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TMI Blog2025 (3) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act but also by the prominent absence of a right to prefer cross-objections having been incorporated in Section 260A despite that avenue having been accorded statutory recognition in Section 253 (4) of the Act. In our considered opinion and bearing in mind the language of Section 260A (6)(b), the right of a respondent can at best stretch to advancing a contention in relation to any finding returned by the Tribunal adverse to that party and which has an indelible connect with the question of law on which the appeal may be admitted. We thus find ourselves unable to countenance sub-sections (6) and (7) of Section 260A as conferring an independent right in a respondent to maintain or continue an apparent challenge in respect of a finding rendered by the Tribunal de hors or disconnected with the substantial question of law on which such an appeal may be entertained. In summation, we would hold that absent a specific adoption of a right to prefer cross-objections and the same being statutorily acknowledged to be part of the appeal procedure laid out in Section 260A of the Act, a cross-objection would not be maintainable. Section 260A (6) is merely an enabling provision and which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of unexplained purchases amounting to Rs. 1,77,31,37,509/- while holding that the books of accounts of the assessee were defective? B. Whether the Ld. ITAT has erred in law on the facts of the case in not upholding the action of the AO in disallowance of Rs. 1,08,34,15,088/- under Section 40A (3) of the Act and in holding that no addition was made by the AO under Section 40A (3) whereas the AO had categorically mentioned this addition in order and also initiated penalty under Section 271 (l) (c) of the Act, though no separate addition was made considering the disallowance of higher amount on account of bogus purchases? C. Whether the Ld. ITAT has erred in law on the facts of the case in adjudicating the addition made under Section 40A (3) of the Act when the assessee had not taken any ground in this respect before the Ld. CIT (A)? D. Whether, the Ld. ITAT has erred in law on the facts of the case in not sustaining the addition made by the Assessing Officer of Rs. 72,18,132/- on the issue of Deemed Dividend even when the provisions of the Section 2 (22) (e) of the Act are clearly applicable?" 3. After hearing learned counsels for respective sides, we had by our or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Ground No. 2 of the C.O. In view of the same, the issues are being examined on merits of the case in the appeal of the revenue along with Ground No. 3 of the Cross Objection." The appeals preferred by the assessee, however, came to be partly allowed and which led to the institution of the present appeals. 5. The appellants argue that the cross-objections would not be maintainable in light of Section 260A of the Act neither envisaging nor creating such a remedy. According to learned counsels, Section 260A is a remedy of redressal before the High Court in respect of an order passed by the Tribunal provided a substantial question of law arises. It was their contention that the provision itself enables the Income Tax Department or an assessee to institute such an appeal against an order of the Tribunal and the same being liable to be entertained only if it were to give rise to a substantial question of law. According to them, absent Section 260A conferring a right upon a respondent in such an appeal to prefer a cross-objection, the objections as preferred are liable to be dismissed. The appellants argue that Section 260A clearly does not create such a right in explicit terms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department or affirming the view expressed by the Tribunal. While in the case of the latter, the assessee may not be prejudiced if the High Court were to dismiss the appeal, it would stand permanently deprived of the right to question or assail the rendering of opinion by the Tribunal on the invocation of Section 153C of the Act. Learned counsel argued that the issue of whether Section 153C was validly invoked undoubtedly strikes at the root of the jurisdiction which was exercised by the Assessing Officer [AO]. It was pointed out that the assessee had argued before the Tribunal that there was no incriminating material which would have justified the invocation of that provision and which undoubtedly is a sine qua non for the commencement of search assessment proceedings against the other person. Mr. Kantoor thus submitted that the right to prefer cross-objections should be read into the provisions of Section 260A of the Act. 10. Learned counsel also sought to buttress his submissions with the aid of the following example. He submitted that the Court may consider a hypothetical case where an assessment is triggered by an AO invoking the powers of reassessment or alternatively, an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the filing of cross-objection in a second appeal. The principal decisions of the Supreme Court which were noticed by the Karnataka High Court were those in Superintending Engineer v. B. Subba Reddy (1999) 4 SCC 423 and Municipal Corpn. of Delhi v. International Security & Intelligence Agency Ltd. (2004) 3 SCC 250. 14. However, it would be pertinent to note that none of the decisions of the Supreme Court cited above were concerned with the maintainability of cross-objections in a second appeal nor does that question appear to have been raised or answered. Those decisions had principally ruled on the scope of Order XLI Rule 22 of the Code and the extent of the right inhering in a party-respondent to assail a part of the judgment or decree operating against it or a finding appearing in such a judgment adverse to that party. 