HMRC has told MPs it wanted to fine Google over their tax affairs - but could not prove their accounts were assembled with "insufficient care".
Earlier Google finance boss Tom Hutchinson said HMRC determined they had a "reasonable argument" for the amount of UK profit they declared.
"And that's why there was no penalty," he added.
Google has insisted the £130 million UK tax deal with HMRC is "fair".
The company's finance boss Tom Hutchinson said the figure was the largest tax settlement following an audit ever paid by Google outside the US.
He added the firm had not incurred any fines because HMRC determined they had a "reasonable argument" for the amount of profit they were showing.
"HMRC looks and sees, are we just ignoring the rules? Or did we interpret the rules in a reasonable way?" he said.
"And they determined we did, and that's why there was no penalty."
Google bosses were today accused of "living on a different planet" as they were grilled by MPs over their controversial UK tax deal.
Committee chair Meg Hillier asked Google UK boss Matt Brittin: "You're British, you're a British taxpayer. So don't you feel a bit embarrassed by this?
"The fact that you don't even know what you're paid? You're living on a different planet.
"Frankly, you are taxing my patience and the patience of the hard-working taxpayer out there."
Mr Brittin said: "I'm proud to be British. I appear here because I believe in the process of democracy."
But he insisted Google were paying the right tax in the UK: "It's not 3%, it is 20%."
Google's finance boss Tom Hutchinson added the £130 million deal was "fair" and said it was the biggest settlement they had agreed outside the US.
The UK boss of Google claims he "does not know how much he gets paid" as he was grilled by MPs today.
Matt Brittin said he "understood the anger and frustration" of UK taxpayers over his company's £130 million tax deal with HMRC.
But Public Accounts Committee chair Meg Hillier hit back: "Do you really understand the anger Mr Brittin? What do you get paid?"
Mr Brittin repeatedly dodged the question saying: "I don't have the exact figure" and would provide it to the committee "privately, if it was relevant".
When pressed further, Ms Hillier said: "My point is, taxpayers out there, our constituents, are very angry.
"They live in a different world to you, clearly, if you can't even tell us what you actually get paid. I wonder if you've got tin ears."
Earlier the committee heard Google's Chief Executive was paid £138 million in the last year alone.
A senior representative of the British Chambers of Commerce (BCC) has said many businesses are angry at what they see as "two parallel tax systems" in the UK.
Answering a question on Google's tax settlement with the UK government, Dr Adam Marshall told ITV News Business Editor Joel Hills "there is still a long way to go until a lot of businesses feel that tax is a level playing field and there is no unfair competition out there".
There is certainly a sense of anger amongst many businesses over what they see as being two parallel tax systems.
One that applies to them and another that applies to a small number of global and often multinational companies who are often able to shift their profits around the world and conduct tax avoidance scheme.
The BCC's executive director of policy and external affairs added that there is a growing perception that "there is something not right in the system".
The British Chambers of Commerce represents thousands of businesses of all sizes and sectors, which altogether employ more than 5,000,000 people.
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As a European investigation looms over Google's £130m deal with the Treasury, the president of Airbus UK, Paul Kahn told ITV News Business Editor Joel Hills that issues surrounding the tax affairs of multinationals is a matter of concern.
He said it was easy for businesses to be "straightforward and open" but when pressed on companies that are not, he said: "I couldn't possibly comment on that."
It's very easy to play in a very straightforward and open manner with governments including in the UK with HMRC.
Chancellor George Osborne visited the Airbus factory in Bristol on Thursday, as he announced the sale of the government's final stake in Lloyds Banking Group was being postponed because of the current turbulence in global financial markets.
Watch Joel Hills' report: