Section 260A of ITA, 1961 : Section 260A: Appeal To High Court

Explanation using Example

Imagine a scenario where a business owner, Mr. Sharma, disagrees with the income tax assessment made by the Income Tax Department. He believes that the assessment has incorrectly disallowed certain business expenses, leading to a higher tax liability. Mr. Sharma appeals to the Income Tax Appellate Tribunal (ITAT), but the ITAT upholds the assessment.

Convinced that the ITAT's decision involves a substantial question of law regarding the interpretation of what constitutes allowable business expenses under the Income Tax Act, Mr. Sharma decides to appeal to the High Court.

He files a memorandum of appeal to the High Court within 120 days of receiving the ITAT's order, stating the legal question involved. The High Court admits the appeal, formulates the question of law, and decides to hear the case.

During the hearing, the High Court focuses on the question it formulated, but also allows arguments on whether the case involves other substantial questions of law. After considering the arguments, the High Court delivers a judgment providing the legal reasoning for its decision and awards costs as it sees fit.

In its judgment, the High Court may also address issues that the ITAT did not determine or that were wrongly determined due to the legal question involved. This judgment will then guide how such expenses are treated in future tax assessments.