15. For the purposes of examining the scope of the right which Order XLI Rule 22 of the Code creates, we at the outset deem it appropriate to set out a table which captures the significant amendments which came to be introduced in that provision and how the rule read pre and post amendment of the Code by virtue of Act 104 of 1976: "Order 41 Rule 22 prior to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it being open to the respondent to not only support the decree but to also prefer a cross-objection to the decree itself. The three recourses which are open for the respondent to adopt were elaborately explained by the Supreme Court in B. Subba Reddy, Banarsi v. Ram Phal (2003) 9 SCC 606 and International Security & Intelligence Agency. 17. Explaining the scope of Order XLI Rule 22 of the Code, the Supreme Court in B. Subba Reddy summed up the legal position in the following terms: "23. From the examination of these judgments and the provisions of Section 41 of the Act and Order 41 Rule 22 of the Code, in our view, the following principles emerge: (1) Appeal is a substantive right. It is a creation of the statute. Right to appeal does not exist unless it is specifically conferred. (2) Cross-objection is like an appeal. It has all the trappings of an appeal. It is filed in the form of memorandum and the provisions of Rule 1 of Order 41 of the Code, so far as these relate to the form and contents of the memorandum of appeal apply to cross-objection as well. (3) Court fee is payable on cross-objection like that on the memorandum of appeal. Provisions relating to appeals by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if the principal appeal came to be withdrawn. It was further observed that the right conferred by Order XLI Rule 22 of the Code is intended to enable the respondent to seek closure of the entire litigation and for all questions being finally laid to rest even in situations where the judgment or decree may be only partly against its interest. 19. However, the Supreme Court in B. Subba Reddy categorically held that an appeal is a substantive right and essentially a creation of the statute. It was thus explained that a right to appeal cannot be claimed to be one which inheres in a party and that it must be founded upon a specific statutory conferment. It was in the aforesaid backdrop that it held that since the right to prefer cross-objections was not merely procedural but one which would have to be based on a statutory grant, the cross-objections in the appeal under Section 39 of the Arbitration Act would not be maintainable. 20. The question again appears to have arisen for the consideration of the Supreme Court in Banarsi. In Banarsi, the Supreme Court firstly culled out the three possible scenarios in which a respondent may seek to claim the right to prefer cross-objections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with an issue. The advantage of preferring such cross-objection is spelled out by sub-rule (4). In spite of the original appeal having been withdrawn or dismissed for default the cross-objection taken to any finding by the respondent shall still be available to be adjudicated upon on merits which remedy was not available to the respondent under the unamended CPC. In the pre-amendment era, the withdrawal or dismissal for default of the original appeal disabled the respondent to question the correctness or otherwise of any finding recorded against the respondent." 21. Insofar as case (i) was concerned and where the decree partly be against the respondent, the Supreme Court held that it would be necessary for the respondent to either file an appeal against that part of the decree or prefer a cross-objection. Proceeding then to take note of the legislative changes that had been ushered in by Act 104 of 1976, the Supreme Court, while dealing with cases (ii) and (iii), explained that under the amended Code, the respondent would have the right to assail the correctness of an adverse finding, even though the decree may be entirely in its favour without preferring a cross-objection. It fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing any cross-objection to the decree or order impugned is the exercise of right of appeal though such right is exercised in the form of taking cross-objection. The substantive right is the right of appeal; the form of cross-objection is a matter of procedure. 16. Though the statement of law made hereinabove flows simply by the reading of the relevant statutory provisions yet some available decisions may also be noticed. In Bhadurmal v. Bizaatunnisa Begum [AIR 1964 AP 365 : (1964) 1 An WR 290] a Division Bench presided over by Jaganmohan Reddy, J. (as His Lordship then was) held cross-objection to be maintainable in an appeal preferred under Sections 47 to 49 of the Hyderabad Jagirdars Debt Settlement Act, 1952 because the provisions of the Civil Procedure Code were generally applicable by virtue of Section 51 thereof. The applicability of Order 41 Rule 22 to the appeals under that Act was held not excluded merely because provisions governing grounds of appeal and court fees were specifically enacted in the Hyderabad Act. In Inayatullah Khan v. Diwanchand Mahajan [AIR 1959 MP 58 : 1958 MP LJ 786] Chief Justice M. Hidayatullah (as His Lordship then was) upheld maintainability of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such appeal. P.B. Gajendragadkar, J. (as His Lordship then was) speaking for the Court observed : (AIR p. 99, para 11) "There is no doubt that, in an ordinary civil appeal, the respondent would be entitled to support the decree under appeal on grounds other than those found by the trial court in his favour. Order 41 Rule 22 of the Code of Civil Procedure which permits the respondent to file cross-objections recognize the respondent's right to support the decree on any of the grounds decided against him by the court below. In the present case no appeal could have been preferred by Respondent 1 because she had succeeded in obtaining the declaration that the appellant's election was void and it should therefore be open to her to support the final conclusion of the High Court by contending that the other finding recorded by the High Court which would go to the root of the matter is erroneous. Prima facie there appears to be some force in this contention;" However, the Court did not express any final opinion thereon as it was considered not necessary to decide the point in that appeal. 