Section 260A- judgments of honourable Supreme Court about procedure for dismissal of appeal in limine and admitting appeal on substantial question of law need reconsideration – to avoid plethora of litigation.

[CA DEV KUMAR KOTHARI]

Section 260A  and 261 of the Income-tax  Act.

 Section 100 of the Code of Civil Procedure, 1908.

Issue: Substantial Question of law (SQL)

2019 (3) TMI 66 - SUPREME COURT  COMMISSIONER OF INCOME TAX-I VERSUS M/S RASHTRADOOT (HUF) CIVIL APPEAL No. 2362 OF 2019 (Arising out of S.L.P.(C) No.20075 of 2017) Dated: - 27 February 2019.  Honorable Judges ABHAY MANOHAR SAPRE and DINESH MAHESHWARI, JJ.

2019 (3) TMI 903 - SUPREME COURT  THE PRINCIPAL COMMISSIONER OF INCOME TAX-8 VERSUS M/S YES BANK LTD. CIVIL APPEAL No.3148 OF 2019 (Arising out of S.L.P.(C) No.7118 of 2018)  Dated: - 15 March 2019   honorable judges Abhay Manohar Sapre And Dinesh Maheshwari, JJ.  

2019 (4) TMI 957 - SUPREME COURT  PR. COMMISSIONER OF INCOME TAX, CENTRAL 2 VERSUS M/S A.A. ESTATE PVT. LTD. CIVIL APPEAL No.3968 OF 2019 (Arising out of S.L.P.(C) No.29524 of 2017)  Dated: - 16 April 2019  honorable judges Abhay Manohar Sapre And Dinesh Maheshwari, JJ.  

2019 (5) TMI 201 - SUPREME COURT RYATAR SAHAKARI SAKKARRE KARKHANE NIYAMIT VERSUS ASST. COMMISSIONER OF INCOME TAX-C-1 & ORS. CIVIL APPEAL Nos. 4515-4524 OF 2019 (Arising out of S.L.P.(C) Nos.14053-14062 of 2017)  Dated: - 01 May 2019. Honorable   judges: ABHAY MANOHAR SAPRE And DINESH MAHESHWARI, JJ.

2019 (5) TMI 1219 - SUPREME COURT -  LAL BAHADUR GAUTAM VERSUS STATE OF U.P. AND OTHERS CIVIL APPEAL NO(s). 4794 OF 2019  Dated: - 08 May 2019- on aspect of Advocates also act  as officer of Court.

General understanding:

Appeal against order of Tribunal can be filed by any aggrieved party that is by revenue and assesse or both. High Court can admit appeal on any substantial question of law (in short SQL)  raised by the appellant  as it is or in modified form and can also admit other substantial question of law, if for reasons recorded by the High Court more substantial question of law arises. An appeal can also be dismissed even after admitting the appeal if High Court later find that the SQL framed  is not  a SQL requiring answer.

Whether there is a SQL- need of hearing:

As per understanding and experience of author and regular reading of orders of High Courts on appeal u.s. 260A it is felt that , hearing of parties to the appeal is important to decide whether SQL arises from the order of Tribunal. The appellant can raise his contentions as to how there is a SQL and respondent  can raise his contention as to how there is no SQL.

It is worth to mention that Advocates appearing before the Court are also officers of the Court and they are expected and are duty bound to assist the Court to render justice. Therefore, assistance of Advocates of parties to appeal is also very important and that can be availed only if Advocates of both parties are heard.  Regarding nature of Advocates as officers of Court reference can be made to judgment reported as 2019 (5) TMI 1219 - SUPREME COURT -  LAL BAHADUR GAUTAM VERSUS STATE OF U.P. AND OTHERS CIVIL APPEAL NO(s). 4794 OF 2019  Dated: - 08 May 2019  and other judgments referred to therein.

Section 260A and 261 both need to be read together and in harmonious manner:

The purpose of assesse appellant may be restricted to seek justice in his case and the answer on SQL will be important in his case for the year for which appeal is filed and other years for  which answer to SQL will be relevant. 

However the purpose of revenue as  appellant as well as respondent  will be very wider  because  answer on SQL   will have binding effect in case of many  assesse for many years in which law remain same or similar.

Besides as per understanding of author one of important purpose of appeal before High Court u.s. 260A and appeal before the Supreme Court u.s. 261 is determination of law on SQL  and judgment of High Court will be binding within its jurisdiction and judgment of the Supreme Court will be binding allover India. In many situations answer on SQL by any High Court can be binding in area of other High Court and will have effect of persuasive until and unless the jurisdictional High Court   has taken

Therefore, even in such appeals important aspect of determination of law by courts through judicial examination of law and pronouncements of law by answering SQL  is  very important for the parties to appeal as well as general public.

