Safiya Malik

The Delhi High Court considered the maintainability of cross-objections filed by the respondent-assessee in a series of income tax appeals. The Division Bench, comprising Justice Yashwant Varma and Justice Harish Vaidyanathan Shankar, examined whether Section 260A of the Income Tax Act, 1961, allows cross-objections in appeals before the High Court. The appellants submitted that the provision does not provide for such a remedy, while the respondents contended that disallowing cross-objections would leave them without recourse.

The appeals arise from an order dated November 24, 2022, issued by the Income Tax Appellate Tribunal (ITAT) concerning proceedings initiated under Section 153C of the Income Tax Act. The matter originates from a search and seizure operation conducted on September 17, 2010, in the case of Nagar Dairy Group. Documents and materials related to the respondent-assessee were seized from M/s AIMS Promoters Pvt. Ltd. The Revenue filed appeals challenging the ITAT’s decision regarding the disallowance of INR 1,08,34,15,088 under Section 40A(3) of the Act. The assessing officer had referred to this addition in the assessment order.

The appellants, represented by counsels Sanjay Kumar, Monica Benjamin, and Easha, submitted that cross-objections are not maintainable in an appeal under Section 260A. They stated that this provision limits appellate intervention to substantial questions of law and does not provide an express right to respondents to file cross-objections. They further argued that Order XLI Rule 22 of the Civil Procedure Code, which permits cross-objections in civil appeals, does not extend to tax appeals under Section 260A. It was submitted that an appeal under this provision is distinct from first appeals under the Civil Procedure Code, as it is confined to legal questions formulated by the High Court.

The respondents, represented by counsels Ved Jain, Nischay Kantoor, and Soniya Dodeja, submitted that disallowing cross-objections would deprive them of a crucial remedy. They sought to challenge the ITAT’s findings on the validity of the search assessment under Section 153C through cross-objections. It was argued that if the High Court were to decide the Revenue’s appeal in favor of the department, the respondents would not have an opportunity to contest the Tribunal’s findings. It was further submitted that some High Courts have allowed cross-objections in tax appeals and that the principles underlying Order XLI Rule 22 should be read into Section 260A.

The court referred to the Karnataka High Court’s decision in Smt. Jyoti Kumari v. Asst. CIT and stated that “a cross-objection is not maintainable in an appeal under Section 260A since the provision does not confer such a right in express terms.” The Delhi High Court examined whether the statutory language of Section 260A permits an implied right to file cross-objections. The court recorded that “Section 260A is structured to limit appellate intervention to substantial questions of law and does not explicitly incorporate the procedural framework of Order XLI Rule 22.” It was observed that “the provision does not confer an express right to file cross-objections.”

The respondents argued that the ITAT had upheld the validity of the search assessment under Section 153C and that they intended to challenge this aspect through cross-objections. It was submitted that the absence of a procedural avenue for cross-objections would leave them remediless. The court recorded that “while cross-objections provide an alternative mechanism for respondents to contest unfavorable findings, the absence of this procedural avenue does not leave them entirely remediless.” The respondents were permitted to file an independent appeal if they wished to challenge the Tribunal’s ruling on Section 153C.

The court examined Supreme Court decisions concerning Order XLI Rule 22. It referred to Superintending Engineer v. B. Subba Reddy and Municipal Corpn. of Delhi v. International Security & Intelligence Agency Ltd., stating that “a cross-objection partakes the nature of an appeal and must be specifically provided for within the statute.” The court recorded that “cross-objections, which may seek to challenge factual determinations or other aspects of the Tribunal’s order, do not align with the statutory scheme of Section 260A.”

The Bench further recorded that “this would also be in line with the decisions rendered in the context of the Code and the maintainability of cross-objections in a second appeal and where it was held that in case the objection be indelibly coupled to the main question, there would be no legal requirement of preferring cross-objections separately.” The respondents could raise arguments in defense of the decision that was in their favor, without needing a separate cross-objection.

The present applicants had filed cross-objections before the ITAT, which were addressed along with the main appeals. The court stated that “if a cross-objection is akin to an appeal, the applicant could have possibly taken appropriate steps to assail the order of the Tribunal to the extent that it was so aggrieved.” The Bench recorded that “however, and for reasons assigned above, the remedy was clearly not that of a cross-objection.”

The court upheld the preliminary objection raised by the appellant on the point of maintainability and dismissed the cross-objections filed by the respondent-assessee. It recorded that “we would thus and for all the aforesaid reasons uphold the objection of the appellant on the point of maintainability. The cross-objections being C.M. APPL. Nos. 9854/2025, 9852/2025, 9857/2025, and 9849/2025 are held to be not maintainable and thus dismissed.” 

Case Title: Pr. Commissioner of Income Tax (Central)-2 v. Nagar Dairy Pvt. Ltd.
Neutral Citation: 2025: DHC: 1350 - DB
Case Numbers: ITA 320/2023, ITA 326/2023, ITA 341/2023, ITA 369/2023
Bench: Justice Yashwant Varma, Justice Harish Vaidyanathan Shankar

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