18. We have, therefore, no doubt in our mind that right to take a cross-objection is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 39 (1) of the Act. 20. Once we hold that by taking cross-objection what is being exercised is the right of appeal itself, it follows that the subject-matter of cross-objection and the relief sought therein must conform to the requirement of Section 39 (1). In other words, a cross-objection can be preferred if the applicant could have sought for the same relief by filing an appeal in conformity with the provisions of Section 39 (1) of the Act. If the subject-matter of the cross-objection is to impugn such an order which does not fall within the purview of any of the categories contemplated by clauses (i) to (vi) of sub-section (1) of Section 39 of the Act, the cross-objection shall not be maintainable." 24. It is thus apparent that insofar as the Code is concerned, the interplay between Section 96 and Order XLI Rule 22 of the Code is no longer res integra. The question, however, which still merits consideration is whether a cross-objection would be maintainable in a second appeal which traces its genesis to Section 100 of the Code. This aspect assumes significance since Order XLI Rule 22 is placed in Chapter XLI and which primarily deals with appeals from original decrees. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions formulated by it. That was inserted in consequence to the amendment made in Section 100. Still Rule 1 of Order 42 remained unchanged. The question whether the provisions contained in Rule 10 of Order 41 apply to appeals under Letters Patent came up for consideration before the Privy Council in Sabitri Thakurain v. Savi, AIR 1921 PC 80, where it was held that the provision applies to appeals under Letters Patent as to appeal under the Civil Procedure Code. The Madhya Pradesh High Court in the decision in Satyabhamadevi v. Ramkishore, AIR 1975 MP 115 held that Order 41 applies to Letters Patent Appeals and in appeals from the decisions of a single Judge in original matters or in first appeals which lie to the High Court as of right under Clause 10 of the Letter Patent (MP). Relying on the decision in AIR 1921 PC 80, it was held that cross objection can be filed under Rule 22 as of right. The Jammu and Kashmir High Court is also of the same view. In Wali Mohd. v. Faqir Mohd., AIR 1978 J & K 92, a Full Bench of that High Court held that Order 41 of the Code of Civil Procedure applies to Letters Patent Appeals. Since Order 41 permits the filing of the cross objections by the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals by virtue of the provision in Rule 1 of Order 42 one has to see the grounds on which a cross objection can be taken in a first appeal. Under Rule 22 a cross objection can be filed only by a party who might have appealed but did not choose to file an appeal. The test to determine whether any objection can be taken by way of cross objection is to see whether the respondent could have appealed against the portion of the decree which is against him and whether he could have raised it in a memorandum of appeal. If he can raise such an objection in a memorandum of appeal he can also raise it by way of cross objections. The question therefore is whether the objection sought to be raised can be raised in a memorandum of second appeal. 19. An appeal to this Court under Section 100 lies only if this court is satisfied that the case involves a substantial question of law. If the memorandum of appeal has precisely stated the substantial question of law involved in the appeal and if this court is satisfied that such a question is involved this court has to formulate that question and hear the appeal on the question so formulated. If on the objections raised by the respondent a substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the maintainability of a cross-objection, even in a second appeal or in an appeal of the nature of section 260A of the Act, viz., Ravinder Kumar Sharma v. State of Assam reported in (1999) 7 SCC 435 relying particularly on paras. 19 to 24: "19. In connection with Order 41 rule 22 CPC after the 1976 amendment, we may first refer to the judgment of the Calcutta High Court in Nishambhu Jana v. Sova Guha [1984-85] 86 CWN 685. In that case, Mookerjee J. referred to the 54th Report of the Law Commission (at page 295, para. 41.70) to the effect that Order 41, rule 22 gave two distinct rights to the respondent in the appeal. The first was the right to uphold the decree of the court of first instance on any of the grounds which that court decided against him. In that case, the finding can be questioned by the respondent without filing cross objections. The Law Commission had accepted the correctness of the Full Bench of the Madras High Court in Venkata Rao case, AIR 1943 Mad 698. The Commission had also accepted the view of the Calcutta High Court in Nrisingha Prosad Rakshit v. Commissioners of Bhadreswar Municipality that a cross-objection was wholly unnecessary in case the adverse foldi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation now inserted by Act 104 of 1976 has made it obligatory to file cross-objections even when the respondent supports the decree by stating that the findings against him in the court below in respect of any issue ought to have been in his favour'. 