the instant case, the Commissioner, on examination of records, prima facie came to the conclusion that payments of commission and brokerage did not appear to come under any of sub-clauses of section 35B(1)(b) of the Act and he also came to the conclusion that the Income-tax Officer had, in a perfunctory and mechanical manner, allowed the claim of the assessee and that the order was erroneous and prejudicial to the interest of the revenue as the Income-tax Officer allowed the claim without verifying under what sub-clause of section 35B(1)(b) of the Act, the claim would fall. Therefore, when the Commissioner prima facie came to the conclusion that the order passed by the Income-tax Officer was in accordance with and the assessment records disclose that the Income-tax Officer had not undertaken the enquiry which was expected of him before allowing the claim of the assessee for weighted deduction, we hold that the Tribunal was not justified i ..... 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