Penalty for Form 26AS mismatch fails where service tax is reconciled, verified, and the penal limb is ly invoked.

Penalty under section 271(1)(c) was unsustainable where the assessee gave a credible reconciliation showing that the Form 26AS mismatch related to service tax included in gross billing but not part of taxable income. The explanation was supported by verifiable records, and the amount had already been captured through a corresponding disallowance under section 43B, so a further addition would have amounted to double addition. The Revenue did not disprove the explanation, and the penalty order was also defective because it did not clearly specify the precise limb of concealment or furnishing inaccurate particulars. On these facts, the levy was cancelled.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable for the addition arising from a mismatch between receipts reflected in Form 26AS and the assessee's books, where the difference was explained as service tax component and the assessment also contained a corresponding disallowance under section 43B.

Analysis: The difference in receipts was reconciled by showing that the contractee had deducted tax on the gross billing amount inclusive of service tax, although service tax was not part of the assessee's income and was separately accounted for. The assessee furnished supporting reconciliation and the amount was already reflected in the computation through disallowance under section 43B, so the further addition would result in a double addition. The Board's circulars clarified that tax was not required to be deducted on the service tax component where it was shown separately, and the explanation was found factually correct and verifiable. The penalty order also suffered from lack of clarity as to the specific limb invoked under section 271(1)(c).

Conclusion: Penalty was not leviable; the levy under section 271(1)(c) was unsustainable and was cancelled.

Final Conclusion: The assessee succeeded because the addition was satisfactorily explained and the penalty could not stand on the facts or on the defective invocation of the penal provision.

Ratio Decidendi: Where an assessee gives a credible and verifiable reconciliation explaining the addition, and the Revenue has not disproved the explanation, penalty for concealment or furnishing inaccurate particulars cannot be sustained, especially when the penalty order does not clearly specify the precise limb of section 271(1)(c) invoked.

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