22. A similar view was expressed by U. N. Bachawat J. in Tej Kumar Jain v. Purshottam, AIR 1981 MP 55 that after the 1976 amendment, it was not obligatory to file cross-objection against an adverse finding. The Explanation merely empowered the respondent to file cross-objections. 23. In our view, the opinion expressed by Mookerjee J. of the Calcutta High Court on behalf of the Division Bench in Nishambhu Jena case and the view expressed by U. N. Bachawat, J. in Tej Kumar case in the Madhya Pradesh High Court reflect the correct legal position after the 1976 amendment. We hold that the respondent-defendant in an appeal can, without filing cross-objections attack an adverse finding upon which a decree in part has been passed, against the respondent, for the purpose of sustaining the decree to the extent the lower court had dismissed the suit against the defendant-respondent. The filing of cross-objection, after the 1976 amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, and (ii) to all the appeals, under the Act. However, the applicability of such of the provisions of the Code of Civil Procedure shall be excluded as may be inconsistent with the provisions of the Act and/or of rules made thereunder. A bare reading of these provisions shows that in all the appeals filed under section 39, the provisions of the Code of Civil Procedure, 1908, would be applicable. This would include the applicability of Order 41 including the right to take any cross-objection under rule 22 thereof to appeals under section 39 of the Act." and, therefore, having regard to the language of section 39 of the Arbitration Act, 1940, the Supreme Court ruled that section 39 being in the nature of first appeal and with the provisions of Order 41 having been made applicable rule 22 of Order 41 was also attracted and applicable to an appeal under section 39 of the Act. However, in the present situation, we find such is not the case in so far as sub-section (7) of section 260A of the Act is concerned for the reason that the provisions of section 260A of the Act are more comparable to an appeal under section 100 of the Code of Civil Procedure rather an appeal under section 96 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in terms of Order 41 rule 22 is tenable in a second appeal particularly, such a question having been not raised nor made an issue in the several authorities placed before us by the learned counsel and the other authorities, which we had occasion to refer to are only incidentally touching upon the aspect and in the wake of the provisions of Order 41, rule 22 as it occurs as part of the procedure regulating the filing of a regular first appeal, it cannot be by implication extended under order 42 to attribute a right of filing a cross-objection in a section 100 appeal also. 80. A Single Bench decision of the Orissa High Court in the case of Sridhar Ghose v. Harimohan Sahu reported in [1964] AIR 1964 Orissa 141, while opines that a cross-objection in terms of Order 41, rule 22 is not tenable in a second appeal. A contrary view appears to have been taken in a Single Bench decision of the Kerala High Court in the case of Palasseri Velayudhan v. Palasseri Ithayi reported in [1994] AIR 1994 Ker 267, however, to the limited extent of the cross-objection also conforming to the requirements of a section 100 appeal. 81. We have bestowed our attention to these two authorities of the O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined the possibility of a cross objection in terms of Order 41, rule 22 of the Code of Civil Procedure being entertained in an appeal under section 260A of the Act and on such examination and we notice our examination only indicates to the contrary, that when a cross-objection is not tenable even in an appeal under section 100 of the Code of Civil Procedure, it is a fortiori so in an appeal under section 260A of the Act. 84. We find that the provisions of sub-section (7) of section 260A of the Act on which Sri Shankar, learned counsel for the assessee, has placed considerable reliance to contend that cross-objections are tenable even in an appeal under section 260A of the Act, also only enables the provisions of Code of Civil Procedure relating to the appeal to the High Court being made applicable only as far as may be and subject to the other provisions in this section or in the Act also. Sub-section (7) of section 260A of the Act figuring towards the end of the section "Expressly providing for the procedure to be followed, it should be understood to be only in respect of the procedural aspects of Order 42 that is made applicable and even there to the extent it may be made appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right of cross-objection. It is on an over all examination of all these aspects, we hold that a cross-objection is not permitted in an appeal under section 260A of the Act." 30. In our considered opinion, the question which stands posited for our consideration would have to be firstly and independently answered, bearing in mind the nature of the remedy that the Act creates and the language in which Section 260A stands couched. The said provision is extracted hereinbelow: "260A. Appeal to High Court.-(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal before the date of establishment of the National Tax Tribunal], if the High Court is satisfied that the case involves a substantial question of law. (2) The Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such] appeal under this sub-section shall be- (a) filed within one hundred and twenty days from the date on which the order appealed against is received by the assessee or the Principal Chief Commissioner or Chief Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed amendment seeks to provide that an appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law. In an appeal under the proposed new section, the Memorandum of Appeal shall precisely state the substantial question of law involving the appeal and where the appeal is made by the assessee, such appeal shall be accompanied by a fee of ten thousand rupees and shall be filed within sixty days of the date on which order is communicated to him. Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. The appeal shall be heard only on the question so formulated, and the respondents shall at the hearing of appeals, be allowed to argue that the case does not involve such question. However, nothing in this section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law, not formulated by it, if it is satisfied that the case involves such questions. The High Court shall decide the question of law so for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent that Section 260A of the Act may envisage or sanction. 35. Recourse to the Code and the judgments rendered in the context of its provision may also not provide a conclusive answer to the issue that arises for our consideration since, and in any case, learned counsels for respective sides have not cited for our consideration any judgment which may have authoritatively ruled upon the maintainability of a cross-objection in a second appeal. This, of course, subject to the observations which were rendered by the Karnataka High Court in Jyoti Kumari and the opinion expressed by a learned Single Judge of the Kerala High Court in Palasseri. However and since the question of whether a cross-objection would be maintainable in a second appeal does not directly arise for our consideration, we desist from rendering any definitive opinion on that issue. 36. For the purposes of evaluating whether a cross-objection would lie, we would thus seek to rest our opinion principally on the language in which Section 260A itself stands couched and refer to the provisions of the Code only for the purposes of a comparative analysis. It is this approach which, in our considered would be the most pru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the Appellate Court within one month from the date of service on him or his pleader of notice of the day fixed for hearing the appeal, or within such further time as the Appellate Court may see fit to allow. [Explanation.-A respondent aggrieved by a finding of the Court in the judgment on which the decree appealed against is based may, under this rule, file cross-objection in respect of the decree in so far as it is based on that finding, notwithstanding that by reason of the decision of the Court on any other finding which is sufficient for the decision of the suit, the decree, is, wholly or in part, in favour of that respondent.]" 39. Before attempting to answer the question of whether the appeal under Section 260A contemplates the filing of a cross-objection, our discussion would have to be prefaced by bearing in mind the following well-settled precepts which govern the remedy of an appeal. As has been repeatedly held, an appeal is principally a creation of statute. It is not a remedy which can be said to be either inherent or one which could be claimed as a matter of right. The right of appeal must be founded on a statutory prescription and cannot be assumed to be ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatute itself. In fact, and as was noticed in the preceding parts of this order, the Supreme Court itself while speaking on the nature of the right which Order XLI Rule 22 creates had in unambiguous terms held that a cross-objection was akin to a right to appeal. 43. However, and as we view the appellate mechanism which stands embodied in the Act, we find that the Legislature appears to have consciously desisted from adopting principles akin to Order XLI Rule 22 of the Code or specifically introducing provisions enabling the respondent in an appeal under Section 260A to prefer cross-objections. We allude to a conscious silence in light of the contrast which comes to the fore when we view Section 253 alongside Section 260A. It is pertinent to note that Section 253 of the Act makes the following provisions: "253. Appeals to the Appellate Tribunal.-(1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order- (a) an order passed by a Deputy Commissioner (Appeals) before the 1st day of October, 1998 or, as the case may be, a Principal Commissioner or Commissioner (Appeals) under Section 154, Section 158-BFA, Section 250, Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer to appeal to the Appellate Tribunal against the order. (2A) [* * *] (3) Every appeal under sub-section (1) or sub-section (2) shall be filed within two months from the end of the month in] which the order sought to be appealed against is communicated to the assessee or to the Principal Commissioner or Commissioner, as the case may be: Provided that in respect of any appeal under clause (b) of sub-section (1), this sub-section shall have effect as if for the words "sixty days", the words "thirty days" had been substituted. (3-A) [* * *] (4) The Assessing Officer or the assessee, as the case may be, on receipt of notice that an appeal against an order, has been preferred under sub-section (1) or sub-section (2) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of such order, and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3). (5) The Appellate Tribunal may ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, modifications and adaptations as may be specified in the notification: Provided that no direction shall be issued after the 31st day of March, 2025. (10) Every notification issued under sub-section (8) and sub-section (9) shall, as soon as may be after the notification is issued, be laid before each House of Parliament." 