In CIT vs. Shriram Ownership Trust (2020) (122 taxmann.com 155), the Madras High Court has held that a Respondent in an appeal filed u/s 260A of the Act is not entitled to challenge an adverse finding by the Tribunal. Advocate Sukhsagar Syal has explained the implications of the judgement and argued that it requires reconsideration. He has also offered practical suggestions on what litigants should do to safeguard their interests
1. A litigant approaches a Court expecting and praying for a specified set of reliefs under the relevant laws, but what does the law expect of a litigant? How far and to what extent should a party pursue litigation? Whether even after obtaining complete relief from an appellate forum (for instance Tribunal), is the winning party entitled to challenge such an order in appeal before a higher forum, if one or more of the grounds were decided against it, even though the issue was decided in its favour on another ground(s)? In a recent judgement in the case of CIT vs. Shriram Ownership Trust (2020) (122 taxmann.com 155), the Madras High Court has held that a Respondent in an appeal filed u/s 260A of the Act is not entitled to challenge an adverse finding by the Tribunal. Advocate Sukhsagar Syal has explained the implications of the judgement and argued that it requires reconsideration. He has also offered practical suggestions on what litigants should do to safeguard their interests”>CIT vs. Shriram Ownership Trust (2020) (122 taxmann.com 155), the Madras High Court had an occasion to consider this issue.
2. The assessee therein had inter alia challenged an addition under section 56(2)(vii) of the Income-tax Act, 1961 (‘the Act’). In addition to challenging the correctness of the addition on its merits, the assessee had also raised a jurisdictional ground calling into question the jurisdiction of the JCIT in giving directions under section 144A of the Act. The Tribunal decided the jurisdictional ground against the assessee, however, it concurred with the assessee on the merits of the case and, accordingly, the addition was deleted. The assessee, having effectively succeeded before the Tribunal, did not file an appeal to the High Court against the adverse finding of the Tribunal on its jurisdictional ground. The Department, in its appeal, assailed the order of the Tribunal on the merits of the addition. When the matter came up for hearing, the assessee, in the capacity of a Respondent, urged the High Court to also adjudicate on the jurisdictional ground, which was decided against it by the Tribunal. The High Court rejected this plea. In doing so, the High Court held that as the assessee had not filed an appeal challenging such adverse finding, it could not seek such a relief in the appeal filed by the Department.
3. Having appreciated the Court’s reasoning, it may be worthwhile to examine some further aspects to this issue, which were perhaps, not brought to the Court’s attention. An attempt has been made in this write-up to examine such other aspects and explore if there exists a view, contrary to the one adopted by the Madras High Court, and understand the approach that a winning party is expected to adopt in cases of this nature.
No appeal against an adverse finding
4. At the outset, it is to be appreciated that no appeal lies against an adverse finding (1) . In order to assail an order in appeal, the appellant must be ‘aggrieved by the order’ and not just ‘aggrieved by a finding’ therein (2) . The principle emerging from these judgements seems to be that if a party has obtained effective relief before a Court, it is expected to put a quietus to the issue and not agitate it any further. A party is not permitted to file an appeal which is academic in nature and the outcome of which will have no bearing on the inter se rights and obligations of the parties.This is a legitimate expectation which the State has from its subject, i.e. when a Court has passed, in effect, an order favourable to a party, then the successful party is not expected to challenge the order any further on the grounds which, though decided against it, do not adversely affect it.
Cross-objection against an adverse finding
5. The second question is if a cross objection can be filed by the Respondent in such cases. For this purpose, the relevant provisions of the Act need to be taken note of. Section 260A of the Act deals with appeals before the High Court against the orders passed by the Tribunal. Sub-section (7) thereof, makes applicable the provisions of the Code of Civil Procedure, 1908 (‘CPC’) in so far as they apply to appeals to the High Court.The provisions of section 260A are in parimateriawith section 100 of the CPC, which deals with appeals from appellate decrees. Order 42 of the CPC, which is placed in Schedule 1, prescribes rules in this regard. Rule 1 thereof in turn refers to and incorporates the rules of Order 41. For the purpose of the presentdiscussion, Rule 22 of Order 41 is relevant. The Rule reads thus-
“(1) Any respondent, though he may not have appealed from any part of the decree, may not only support the decree but may also state that the finding against him in the Court below in respect of any issue ought to have been in his favour; and may also take any cross-objection to the decree which he could have taken by way of appeal provided he has filed such objection in the Appellate Court within one month from the date of service on him or his pleader of notice of the day fixed for hearing the appeal, or within such further time as the Appellate Court may see fit to allow.
