2023 (9) TMI 223 - SCH - Income Tax

Requisite procedure u/s 260A - manner of disposal of the appeal filed by Revenue, by the High Court - non formaliting substantial question of law at the time of admitting the appeal - HELD THAT - We find that in the instant case ex facie the High Court has not followed the procedure contemplated u/s 260A of the Act. Having discussed the principles for entertainment of an Appeal by the High Court under Section 260A and when the same are applied to the present case, we find that the High Court did not formulate any substantial question of law at the time of admitting the appeal, rather the appeal was heard on merits and in the absence of formulating the substantial question of law the appeal was reserved for judgment. During the course of preparation of the judgment, the question of law was framed stated to be a question of law and the matter was then admitted and at the same time considered on merits. Issuance of notice prior to admission without framing any substantial question(s) of law is not contemplated under Section 260A. The High Court has either to admit or not admit the appeal. If the High Court admits the appeal then substantial question(s) of law has to be framed and the respondent put on notice on such substantial question(s) of law. On the contrary, if the High Court is of the view that no substantial question of law arises, then the appeal has to be dismissed. We find that the procedure adopted by the High Court in the instant case is not in consonance with what is contemplated u/s 260A of the Act and hence, on that short ground alone the impugned judgment is set aside. The matter is remanded to the High Court for re-consideration of the appeal filed by the respondent-Revenue having regard to the essentials of Section 260A and in accordance with law. Since the parties are represented by their respective counsel, they shall appear before the High Court on 25.09.2023 without expecting any separate notice from the High Court.

Summary

Issues involved:
The judgment deals with the issue of the manner of disposal of an appeal by the High Court under Section 260A of the Income Tax Act, 1961.

Judgment Summary:

The appellant was aggrieved by the judgment of the High Court of Delhi, where the appeal of the respondent under Section 260A of the Income Tax Act was disposed of on merits without being argued on the substantial question of law. The appellant contended that the High Court did not follow the procedure as required under Section 260A, which mandates formulating a substantial question of law before hearing the appeal on merits. The appellant argued that the reversal of the procedure was evident in this case, where the appeal was reserved for judgment after hearing arguments on merits without formulating the substantial question of law beforehand.

The appellant's counsel emphasized Section 260A of the Act, specifically sub-sections 3 and 4, which outline the procedure for entertaining appeals by the High Court. It was argued that the High Court must be satisfied that a substantial question of law is involved in a case before admitting an appeal. The counsel highlighted that in this case, the High Court did not follow the prescribed procedure and allowed the appeal on merits without formulating the substantial question of law initially.

The respondent's counsel, on the other hand, supported the impugned judgment, stating that the appellant was not taken by surprise as notice was issued, and the appellant argued the case on merits before the judgment was passed. However, the Supreme Court noted that the High Court had not followed the procedure under Section 260A, which requires formulating a substantial question of law before admitting and hearing the appeal.

Upon examining the provisions of Section 260A, the Supreme Court emphasized that an appeal before the High Court must be based on a substantial question of law. The Court noted that the High Court must formulate the question of law before admitting the appeal, and the appeal should be heard and decided based on that formulated question. The Court found that the High Court's failure to follow this procedure warranted setting aside the impugned judgment and remanding the matter for reconsideration in accordance with the law.

The Supreme Court clarified that since the judgment was set aside based on procedural grounds, all contentions on the merits of the matter are left open to be argued before the High Court. The appeal was allowed and disposed of accordingly, with no costs awarded. Pending applications were also disposed of, and the parties were directed to appear before the High Court without expecting a separate notice.