Reasoned adjudication under Section 260A is mandatory; unreasoned affirmance was set aside and remanded for fresh consideration.

A final appellate order under Section 260A of the Income-tax Act, 1961 must frame and answer substantial questions of law and must record reasons when deciding the appeal on merits. An unreasoned affirmance of the Tribunal's order was held to be legally unsustainable and a jurisdictional error. The SC therefore set aside the High Court's judgment and remanded the revenue's appeal for fresh consideration on merits in accordance with law, without expressing any view on the underlying dispute.

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Issues: (i) Whether the High Court's judgment dismissing the revenue's appeal under Section 260A of the Income-tax Act, 1961 was unsustainable for want of reasons and failure to frame and answer the substantial question of law. (ii) Whether the matter was required to be remanded to the High Court for fresh decision on merits in accordance with law.

Issue (i): Whether the High Court's judgment dismissing the revenue's appeal under Section 260A of the Income-tax Act, 1961 was unsustainable for want of reasons and failure to frame and answer the substantial question of law.

Analysis: The High Court disposed of the appeal after hearing both sides but did not frame any substantial question of law and did not record any independent reasoning to show why the Tribunal's order was being affirmed. Section 260A contemplates adjudication on substantial questions of law and, where the appeal is decided on merits, the Court must indicate the reasons supporting its conclusion. The absence of reasons rendered the order legally unsustainable and disclosed a jurisdictional error.

Conclusion: The impugned High Court judgment was unsustainable in law.

Issue (ii): Whether the matter was required to be remanded to the High Court for fresh decision on merits in accordance with law.

Analysis: Since the High Court's order lacked reasons and did not comply with the requirements governing appeals under Section 260A of the Income-tax Act, 1961, the appropriate course was to set aside that order and send the appeal back for reconsideration. The Court also clarified that it was not expressing any opinion on the merits of the dispute, leaving the High Court free to decide the appeal uninfluenced by the observations made.

Conclusion: The matter was remanded to the High Court for fresh decision on merits.

Final Conclusion: The appeal succeeded to the extent that the High Court's order was set aside, and the revenue's appeal was restored for reconsideration by the High Court in accordance with law.

Ratio Decidendi: A final appellate order under Section 260A of the Income-tax Act, 1961 must contain reasons and comply with the requirement of framing and answering substantial questions of law where the appeal is decided on merits; an unreasoned affirmance is legally unsustainable and liable to be set aside.

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