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2017 (9) TMI 475 - AT - Income TaxLevy of penalty under section 271(1)(c) - wrongly deducted tax on service tax - higher TDS is shown in 26AS - whether gross receipts as per 26AS which refers to TDS claim, can be made the basis for an addition - Held that:- The assessee filed reply before A.O. at the penalty stage explaining that his contractee M/s. Pioneer Urban Land & Infrastructure Ltd., had erroneously deducted TDS on the gross billing amount including service tax on the total amount of ₹ 9,65,75,290. The reconciliation and details of the same are filed which shows the billing amount of ₹ 9,65,75,290, work done at ₹ 9,27,53,831, service tax was of ₹ 38,21,460 and the total comes to ₹ 9,65,75,290, on which, TDS @ 2% has been deducted in a sum of ₹ 19,31,506 and after other deductions, the net amount comes to ₹ 8,61,43,082. It, therefore, clearly proved that assessee filed reply before A.O. at the penalty stage supported by the reconciliation certificate. The assessee, thus, has been able to explained that his contractee M/s. Pioneer Urban Land & Infrastructure Ltd., had erroneously deducted TDS on the gross billing amount including service tax. This was the reason, when higher TDS is shown in 26AS and the A.O. had taken item of service tax to the higher receipts. Thus, the assessee has explained the above difference in the receipts as per the details submitted before A.O./CIT(A) and the details noted in 26AS. The assessee also explained that since service tax is not income of the assessee, which is also not disputed by the Ld. D.R, therefore, it would not form part of total receipts of the assessee and has to be given treatment separately in the Balance Sheet. It is well settled law that quantum and penalty proceedings are independent and distinct proceedings. Even if the addition is agreed by the assessee, if the assessee is able to explain the addition, then, penalty may not be leviable in the facts and circumstances of the case. The above facts clearly indicate that the explanation of assessee at the penalty stage was factually correct based on the material on record and assessee successfully explained the addition so made which is the basis for levy of the penalty. Since the difference is reconciled at the penalty stage and claim of assessee have not been doubted or rejected, therefore, Ld. CIT(A) was not justified in confirming the levy of penalty merely because assessee conceded for addition of the amount in question. - Decided in favour of assessee.
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