IN INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM ITA No. 260/JP/2016 Assessment Year : 2009-10. Akar Motors, ACIT, Ajmer Road, Vs. Circle-2, Jaipur. Jaipur. PAN No. AACFA 2927 N Appellant Respondent Assessee by : Shri P.C. Parwal (C.A) Revenue by : Shri R.A. Verma (Addl. CIT) Date of Hearing : 17.10.2016. Date of Pronouncement : 21/10/2016. ORDER PER SHRI KUL BHARAT, JM. This appeal by assessee is directed against order of ld. CIT (Appeals)- I, Jaipur dated 18.01.2016 pertaining to A.Y. 2009-10. assessee has raised following grounds of appeal:- That on facts and in circumstances of case and in law, ld. CIT (Appeals) erred in upholding penalty of Rs. 3,50,610/- levied u/s 271(1)(c) of I.T. Act. 2. Briefly stated facts are that case of assessee was picked up for scrutiny and assessment under section 143(3) of Income Tax Act, 1961 (hereinafter referred to as Act) was framed vide order dated 27.12.2011. While framing assessment, AO made disallowance of interest by observing that assessee firm has given interest free loans to its partner for non business purposes and also initiated penalty proceedings under section 271(1)(c) of Act. 2 ITA No. 260/JP/2016 M/s. Akar Motors, Jaipur. Subsequently, AO imposed penalty of Rs. 3,50,610/- in respect of addition of Rs. 10,31,510/- confirmed by ld. CIT (A) in quantum proceedings. assessee aggrieved by this order, filed appeal before ld. CIT (A), who after considering submissions and applying judgment of Hon ble Delhi High Court rendered in case of CIT vs. NG Technologies Ltd. (2015) 57 Taxman.com 389 (Delhi) dismissed appeal thereby confirmed penalty imposed by AO. 3. Now assessee has filed present appeal. 4. ld. Counsel for assessee has reiterated submissions as made in written brief. ld. Counsel submitted that AO framed assessment at Rs. 1,23,43,166/- against income declared at Rs. 1,06,12,738/-. AO made disallowance on account of Repair and maintenance expenses, disallowance on account of discount allowed and disallowance out of interest expenses. ld. Counsel submitted that ld. CIT (A) deleted disallowances made on account of Repair and maintenance, discount and reduced disallowance made on interest expenses. ld. Counsel submitted that in penalty proceedings, assessee had explained that disallowance was made on technical reasons. interest expenses claimed are genuinely incurred in bonafide manner. amount of interest paid is not in dispute. There no malafide intention in making claim of interest and all information are disclosed. He submitted that ld. CIT (A) has wrongly applied judgment of Hon ble Delhi High Court (supra). ld. Counsel placed reliance on judgment of Hon ble Supreme Court rendered in case of CIT vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (SC) and submitted that Hon ble Apex court has held that words inaccurate and particulars in conjunction mean details supplied in return, which are not accurate, not 3 ITA No. 260/JP/2016 M/s. Akar Motors, Jaipur. exact or correct, not according to truth or erroneous. ld. Counsel submitted that judgment relied on by ld. CIT (A) is distinguishable on facts. He submitted that in that case assessee had claimed loss on sale of plant & machinery in Profit & Loss account which is capital loss. He submitted that in that case claim was contrary to elementary and well known basic principles of accountancy. Therefore, under peculiarity of those facts, Hon ble High Court confirmed penalty. But in present case, facts are distinguishable as assessee had disclosed all material facts before AO. partner to whom loan is advanced had also introduced capital on which no interest was charged. ld. Counsel submitted that firm had interest free funds in shape of advances from customers of Rs. 10,74,969/- and sundry creditors Rs. 2,12,284/- respectively. 4.1. On contrary, ld. D/R opposed submissions and submitted that there is no dispute with regard to fact that loan was advanced out of over draft facility. assessee was aware that advance was given not for business purpose. He submitted that at one hand assessee is paying interest to bank and on other hand same amount is advanced to partner without charging interest. Therefore, AO had rightly disallowed interest and ld. CIT (A) has rightly applied judgment of Hon ble Delhi High Court, supra. 4.2. We have heard rival contentions, perused material available on record and gone through orders of authorities below. undisputed facts that emerged from record are that assessee firm had advanced loan of Rs. 2,56,76,179/- on which no interest has been charged assuming that assessee was having interest free funds in form of capital introduced by partner and other interest deposits of Rs. 10,74,969/- and Rs. 2,12,284/- respectively, even 4 ITA No. 260/JP/2016 M/s. Akar Motors, Jaipur. than money so advanced exceeded interest free funds. There is no dispute with regard to fact that this loan was given out of interest bearing funds on which assessee had claimed interest. Under these facts, we are unable to accept submission of ld. Counsel for assessee that issue is squarely covered by judgment of Hon ble Supreme Court rendered in case of Reliance Petroproducts Ltd. (supra). assessee has not placed any material suggesting that issue is debatable in view of fact that there is direct nexus between advance bearing funds and loan advanced to partner. Therefore, we do not see any infirmity in order of ld. CIT (A), same is hereby affirmed. ground raised by assessee is rejected. 5. In result, appeal of assessee is dismissed. Order is pronounced in open court on 21.10.2016. Sd/- Sd/- ( HkkxpUn ( dqy Hkkjr) ( BHAGCHAND) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 21 /10/2016. Das/ vkns'k dh izfrfyfi vxzsf"kr@Copy of order forwarded to: 1. Appellant- M/s. Akar Motors, Jaipur. 2. Respondent ACIT, Circle-2, Jaipur. 3. CIT(A). 4. CIT, 5. DR, ITAT, Jaipur 6. Guard File (ITA No. 260/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 5 ITA No. 260/JP/2016 M/s. Akar Motors, Jaipur. Akar Motors v. ACIT, Circle-2, Jaipur