Interpretation of "Such Question" in Section 260A(5) (of Income Tax Act, 1961) Clarified by the Supreme Court.

The Supreme Court has allowed the appeals filed by the assessee and set aside the order of the High Court. The case involves a bunch of appeals filed by both the assessee and the Commissioner of Income Tax under Section 260-A (of Income Tax Act, 1961). The High Court dismissed the appeals filed by the assessee and allowed the appeals filed by the Commissioner. However, the Supreme Court found that the High Court did not frame any questions of law as required under Section 260-A(3) (of Income Tax Act, 1961). The Court cited a recent judgment and clarified that the questions framed by the High Court are essential for hearing the appeal on merits. Therefore, the case is remanded back to the High Court to decide the appeals afresh after framing appropriate substantial questions of law. The Court has not expressed any opinion on the merits of the case and the High Court is instructed to decide the appeals strictly in accordance with the law.

1. Leave granted.

2. These appeals are filed against the final judgment and order dated 26.02.2016 passed by the High Court of Karnataka, Circuit Bench at Dharwad in ITA Nos.100111­100120 of 2015 whereby the High Court dismissed the ITAs filed by the appellant(assessee) herein.

3. These appeals are filed by the assessee against the order passed by the High Court by which a bunch of appeals, some filed by the assessee and

some filed by the Commissioner of Income Tax (Revenue) under Section 260 (of Income Tax Act, 1961)­A of the Income Tax Act, 1961(hereinafter referred to as “the Act”) were

disposed of.

4. So far as the appeals filed by the assessee were concerned, they were dismissed and so far as the appeals filed by the Commissioner of Income Tax

were concerned, they were allowed. The assessee has felt aggrieved and has filed these appeals by way of special leave in this Court.

5. We do not consider it necessary to set out the facts of the case in detail in the light of the order that we are passing for the disposal of these appeals.

6. Heard Ms. Anitha Shenai, learned senior counsel for the appellant(assessee) and Mr. K. Radhakrishnan, learned senior counsel for the

respondents.

7. Having heard the learned counsel for the

parties and on perusal of the record of the case, we

are inclined to allow these appeals, set aside the

impugned order and remand the case to the High

Court with a request to decide the appeals afresh on

merits in accordance with law.

8. The need to remand these appeals is called for

because from the perusal of the order, we find that

in Para 4, the High Court observed, "Assessee has

raised the following questions of law in its appeals”

and then set out four questions. Likewise, in Para 5,

the High Court observed, "Revenue has raised the

following questions of law in its appeals” and then

set out three questions.

9. It is not in dispute that the High Court did not frame any question as required under Section 260 (of Income Tax Act, 1961)­A (3) of the Act.

10. This Court recently examined this question in Civil Appeal No.3968 of 2019 arising out of S.L.P.(c) No.29524 of 2017 (PR. Commissioner of Income

Tax Central­2 vs. M/s A.A. Estate Pvt. Ltd.) decided on 16.04.2019. Paras 21 to 26 and 28 are apposite which read as under:

“21. As is clear from reading of Para 2, the two questions set out in Para 2 were not the questions framed by the High Court as was required to be framed under Section 260 (of Income Tax Act, 1961)­A(3) of the Act for hearing the appeal but were the

questions urged by the appellant.

22. In our view, there lies a distinction between the questions proposed by the appellant for admission of the appeal and the questions framed by the Court.

23. The questions, which are proposed by the appellant, fall under Section 260 (of Income Tax Act, 1961)­A (2) (c) of the Act whereas the questions framed by the High Court fall under Section 260 (of Income Tax Act, 1961)­A (3) of the Act. The appeal is heard on merits only

on the questions framed by the High Court under sub­section (3) of Section 260 (of Income Tax Act, 1961)­A of the Act as provided under Section 260 (of Income Tax Act, 1961)­A (4) of the Act. In other words, the appeal is heard only on the questions framed by the Court.

24. Third, if the High Court was of the view that the appeal did not involve any substantial question of law, it should have recorded a categorical finding to that effect saying that the questions proposed by the

appellant either do not arise in the case or/and are not substantial questions of law so as to attract the rigor of Section 260 (of Income Tax Act, 1961)­A of the

Act for its admission and accordingly should have dismissed the appeal in limine.

25. It was, however, not done and instead the High Court without admitting the appeal and framing any question of law issued notice of appeal to the respondent ­assessee, heard both the parties on the questions urged by

the appellant and dismissed it. In our view, the respondent had a right to argue “at the time of hearing” of the appeal that the questions framed were not involved in the appeal and this the respondent could urge by

taking recourse to sub­ section (5) of Section 260 (of Income Tax Act, 1961)­A of the Act. But this stage in this case did not arise because as mentioned above, the High Court neither admitted the appealnor framed any question as required under

sub­section (3) of Section 260 (of Income Tax Act, 1961)­A of the Act.

The expression “such question” referred to in sub­ section (5) of Section 260 (of Income Tax Act, 1961)­A of the Act means the questions which are framed by the High Court under sub­section (3) of Section 260 (of Income Tax Act, 1961)­A at the time of admission of the appeal

and not the one proposed in Section 260 (of Income Tax Act, 1961)­A (2) (c) of the Act by the appellant.

26. We are, therefore, of the view that the

High Court did not decide the appeal in

conformity with the mandatory procedure

prescribed in Section 260 (of Income Tax Act, 1961)­A of the Act.

28. In the light of the foregoing discussion,

we consider it just and proper to remand the

case to the High Court for deciding the

appeal afresh to answer the questions framed

above on merits in accordance with law.”

11. The facts of the case at hand and the one

involved in M/s A.A. Estate Pvt. Ltd. quoted above

are identical and, therefore, keeping in view the law

laid down by this Court in M/s A.A. Estate Pvt.

Ltd.(supra), these appeals have to be allowed and

the case needs to be remanded to the High Court for

hearing afresh on merits.

12. In view of the foregoing discussion, the appeals

are allowed. The impugned order is set aside. The

appeals are remanded to the High Court for hearing

afresh only after framing appropriate substantial

question(s) of law as required under Section 260 (of Income Tax Act, 1961)­

A(3) of the Act.

13. Having formed an opinion to remand the case

to the High Court, we have not expressed any

opinion on the merits of the issues involved in these

appeals. The High Court will, therefore, decide the

appeals strictly in accordance with law,

uninfluenced by any observations made in the

impugned order and in this order.

[ABHAY MANOHAR SAPRE]

[DINESH MAHESHWARI]

New Delhi;

May 01, 2019