44. Thus, at the stage of an appeal reaching the board of the Tribunal, both the Revenue as well as the assessee are statutorily enabled to prefer a cross-objection on receipt of notice of an appeal by filing a memorandum in that regard. That cross-objection could be in relation to "any part of such order" and which forms the subject matter of the appeal filed before the Tribunal. The Legislature has, however, chosen not to introduce any corresponding or parallel provision in Section 260A. 45. The position which thus emerges is that while Order XLI Rule 22 explicitly enables a respondent to assail a finding or a part of the decree by which such party may be aggrieved although the ultimate judgment may be in its favour, Section 260A neither adopts nor replicates that language in express terms. Similarly, Section 260A (6) is cast in language clearly distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in respect of "any part of such order" and the same being inherently incompatible with the nature of the appeal remedy which is envisaged by Section 260A. This, since, indisputably the Section 260A appeal is restricted to a substantial question of law which may be said to arise as opposed to a wholesome or full-scale challenge to the order of the Tribunal on merits. 49. For completeness of the discussion, we then turn our attention to Section 260A (6) although no submissions were addressed by learned counsels for respective sides in its light. Sub-section (6) empowers the High Court, while considering an appeal, to rule on any issue which may have been in its opinion wrongly decided or not determined by the Tribunal. It could have been possibly urged that we should discern the existence of a distinction between the words 'order' and 'issue' as they appear in different parts of Section 260A. 50. An 'issue' as is well recognized in the field of civil procedure essentially means the identification of the substance of a dispute, the question in controversy or the point of contestation between parties. An 'order', on the other hand, is a definitive determination although it may no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court.-(1) The assessee or the Principal Commissioner or Commissioner may, within sixty days of the date upon which he is served with notice of an order passed before the 1st day of October, 1998, under Section 254, by application in the prescribed form, accompanied where the application is made by the assessee by a fee of two hundred rupees, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order and, subject to the other provisions contained in this section, the Appellate Tribunal shall, within one hundred and twenty days of the receipt of such application, draw up a statement of the case and refer it to the High Court : Provided that the Appellate Tribunal may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the period hereinbefore specified, allow it to be presented within a further period not exceeding thirty days. (2) If, on an application made under sub-section (1), the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the Principal Commissioner or Commissioner, as the case may be, may, within six mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. 12. Section 256 (1) of the Income Tax Act, 1961 entitles the assessee or the Commissioner, as the case may be, to apply to the Appellate Tribunal to refer to the High Court any question of law arising out of the order made by the Appellate Tribunal under Section 254. A period of limitation for making such application is prescribed. If the application is rejected by the Appellate Tribunal the applicant is entitled to apply to the High Court, again within a prescribed period of limitation, and the High Court may, if it is not satisfied of the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and refer it. It is clear that the statute expressly contemplates an application in that behalf by a party desiring a reference to the High Court. The application has to be filed within a prescribed period of limitation. If the application is rejected by the Appellate Tribunal, it is the applicant thus refused who is entitled to apply to the High Court. If the Appellate Tribunal allows the application made to it, Section 256 (1) requires it to draw up the statement of the case and refer it to the High Court. The statement of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer the case to the High Court to ask for a reference of those questions of law also which arise on its submissions negatived in appeal by the Appellate Tribunal. It is, as it were, recognising a right in the winning party to support the order of the Appellate Tribunal also on grounds raised before the Appellate Tribunal but negatived by it. 14. There are, therefore, those two categories, one in which a non-applicant can ask for the reference of questions of law suggested by it and the other in which it cannot. To the extent to which the courts have omitted to consider the distinction between these two categories, they have erred. There are cases where it has been held that there is an absolute bar against a non-applicant seeking a reference of questions of law on a reference application made by the other party. They include: CIT v. S.K. Srinivasan [(1970) 75 ITR 93 (Mad HC)] and CIT v. Ramdas Pharmacy [(1970) 77 ITR 276 (Mad HC)]. Cases taking the opposite extreme view are: CIT v. Bantiah Bank Ltd. [ IT Ref No 20 of 1950, decided on October 10, 1950], followed in Girdhardas & Co. Ltd.[(1957) 31 ITR 82 (Bom HC)] and Educational & Civil List Reserve Fond 1 through H.H. Maharana Bh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tived by it. Of significance was the conclusion of the Supreme Court and which had in V. Damodaran upheld the objection of the Revenue when it held that the question on which reference was sought by the assessee "involved the grant of separate and distinct reliefs" and the decision on the question does not affect the other. 