Explanation. —A respondent aggrieved by a finding of the Court in the judgment on which the decree appealed against is based may, under this rule, file cross-objection in respect of the decree in so far as it is based on that finding, notwithstanding that by reason of the decision of the Court on any other finding which is sufficient for the decision of the suit, the decree, is, wholly or in part, in favour of that respondent.
(4) Where, in any case in which any respondent has under this rule filed a memorandum of objection, the original appeal is withdrawn or is dismissed for default, the objection so filed may nevertheless be heard and determined after such notice to the other parties as the Court thinks fit.”
6. The Rule, therefore, permits a Respondent to challenge an adverse finding or a ground, notwithstanding the fact that the final outcome of the order appealed against was in its favour. It is of relevance to appreciate that the Rule uses the word ‘may’. Therefore, it merely permits, and in no manner requires the Respondent to file a cross-objection to challenge such a finding or a ground.
7. The Supreme Court in the case of Banarsi and Others vs. Ram Phal (2003) (AIR SC 1989) elucidated the import of this Rule. It was held therein that where an order is entirely in favour of the Respondent, though one of the grounds has been decided against it, the Respondent is entitled to(emphasis supplied)agitate such a ground with or without filing a cross-objection. The decision to file a cross-objection in such cases is entirely at the discretion of the Respondent.
8. The Court further explained that the only advantage of filing a cross-objection is that even if the original appeal is dismissed or withdrawn, the cross-objection will still be maintainable and the Court will be required to adjudicate upon its merits. This is by virtue of sub-rule (4) of Rule 22.
9. Filing of a cross objection is necessary only in such cases where a Respondent seeks a relief, higher than and in addition to, what has been granted to it in the impugned order (3) . In the case of Shriram Ownership Trust (supra), both the quantum additions (under section 56(2)(vii) and section 14A) were deleted by the Tribunal on merits. Therefore, by urging the jurisdictional ground before the High Court, the assessee (Respondent) was not seeking any relief higher than what was granted to it by the Tribunal. Hypothetically, if one of the quantum additions was confirmed by the Tribunal and accepted by the assessee, even then, the assessee, as a Respondent, would have been entitled to raise the jurisdictional ground before the High Court without filing a cross-objection. However, if such a jurisdictional ground was decided in its favour by the High Court, it would not have led to the annulment of the entire assessment. Its limited effect would have been on the additions, whichwere the subject matter of the Department’s appeal before the High Court. (4)
10. It is also of relevance to note that Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 is in pari materia with Order 41 Rule 22 of the CPC. If the Tribunal, exercising its appellate jurisdiction, can entertain a Respondent’s challenge to an adverse ground without filing across-objection, certainly, the High Court, which holds much wider powers, ought to be understood to be empowered to do the same.
11. Another provision, which is relevant to this issue, is Order 41 Rule 33 of the CPC. The Rule reads as under-
“33. Power of Court of appeal.- The Appellate Court shall have power to pass any decree and make any order which ought to have been passed or made and to pass or make such further or other decree or order as the case may require, and this power may be exercised by the Court notwithstanding that the appeal is as to part only of the decree and may be exercised in favour of all or any of the respondents or parties, although such respondents or parties may not have filed any appeal or objection and may where there have been decrees in cross- suits or where two or more decrees are passed in one suit, be exercised in respect of all or any of the decrees, although an appeal may not have been filed against such decrees.”
