The Supreme Court has held that the procedure adopted by HC is not in consonance with what Section 260A contemplates, hence, sets aside the impugned judgment on this ground alone and remands HC for re-consideration of Revenue’s appeal having regard to the essentials of Section 260A and in accordance with law

Division bench of Justice B.V. Nagarathna and Justice Ujjal Bhuyan clarified that the judgment is set aside only on the procedural issue, thus, all the contentions on the merits of the matter are left open to be urged before High Court.

SC sets aside the Delhi HC judgment by holding that the HC “did not formulate any substantial question of law at the time of admitting the appeal, rather the appeal was heard on merits and in the absence of formulating the substantial question of law the appeal was reserved for judgment..

The Apex Court analysed Section 260A and observes that High Court is either to admit or not admit the appeal and if HC admits the appeal then substantial question(s) of law has to be framed with a notice to the respondent whereas if HC opines that no substantial question of law arises, then the appeal has to be dismissed.

SC: Expounds on procedure governing admission of appeal under Sec.260A; Sets aside HC ruling

The SC observes that while entertaining an appeal HC must formulate the question and admit the appeal, thereafter, on the question so formulated the respondent must also be heard and consequently the matter must be disposed of depending on whether the substantial question of law requires to be answered for or against either of the parties or no such question of law would arise.

Further observes that HC also has the power to formulate a fresh question of law if it so arises in the course of hearing.

Delhi HC, by the impugned judgment, had restored the addition of Rs.2.68 Cr. under Section 68 in respect of loans/advances received from four parties as the Assessee failed to discharge the ‘initial’ onus of establishing creditworthiness and genuineness qua the credito.

Case Title: Bikram Singh v/s PCIT