Cross-Objection Maintainable in Income Tax Appeals Under Section 260A: Calcutta High Court

The Calcutta High Court ruled that Order XLI Rule 22 of the CPC applies to High Court tax appeals, letting a respondent file cross-objections, and declined to follow contrary Karnataka and Delhi High Court rulings.

The Calcutta High Court has held that a respondent can file a cross-objection in an appeal under Section 260A of the Income Tax Act, 1961, because Section 260A(7) imports Order XLI Rule 22 of the Code of Civil Procedure, 1908. [Principal Commissioner of Income Tax, Kolkata-2 v. Birla Corporation Ltd.]

A Division Bench of Justice Rajarshi Bharadwaj and Justice Sudip Deb decided the point as a preliminary issue in the Revenue’s appeal, which raises questions on Section 80IA deduction, the Section 14A disallowance under Rule 8D, additional depreciation and an interest subsidy. The Revenue objected to the assessee’s cross-objection, whose questions the Court found interlinked with the issue under Section 14A and Rule 8D.

The Revenue argued that Section 260A, unlike Section 253(4) and (5) for Tribunal appeals, makes no provision for cross-objections, and that the respondent’s only remedy was its own appeal. It relied on Smt. Jyoti Kumari v. Assistant Commissioner of Income-Tax ([2012] 344 ITR 60 (Karn)) and Principal Commissioner of Income-Tax v. Nagar Dairy Pvt. Ltd. ([2025] 480 ITR 354 (Delhi)).

The assessee contended that a Section 260A appeal is in substance a second appeal, attracting Sections 100 and 103, Order XLI and Order XLII of the CPC. It cited Hari Shankar Rastogi v. Sham Manohar & Ors. ((2005) 3 Supreme Court Cases 761) and Bikram Singh v. Principal Commissioner of Income-Tax ([2023] 458 ITR 684 (SC)).

The Court noted that Order XLII Rule 1 extends Order XLI to second appeals, that Hari Shankar Rastogi applied Order XLI Rule 22 to second appeals, and that Bikram Singh treated a Section 260A appeal as akin to a second appeal. The words “so far as may be” in Section 260A(7) do not exclude Rule 22. Section 260A(7), it held, “necessarily includes the right of filing cross-objection. Such right need not be spelt out specifically.”

Relying on Municipal Corporation of Delhi & Ors. v. International Security & Intelligence Agency Ltd. ((2004) 3 SCC 250) and CIT v. Meghalaya Steels Ltd. ([2015] 377 ITR 112 (SC)), the Bench treated the form of a cross-objection as procedural and held that Section 260A(7) does not curtail the CPC. It declined to agree with Smt. Jyoti Kumari and Nagar Dairy.

A substantial question of law is still required, and a cross-objection cannot extend to questions of fact or matters not arising from the Tribunal’s order; it must be confined to the part of the order adverse to the respondent.

The appeal is listed for hearing on 30 Nov 2026 to formulate the questions framed by the respondent, subject to the Court being satisfied they are substantial questions of law. No costs were awarded.