Discussion about procedural aspect:

In case of Rashtradoot (HUF) Supra. The Supreme Court has considered/ decided on the following lines:

From judgment	Observations/ remarks of author:
11. That apart, we find that the High Court committed another error. The High Court while deciding the appeal heard the learned counsel for the parties, yet did not frame any substantial question of law arising in the case.	As per judgment, if parties are heard, then SQL must be framed. This need reconsideration because if after hearing parties it is found that no SQL arises, then there is no need to frame SQL in fact no SQL can be framed. As discussed in preamble of this article, with due respect, author feel that hearing of counsels is important even to find out whether any SQL is arising from the order of Tribunal.
12. Section 260A of the Act is akin to Section 100 of the Code of Civil Procedure, 1908 (hereinafter referred to as “the Code”) with addition of sub-sections (6)(a),6(b) and (7) of Section 260A of the Act.	Appeals under tax laws can be considered of different nature from general appeals for the reason that at least one of party in all such appeals is the same that is GOI though appeals are filed and represented through concerned officers and counsels. The judgment  will be applicable in all similar cases on SQL decided by the Supreme Court and High Courts in many situations, e.g. when revenue accepts judgment of High Court. .
13. The High Court has jurisdiction to dismiss the appeal filed under Section 260A of the Act on the ground that it does not involve any substantial question of law. Such dismissal is considered as a dismissal of the appeal in limine, i.e., dismissal without issuing any notice of appeal to the respondent and without hearing the respondent.	As discussed earlier, issue of notice and hearing of parties are important procedure in determination whether SQL arises from the order of Tribunal. Even for preliminary  decision, whether any SQL arises, hearing of counsels of parties is important to do justice.
14. The High Court has also the jurisdiction to dismiss the appeal by answering the question(s) framed on merits or by dismissing the appeal on the ground that the question(s) though framed but such question(s) does/do not arise in the appeal. The High Court, though may not have framed any particular question at the time of admitting the appeal along with other question, yet it has the jurisdiction to frame additional question at a later stage before final hearing of the appeal by assigning reasons as provided in proviso to Section 260A(4) and Section 260A(5) of the Act and lastly, the High Court has jurisdiction to allow the appeal but this the High Court can do only after framing the substantial question(s) of law and hearing the respondent by answering the question(s) framed in appellant’s favour.	With due respect author feels that the view taken by honorable SC is very technical view based on strict interpretation of provision. If such view is taken then in most of cases, first of all, High Court will have to admit appeal , frame SQL then answer such SQL or taken a view that SQL though framed does not arise and need not be  answered.
15. However, in this case, we find that the High Court did not dismiss the appeal in limine but dismissed it after hearing both the parties. In such a situation, the High Court should have framed the question(s) and answered them by assigning the reasons accordingly one way or the other by exercising powers under subsections (4) and (5) of Section 260A of the Act.
16. As mentioned above, in the absence of any discussion or/and the reasoning/ground as to why the order of ITAT does not suffer from any illegality and why the grounds of Revenue are not acceptable and why the appeal does not involve any substantial question(s) of law or though framed cannot be answered in Revenue’s favour, the impugned order suffers from jurisdictional errors and, therefore, legally unsustainable for want of compliance of the requirements of subsections (4) and (5) of Section 260A of the Act.
17. This Court has consistently laid emphasis that every order/judgment, which decides the lis between the parties, must contain the reason(s)/ground(s) for arriving at a particular conclusion.	Author fully agree with this aspect and hope that in future all orders passed by all authorities will be speaking orders. Even honorable Supreme Court, is requested to pass speaking orders so that readers of order can understand reason of the order or judgment from the point of view, otherwise one has to consider the point of view as discussed and decided by High Court.
18. Indeed, what is decisive for deciding the case is not the conclusion alone but the reason(s)/ground(s) assigned in support of such conclusion, which results in reaching to such conclusion.	This rule is unfortunately not followed even by lowest authority like Assessing Officer who generally do not discuss, at all, or discuss very summarily, about claims allowed. Many officers make lengthy discussions about claims disallowed even if such disallowance is contrary to law settled by Courts. In another article author has also expressed view that in present days , even judgments of honorable Supreme Court can serve in better manner, if they are speaking because review and reconsideration of judgments of the Supreme Court by larger bench is also experienced and instances are likely to increase.
19. In order to decide as to whether the impugned order is legally sustainable or not, the Appellate Court is entitled to know as to what impelled the Court below to pass such order in favour of one party and against the aggrieved party. We find that this requirement is missing in the impugned order of this case and hence the interference is called for. (See State of Maharashtra vs. Vithal Rao Pritirao Chawan, (1981) 4 SCC 129 = 1981 (7) TMI 246 - SC ORDER, Jawahar Lal Singh vs. Naresh Singh & Ors., (1987) 2 SCC 222 = 1987 (2) TMI 512 - SUPREME COURT, State of U.P. vs. Battan & Ors., (2001) 10 SCC 607 = 2000 (5) TMI 1074 - SUPREME COURT, Raj Kishore Jha vs. State of Bihar & Ors., (2003) 11 SCC 519 = 2003 (10) TMI 640 - SUPREME COURT and State of Orissa vs. Dhaniram Luhar, (2004) 5 SCC 568) = 2004 (2) TMI 687 - SUPREME COUR.	This is very important and is equally important in case of orders passed by original authority and other appellate authority, revisionary authority, tribunals, High Court and even the Supreme Court. Besides appellate authority, parties to case must also have some idea as to what were reason that decided the matter in a way or another. The appellant and respondent both , and also public at large who is affected by judgment of the Supreme Court  should be able to   know, why  the judgment is passed  in one way or other. Merely dismissal of appeal leaves readers of the judgment unsatisfied about reasons for the same.
20. In view of the foregoing discussion, we allow the appeal, set aside the impugned order and remand the case to the High Court with a request to decide the appeal filed by the Revenue (Commissioner of Income Tax) afresh on merits in accordance with law.	If the view taken about requirement of framing SQL, if hearing has taken place,  then in large proportion of  cases in which High Courts have dismissed appeal , after hearing parties,  for the reason that no SQL arise, will   have to be restored to the High Court, as have been in some of cases mentioned in the preamble of the article.

