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2017 (10) TMI 600 - HC - Income TaxApplication to Income Tax Settlement commission [ITSC] - reasons given by the ITSC for rejection of the application that the questionnaire issued by the AO was not answered - Held that:- Insofar as the first reason is concerned, once the ITSC proceeds with the settlement application, as per Section 245D (4), the proceedings before the AO comes to a standstill. This is clear from a reading of Section 245F (2) of the Act. Thus, no adverse inference can be drawn from the fact that the questionnaire issued by the AO was not answered. Insofar as the second reason i.e. full and true disclosure is concerned, even the report of the CIT does not point to a great variance in the income disclosed. The difference between the two amounts as disclosed by the Petitioner and as deduced by the CIT from the documents seized is approximately ₹ 14,621,882/- which constitutes less than 1.5% difference in the amount disclosed and the amount computed by the CIT. It is possible that the said amount can be reconciled before the ITSC if the application is proceeded with and heard finally. The difference is too minimal when compared to the total amount disclosed, to constitute a failure to make full and true disclosure of the income Applicant has taken contradictory stand regarding whether it is a successor company or a new set up to explain the sale of assets - ITSC appears to have proceeded on a wrong premise. There is no doubt that Shetkari is an earlier avatar of the Petitioner. The Joint Venture Agreement clearly shows that 100% of shareholding of Shetkari was owned by Ridhi Sidhi and that was intended to be diluted with investments from the other companies including Enn Vee. The application of Enn Vee is pending before the ITSC. The primary ground for rejection is that Enn Vee is a conduit and that it has received the substantial amount of share capital from bogus/non-existent companies. If this is so, it would have consequences for Enn Vee as well. The dismissal of the Petitioner’s applications by the ITSC would result in a failure to examine the matter comprehensively and in entirety. It is not in dispute that the Petitioner company was undergoing restructuring. The restructuring of the shareholding is different from a company being newly setting up. The term 'process of setup' is merely a misdescription by the Petitioner of the restructuring process, in its response dated 1st April 2013, to the notice of the ITSC dated 8th February 2013. The ITSC appears to have borrowed this terminology from the said document and has non-suited the Petitioner on that ground. What indeed is clear from the facts is that the shareholding pattern of the Petitioner company was being restructured/changed and it was not an establishment of a new company. While the shareholding of any company is being changed, there is no bar on depreciation being claimed as permissible in law. Thus, this could not be a ground for rejection of the application We deem it appropriate to set aside the impugned order of the ITSC. It is clarified that this Court has not examined the merits of the dispute which shall be examined by the ITSC in accordance with law.
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