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Question: While deciding an appeal, is it mandatory for the High Court to frame a substantial question of law or can it decide the case on the basis of the question of law urged by the appellant under section 260A(2)(c)?
Case: CIT v. A. A. Estate Pvt. Ltd. 
Facts of the case: The High Court, without itself framing the substantial question of law at the time of admission of appeal, issued notices, heard both the parties and decided the appeal affirming the order of the Tribunal based on the questions raised by the appellant.
Relevant provision of the Income-tax Act, 1961: Section 260A provides that an appeal lies to the High Court from every order passed by the Tribunal, if the High Court is satisfied that the case involves a substantial question of law. In this regard, section 260A(2)(c) requires the appellant to file an appeal before the High Court in the form of a memorandum of appeal precisely stating therein the substantial question of law involved. If the High Court is satisfied that the case involves a substantial question of law, section 260A(3) requires the High Court to formulate such question. Thereafter, section 260A(4) provides that the appeal shall be heard only on the question so formulated; and section 260A(5) provides that the High Court shall decide the question of law so formulated.
Issue: The issue under consideration is whether the High Court was justified in not formulating the substantial question of law as required u/s 260A(3) and adjudicating merely on the questions put forth by the appellant under section 260A(2)(c).
Supreme Court’s Observations: The Apex Court noted that there lies a distinction between the questions proposed by the appellant for admission of the appeal to the High Court and the questions framed by the High Court. The questions, which are proposed by the appellant, fall under section 260A(2)(c) whereas the questions framed by the High Court fall under section 260A(3). Section 260A(4) provides that the appeal is to be heard on merits only on the questions formulated by the High Court under section 260A(3). In other words, the appeal is heard only on the questions formulated by the High Court and not on the questions proposed by the appellant.
In case if the High Court is of the view that the appeal did not involve any substantial question of law, it should have recorded a categorical finding to that effect that the questions proposed by the appellant either do not arise in the case or/and are not substantial questions of law so as to attract the rigour of section 260A for its admission and accordingly, should have dismissed the appeal in limine. However, this was not done in this case. Instead, the appeal was heard only on the questions urged by the appellant u/s 260A(2)(c). The High Court, therefore, did not decide the appeal in conformity with the mandatory procedure prescribed in section 260A.
Supreme Court’s Decision: The Supreme Court held it to be just and proper to remand the case to the High Court for deciding the appeal afresh, on merits of the case in accordance with procedure prescribed in section 260A.