12. A cursory look at the provision makes it palpable that very wide powers have been conferred on an appellate court to pass any order as the case may require. This is notwithstanding the fact that the appeal pertains to only a part of the impugned order or the fact that the Respondent has not filed an independent appeal or a cross- objection. The intention behind the Rule is to see that once the Court is seized of a matter in its appellate jurisdiction, it is able to do complete justice between all the concerned parties. (5) In exercising such powers, the Courts are unfettered by considerations as to what is the subject matter of the appeal or who has filed the appeal or whether the appeal is being dismissed, allowed or disposed of while modifying the judgements appealed against. (6)
13. The combined effect of these two provisions is that a ground or a finding decided against a party, which has not filed a further appeal or a cross-objection, cannot be said to have attained finality. That ground or finding can be agitated by such party as a Respondent before the higher court. (7)
14. As a matter of fact, the Courts (8) have gone to the extent of holding that even de hors the above provisions, i.e. Rules 22 and 33 of Order 41, the appellate courts possess the powers to entertain a Respondent in so far as it seeks to challenge a finding or a ground decided against it. This is for two reasons. Firstly, these Rules are based on the principles of natural justice and no statutory provision is required to invoke this principle. Secondly, an appeal is a continuation of the original proceeding and the rights of the parties cannot be defeated by the form of the order. If the final outcome of a decision is favourable to a person, it would not matter to him how and by what reasoning the decision is arrived at so long as it is not challenged by his adversary. But, if it is so challenged, he must be in a position to support it on every ground he urged before the deciding authority whether or not it found favour. If he were not given that amount of freedom, he would be a victim of wrong reasons. In any event, the law of process is legislated to aid, and not to obstruct the cause of justice. Justice is the goal of jurisprudence, processual, as much as substantive. (9)
15. The above principles would equally apply to a case, where an appellate authority leaves a ground undecided, while giving complete relief on another ground. In such cases too, a Respondent, without filing an appeal or a cross-objection can ask for adjudication on the undecided ground before the higher appellate authority. (10)
16. In summation, an assessee may consider adopting the following approach while contemplating a challenge to a decision of the Tribunal-
I) If the Tribunal has decided some issues in its favour and some against it, and it wishes to challenge the issues which have been decided against it, one of two routes can be taken. It can either file an appeal to the High Court within a period of one hundred twenty days from the date of receipt of the Tribunal’s order as provided in section 260A or it can await the response of the Department to the Tribunal’s order. If the Department prefers an appeal, the assessee can file its cross-objection within a period of one month from the date of service of the notice fixing the hearing of the Department’s appeal, as provided under Order 41 Rule 22. In this regard, it may be noted that a view taken by one of the High Courts (11) is that a cross-objection is not maintainable under section 260A. While this may not be in consonance with the principles set out in the numerous judgements of the Supreme Court and the other High Courts referred to hereinabove, nevertheless, erring on the side of caution, it may be advisable to adopt the first route and file an independent appeal.
II) If the Tribunal has decided all the issues in the assessee’s favour but one or more of the grounds have been decided against it in the process, it can challenge such ground(s)as a Respondent before the High Court with or without filing a cross-objection. The advantage of filing a cross-objection in such cases is that even if the appeal of the Department is withdrawn or dismissed, adjudication can be sought on the cross-objection.
III) If the Tribunal has decided all the issues in the assessee’s favour but one or more grounds have been left undecided, then, similar to the approach in situation II) above, the undecided ground can be agitated by the Respondent with or without filing a cross objection.
IV) If the Tribunal has decided all the issues in the assessee’s favour but there is an adverse finding in the order, then similar to the approach in situation II) above, the assessee can seek expungement of such finding as a Respondent, with or without filing a cross-objection.
(1) Smt. Ganga Bai Vs. Vijay Kumar and Others(AIR 1974 SC 1126)
(2) NalakathSainuddin vs. KoorikadanSulaiman (AIR 2002 SC 2562)
(3) Nalakath Sainuddin vs. Koorikadan Sulaiman (2002) (AIR SC 2562), S. Nazeer Ahmed vs. State Bank of Mysore and others (2007 AIR SC 989)
(4) BR Bamasi vs. CIT (1972) (83 ITR 223) (Bom)
(5) HP Road Trans. Corporation vs. Jai Ram (1980 ACJ 1) (HP)
(6) Prahlad and Others vs. State of Maharashtra and another (2010) (10 SCC 458)
(7) State of Andhra Pradesh vs. B. Ranga Reddy (2019 SCC OnLine SC 1009)
(8) Nalakath Sainuddin vs. Koorikadan Sulaiman (2002) (AIR SC 2562), Ramanbhai Ashabhai Patel vs. Dabhi Ajitkumar Fulsinji and Others (1965) (AIR SC 669), CIT vs. Sundaram & Co. P. Ltd. (1964) (52 ITR 763), Kanpur Industrial Works vs. CIT (1966) (59 ITR 407) (All)
(9) Sushil Kumar Sen v. State of Bihar(1975) 1 SCC 774
(10) CIT vs. Punjab State Cooperative Agricultural Development Bank Ltd. (2016) (389 ITR 607) (P&H)
(11) Smt. JyothiKumari vs. ACIT (2012) (344 ITR 60) (Kar)
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