Another point to be observed is that an appeal against the judgment or order of High Court can be made before the Supreme  Court u.s. 261, in any case which the High Court certifies to be a fit one for appeal to the Supreme Court.

Therefore, unless order or judgment of High Court is speaking it will be difficult for the Supreme Court to adjudicate the same. For passing of order or judgment in a speaking manner , by the High Court, it is necessary and important that the High  hears parties to appeal. Therefore, even for deciding whether there is any SQL, hearing of parties is essential. In the hearing Advocates of parties can advance their contention on important aspects like:

1.   Whether, there is only question of fact and no question of law?

2.   Whether,  there is any  question of law involved?

3.    Whether,  the  question of law involved is on the nature of ‘substantial question of law’?

4. Whether, there is mixed question of law and facts?

5. Whether, finding recorded by Tribunal are correct or wrong and perverse  giving rise to SQL?

Without assistance of Advocates, it will be very difficult for the High Court to properly appreciate facts and law and to decide whether there is SQL. Even in formulation of SQL, assistance of advocates can be taken.

Therefore, author feels that the judgments of the Supreme Court needs reconsideration on the aspects that if High Court decides that there is no SQL then order should be in limine and  if  notice is issued and parties are heard, then High Court must first  formulate SQL and then only can answer SQL or hold that though SQL has been formulated but it is not a  SQL  or a substantial SQL which require answer. 

Statutory Provisions

Income-tax Act, 1961

¹[CC.-Appeals to High Court

Appeal to High Court.

260A. (1) 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.

(2) [The [Principal Chief Commissioner or] Chief Commissioner or [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 assesse or the [Principal Chief Commissioner or] Chief Commissioner or ⁸[Principal Commissioner or] Commissioner];

(b) ⁵[***]

(c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.

⁷[(2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.]

(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.

(4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question :

Provided that nothing in this sub-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 question.

(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

(6) The High Court may determine any issue which-

(a) has not been determined by the Appellate Tribunal; or

(b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1).

⁶[(7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.]

 D.-Appeals to the Supreme Court

Appeal to Supreme Court.

261. An appeal shall lie to the Supreme Court from any judgment of the High Court delivered ¹[********] on a reference made under section 256 ²[against an order made under section 254 before the 1st day of October, 1998 or an appeal made to High Court in respect of an order passed under section 254 on or after that date] in any case which the High Court certifies to be a fit one for appeal to the Supreme Court.

 From the Code of Civil Procedures:

Appeals from appellate decrees

100. Second appeal? (1) Save as otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie to the High Court from every decree passed in appeal by any Court subordinate to the High Court, if the High Court is satisfied that the case involves a substantial question of law.

 (2) An appeal may lie under this section from an appellate decree passed ex parte.

(3) In an appeal under this section, the memorandum of appeal shall precisely state the substantial question of law involved in the appeal.

(4) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.

(5) The appeal shall be heard on the question so formulated and the respondent shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question :

 Provided that nothing in this sub-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 question.]