55. Before closing, we deem it appropriate to notice some of the noticeable decisions which were included in the compilation which was placed on the record by Mr. Kantoor for our assistance. In Commissioner of Income Tax v. Meghalaya Steel (2015) 17 SCC 647, the Supreme Court only observed that Section 260A (7) and by which the provisions of the Code are made applicable would not detract from the inherent power of the High Court to exercise the power of review. The judgment of the Calcutta High Court in Subodh Gopal Bose v. Brojendra Kishore Roy 1952 SCC OnLine Cal 73 is of little assistance since all that it holds is that merely because some of the provisions of Order XLI of the Code are made applicable to second appeals, that would not enable a party to overlook the limitations which are otherwise engrained in Section 100 of the Code. Similarly, the Madhya Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under section 260A of the Act, questions relating to the assessment order can only be decided by this court and furthermore the appeal shall be decided only on the questions formulated by it, there was no question of granting an order of injunction and/or stay of the penalty proceeding in the appeal pending under section 260A of the Act as the High Court would only decide the questions formulated by it for decision and no other question. Therefore, Mr. Mullick contended that the provisions of Order 41, rule 5 of the Code of Civil Procedure in spite of applicability of such a provision in view of sub-section (7) of section 260A of the Act cannot be applied to the facts and circumstances of this case. We are unable to accept this submission of Mr. Mullick. From the facts stated herein earlier, it is clear that the penalty proceeding in fact, has been initiated against the assessee from the assessment order itself. The Assessing Officer, while assessing the Income-Tax dues of the assessee, had passed direction for initiating a penalty proceeding against the assessee. Therefore, it can be easily said that the penalty proceeding has been initiated pursuant to the order of assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 260A of the Act as there cannot be any dispute that the High Court, while exercising the power under section 260A of the Act is a "court" within the meaning of "court" under section 151 of the Code of Civil Procedure. The law is well settled that where the provisions of Order 41, rule 5 of the Code of Civil Procedure cannot be applied in a given case, the court can exercise the inherent power conferred under section 151 of the Code of Civil Procedure as there is no specific provisions in the Code to grant such an order of stay or injunction. Therefore, even assuming that Order 41, rule 5 of the Code of Civil Procedure cannot be applied in the present case, in our view, the High Court being a "court" is entitled to exercise the inherent power under section 151 of the Code of Civil Procedure to grant stay or to pass an order of injunction restraining the respondents from proceeding with the penalty proceeding during the pendency of the appeal. In the case of Mrs. Kavita Trehan v. Balsara Hygiene Products Ltd., (1994) 5 SCC 380 : AIR 1995 SC 441, the Supreme Court while dealing with restitution under section 144 of the Code of Civil Procedure clearly laid down the princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to computation of limitation, we are of the view that Explanation (iii) to section 275 makes it clear that the period of limitation should be excluded when any period during which the proceeding for the levy of penalty is stayed by an order or injunction of any court. From the above, an analogy can be easily drawn by us that in an appropriate situation, the High Court is not powerless to grant stay or pass an order of injunction for the purpose of staying the penalty proceeding during the pendency of the appeal. For the reasons aforesaid, we dispose of the instant application by the following directions: (a) All further penalty proceedings initiated pursuant to the notice dated March 20, 2000, shall remain stayed till the disposal of this appeal. (b) Let the hearing of the appeal be expedited. Since the Revenue has already entered appearance, service of notice of appeal be dispensed with. Let the requisite number of paper books be filed. If no such direction for filing the same has not yet been made, the same may be filed within six weeks from this date in default, put up "for orders". The appeal shall be listed within a period of two months from this date. The application for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a cross-objection the cross-objector cart only support the order made in the lower Court but cannot ask for any further relief. This is an erroneous assumption because in cross-objection a decree can be passed. The cross-objection takes the place of an appeal after it is filed and a decree from an order can be made, just as in an appeal. This is clear from a reading of Order XLI, rule 22, itself. I, therefore, overrule the contention that the cross-objection in this case is not tenable." 60. The issue again arose for consideration of that High Court in Vijay Prakash. Ruling on the aspect of whether a cross-objection would lie bearing in mind the provisions contained in Order XLII Rule 2 of Code, the High Court held as follows: "16. The amendment introduced in Order 42, Rule 2 and section 100, C.P.C. by the Act No. 104 of 1976 brought radical changes in hearing second appeals as well as cross-objections. Before this amendment, substantial question of law was not required to be framed in second appeal and once a second appeal is admitted for hearing parties, the entire decree impugned could be attacked by the appellant. But after the amendment referred to above, the entire situ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. According to Shri Agrawal, in appeal from an appellate decree, the respondent can be heard on question of fact when the same involves substantial question of law. 14. Question, therefore, is as to whether in appeal from appellate decree, i.e., second appeal the respondents can be heard to say that the findings