M/s XYZ Pvt. Ltd., aggrieved by the order of Appellate Tribunal, filed an appeal to the High Court. The High Court without itself framing the…

Issue Involved: The issue under consideration is whether the High Court is justified in not framing any substantial question of law itself and adjudicating merely on the questions put forth by the appellant. Relevant provision of law: Section 260A (1) provides 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. As per section 260A (3) and 260A (4) , if the High Court is so satisfied, it shall formulate that question and the appeal shall be heard only on the question so formulated. Analysis: There lies a distinction between the questions proposed by the appellant for admission of the appeal to the High Court and the questions framed by the High Court. The questions, which are proposed by the appellant, fall under section 260A (2) (c) whereas the questions framed by the High Court fall under section 260A (3) . Section 260A (4) provides that the appeal is to be heard on merits only on the questions formulated by the High Court under section 260A (3) and not on the questions proposed by the appellant. In case the High Court is of the view that the appeal did not involve any substantial question of law, it should have recorded a categorical finding to the effect 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 rigour of section 260A for its admission and accordingly, should have dismissed the appeal at the preliminary stage itself. Conclusion: However, this was not done in this case. Instead, the appeal was heard only on the questions urged by the appellant u/s 260A (2) (c). Accordingly, the action taken by the High Court was not valid, since it did not decide the appeal in conformity with the mandatory procedure prescribed in section 260A. Note: The facts given in the question are similar to the facts in CIT v. A.A. Estate Pvt. Ltd. [2019] 413 ITR 438, wherein the issue came up before the Supreme Court. The above answer is based on the rationale of the Supreme Court in the said case.