The Calcutta High Court has held that a respondent can file cross-objections in an income tax appeal under Section 260A of the Income Tax Act, 1961, even though the provision does not expressly confer such a right.
The Bench of Justice Rajarshi Bharadwaj and Justice Sudip Deb ruled that Section 260A(7), which makes the provisions of the Code of Civil Procedure governing appeals to the High Court applicable to income tax appeals, incorporates the mechanism for cross-objections under Order XLI Rule 22.
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The Court, however, clarified that a cross-objection must challenge a portion of the Income Tax Appellate Tribunal’s order adverse to the respondent and must involve a substantial question of law. It cannot expand the High Court’s jurisdiction to decide factual disputes or matters that do not arise from the Tribunal’s order.
The judgment arose in an appeal filed by the Principal Commissioner of Income Tax against the assessee. The company had filed cross-objections in the Revenue’s appeal, prompting the department to question their maintainability.
The underlying appeal involved several tax issues, including the application of Section 80IA(8) to electricity sales, disallowance under Section 14A read with Rule 8D, additional depreciation and the treatment of an interest subsidy.
The High Court had initially formulated substantial questions of law on March 11, 2020. On May 14, 2026, it reframed the question concerning Section 14A to examine whether the Tribunal had erred in directing the Assessing Officer to exclude investments in subsidiary companies while computing disallowance.
The Bench noted that three questions proposed in assessee’s cross-objections were interlinked with this reframed question. Since the company’s proposed questions had not yet been admitted, the Court decided to first determine whether cross-objections were legally maintainable.
The department contended that a right of appeal is statutory and cannot be presumed. According to the department, Section 260A does not specifically provide for cross-objections, and the general application of the Code of Civil Procedure cannot independently create that right.
It contrasted Section 260A with Section 253, which expressly provides for cross-objections before the Tribunal. The department argued that this difference reflected a legislative choice and that a respondent seeking to challenge an adverse portion of the Tribunal’s order must file a separate appeal before the High Court.
The Revenue also maintained that the Income Tax Act is a self-contained code. It relied on the Karnataka High Court’s decision in Smt. Jyoti Kumari v. Assistant Commissioner of Income-Tax and the Delhi High Court’s decision in Principal Commissioner of Income-Tax v. Nagar Dairy Pvt. Ltd.
The assessee argued that Section 260A(7) must be read together with Sections 100 and 103, Order XLI and Order XLII of the Code of Civil Procedure.
The company submitted that Order XLI Rule 22 permits a respondent to challenge an adverse part of a decree through cross-objections, while Order XLII extends the rules governing first appeals, so far as applicable, to second appeals.
It also relied on Supreme Court decisions recognising the availability of cross-objections in second appeals and describing an appeal under Section 260A as analogous to a second appeal.
Accepting the company’s position on maintainability, the High Court held that Section 260A(7) provides a statutory mechanism for incorporating civil appellate procedure, subject to compatibility with the scheme of income tax appeals.
The Bench found no inconsistency between Order XLI Rule 22 and Section 260A. The absence of an express reference to cross-objections in Section 260A did not exclude their availability.
“Such right need not be spelt out specifically,” the Court observed.
The Bench explained that Order XLI Rule 22 allows a respondent both to support the decision under challenge and to contest the portion adverse to it. Order XLII Rule 1, in turn, makes the rules of Order XLI applicable, so far as may be, to second appeals.
The Court referred to Hari Shankar Rastogi v. Sham Manohar, in which the Supreme Court recognised the application of Order XLI Rule 22 to second appeals. It also relied on Bikram Singh v. Principal Commissioner of Income-Tax, which treated an appeal under Section 260A as akin to a second appeal.
The Court rejected the argument that the specific cross-objection provision in Section 253 necessarily barred a similar procedure before the High Court.
It explained that Section 253 expressly regulates the time and manner of filing cross-objections before the Tribunal, whereas Section 260A incorporates the relevant provisions of the Code of Civil Procedure for High Court appeals.
Consequently, the absence of a separate, self-contained cross-objection provision in Section 260A was insufficient to exclude the procedure available under Order XLI Rule 22.
The Bench also referred to the Supreme Court’s decision in Municipal Corporation of Delhi v. International Security & Intelligence Agency Ltd., distinguishing the procedural form of cross-objections from the substantive right of appeal.
While acknowledging that the Income Tax Act is a self-contained code, the Court held that this did not negate the express incorporation of civil procedure under Section 260A(7).
The Bench emphasised that recognising cross-objections does not dilute the jurisdictional requirements governing appeals under Section 260A.
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