against them in the Courts below in respect of any issue ought to have been in his favour notwithstanding the rider of section 100 or Order 42, Rule 2, Civil Procedure Code? In other words whether involvement of substantial question of law shall or shall not operate against respondent. It is worthwhile mentioning here that the rules of Order 41, apply in the case of appeal from appellate decrees so far as may be, in view of Order 42, Rule 1, Civil Procedure Code. I am of the opinion that different yard stick cannot be applied in the case of appellants and respondent on an issue of fact. In case, the appellant in second appeal from an appellate decree cannot be heard on an issue of fact, unless the same involves substantial question of law, for parity of reasons respondents will also have to pass the same test and satisfy to the Court that the decision on an issue involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of law is another thing. In the case of former, the respondent does not have a say on admission, while in the case of latter, the respondent has got a vested right to put forth his case and contest the matter. Therefore, right to file a cross objection, even before admission, does not arise since the second appeal has not been entertained by the High Court by framing the substantial question of law. In the eyes of the respondent, pendency of the second appeal before admission has not given him the right to file the cross objection, as the cause of action to do so has not arisen. Let us assume that the appeal is dismissed at the admission stage itself on the reason that there is no substantial question of law. This is what the position similar to the dismissal of the appeal under Order 41 Rule 11 CPC. Only when the second appeal is admitted, the respondent will be called upon to answer the substantial question of law so framed. Therefore, I am of the considered view that there is no necessity for the respondent to file the cross objection within 30 days from the date of receipt of notice in the second appeal before admission and on the other hand, he can wait for the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p of an appeal which came to be instituted before that High Court under Section 35G of the Central Excise Act, 1944 [Central Excise Act]. One of the questions that came to be raised was whether the cross-objection filed by the respondent would be maintainable in light of Section 35G (9) of the Central Excise Act and which is pari materia to Section 260A (7) of the Act. 67. However, it becomes pertinent to note that the appeal itself arose from a judgment of the Customs Excise & Service Tax Appellate Tribunal [CESTAT], and which had partly allowed the appeal of the Department while confirming the demand of service tax along with interest. It is this part of the order of the Tribunal that led to the filing of a cross-objection. The assessee in that case was thus faced with part of the demand of service tax having been upheld. The observations thus rendered by that High Court would have to be appreciated in the aforesaid light. In Chhattisgarh State Industrial Development Corp. Ltd., the Chhattisgarh High Court thus held as follows: "2. Thereafter, on the respondents filing cross-objection, the maintainability of which was objected by the appellant, this Court framed the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (AIR 1965 SC 669) negatived the contention that the respondent was not competent to challenge the correctness of a finding as he had not preferred an appeal and said "We cannot lose sight of the fact that normally a party in whose favour the judgment appealed from has been given will not be granted special leave to appeal from it. Considerations of justice, therefore require that this Court should in appropriate cases permit a party placed in such a position to support the judgment in his favour even upon grounds which were negatived in that judgment". 15. We have, thus, no hesitation in answering the second question that cross-objection filed by the respondent is maintainable, however, at the time of hearing of appeal respondent's counsel failed to persuade us to frame any other question of law touching upon its liability to pay service tax on the ground that the Corporation having providing services in the sovereign capacity, it is not liable to pay service tax. Even otherwise we have already dealt with the circular issued by the C.B.D.T. (Central Board of Direct Taxes) holding that the maintenance services and other services provided by the respondent CSIDC to the industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be admitted. 72. This would also be in line with the decisions rendered in the context of the Code and the maintainability of cross-objections in a second appeal and where it was held that in case the objection be indelibly coupled to the main question, there would be no legal requirement of preferring cross-objections separately. This since the same would merely entail the respondent seeking to press an issue though decided against it, in support of the ultimate decision rendered. 73. We also bear in mind the indisputable fact that the present applicants had preferred cross-objections before the Tribunal which came to be partly allowed. For instance, while Ground Nos. 1 and 2 thereof came to be rejected, Ground No. 3 came to be partly allowed alongside Ground No. 6 of the Revenue. The cross-objections thus came to be partly allowed. It was the stand of the respondent itself that a cross-objection is akin to an appeal. If that were so, the applicant could have possibly taken appropriate steps to assail the order of the Tribunal to the extent that it was so aggrieved. However, and for reasons assigned above, the remedy was clearly not that of a cross-objection. 74. We would t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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