Case Law Details
PCIT Vs Samsung India Electronics Pvt. Ltd. (Delhi High Court)
In , the Delhi High Court considered a preliminary objection raised by the respondent-assessee in an appeal filed by the Revenue concerning allowability of remuneration paid to expatriate employees.
The respondent argued that the Income Tax Appellate Tribunal (ITAT), while deciding the present matter, had relied upon its earlier order dated 31.08.2020 for Assessment Year (AY) 2014-15 passed in the assessee’s own case. It was submitted that the Revenue, while challenging the Tribunal’s order for AY 2014-15 before the High Court in ITA 425/2024, had not raised any ground relating to remuneration paid to expatriate employees. Since the appeal for AY 2014-15 had already been dismissed, the respondent contended that the Revenue was barred from raising the same issue in subsequent years on the principle of consistency.
The Revenue, however, submitted that although ordinarily consistency should be maintained, the omission in AY 2014-15 occurred because the Assessing Officer, while preparing the scrutiny report relating to the Tribunal’s order, failed to mention the issue concerning remuneration paid to expatriate employees. Consequently, the competent authorities, including the Commissioner and Principal Commissioner of Income Tax, were never made aware of the issue while deciding whether to file an appeal. The Revenue argued that no conscious decision had been taken either to challenge or not to challenge the issue for AY 2014-15.
The Revenue further submitted that for AY 2015-16, the Tribunal again followed its earlier order for AY 2014-15 and allowed the remuneration paid to expatriate employees, against which the Department had already filed an appeal raising this issue. Similar appeals were also filed for AYs 2020-21 and 2021-22.
The respondent relied on judgments including Radhasoami Satsang v. CIT, CIT v. J.K. Charitable Trust, and PCIT v. Power Links Transmission Ltd. to contend that once the Department had accepted the position in one year, it could not take a contrary stand in later years. The respondent also relied on CBDT Circular No.7/2011 dated 24.05.2011, arguing that the Department was bound by the procedure prescribed for scrutiny of appeals, including examination of whether similar issues had arisen in earlier years.
The High Court examined the concept of consistency in decision-making and observed that consistency presupposes a conscious decision taken by the competent authority. According to the Court, only where an informed and conscious decision has been taken in a particular set of facts can the principle of consistency apply.
The Court found that in the present case the Assessing Officer, either inadvertently or otherwise, failed to mention the issue of remuneration paid to expatriate employees while forwarding the scrutiny report. As a result, the Commissioner and Principal Commissioner of Income Tax had no occasion to consider whether an appeal should be filed on that issue for AY 2014-15. Therefore, the Court held that it could not be said that the competent authority had consciously decided not to challenge the issue.
The Court further observed that no question regarding expatriate remuneration had been proposed in the memorandum of appeal for AY 2014-15, nor had the issue been adjudicated by the Court in the earlier appeal. Consequently, the issue had not attained finality.
Distinguishing the judgments relied upon by the respondent, the Court noted that in Radhasoami Satsang, the Revenue had consistently accepted exemption over a period of more than two decades before attempting to change its position. Similarly, in J.K. Charitable Trust, the Revenue had not challenged the issue for nearly twenty-four to twenty-five years. The Court held that those factual situations were materially different from the present case, where omission occurred only for a single assessment year and due to inadvertence of the Assessing Officer.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. On previous date of hearing i.e. 30.04.2026, Mr. Himanshu S. Sinha, learned counsel for the respondent had raised a preliminary objection that the Income Tax Appellate Tribunal (hereinafter referred to as „the Tribunal‟) had relied upon its earlier decision dated 31.08.2020 for Assessment Year (AY) 2014-15 passed in respondent-assessee’s case and since no ground was taken qua the issue relating to the salary paid to expatriate employees in the appeal filed by it (against the order dated 31.08.2020 passed in Appeal No. 9481/del/2019) and said appeal had been dismissed, the present appeal cannot be entertained, on the principles of consistency.
2. This Court had drawn following proceedings on 30.04.2026 :
“1. Mr. Himanshu S. Sinha, learned counsel for the respondent at the outset pointed out from paragraph No. 6 of the order dated 25.09.2025 passed by the Income Tax Appellate Tribunal, Delhi “I” Bench, New Delhi (ITAT) (hereinafter referred to as ‘the Tribunal’) that the Tribunal has relied upon the decision passed by the Tribunal itself, being the order dated 31.08.2020 for the Assessment Year (AY) 2014-15 in ITA 9481/Del/2019 and decided the issue involved in the present case in favour of the assessee.
2. He informed that the issue relating to salary paid to expatriate employees was not even raised or decided in the appeal which the Income Tax Department had filed before this Court being ITA 425/2024 (dismissed on 08.08.2024), against the Tribunal’s above referred decision dated 31.08.2020.
3. He argued that since the Department had not challenged the Tribunal’s order for AY 2014-15 whereby the salary paid to the expatriate employees was allowed, the appellant is estopped from challenging the same in subsequent year. In support of his contention, learned counsel for the respondent relied upon this Court’s order dated 18.04.2022 in the case of Principal Commissioner of Income Tax v. Power Links Transmission Ltd. reported in [2022] com 542 (Delhi) and other decisions on the line.
4. Mr. Puneet Rai, learned Senior Standing Counsel for the appellant on the other hand argued that normally, the Department should adhere to the principles of consistency and if in a preceding year such issue has not been raised, the Department should not challenge it in the subsequent year(s), but there may be certain circumstances, such as the involvement of the higher revenue, the case may have larger implications and repercussions or there may be some change in law.
5. He argued that the present appeal cannot be rejected outrightly simply because, the Department had chosen not to raise the issue in preceding year.
6. Having heard learned counsel for the parties and considering the line of decisions on this aspect, we are of the view that in normal circumstances, the Department should adhere to the principles of consistency. And if the Income Tax Department wants to challenge an issue which has earlier not been challenged, there should be some conscious application of mind and the same should be reflected in the decision making process of the competent And in a given case, the Court may summon such decision so as to examine whether the appeal should be entertained or not.
7. We therefore, direct Mr. Rai to bring for perusal of the Court, the record relating to the decision, which the Principal Commissioner of Income Tax has taken for filing the appeals qua AYs 2014-15, 2020-21 and 2021- 22.
8. List these cases on 06.05.2026.”
*emphasis supplied.
3. Pursuant to direction issued by this Court, Mr. Puneet Rai, learned Senior Standing Counsel for the appellant has placed on record, various documents relating to the department’s decision to file appeal for AY 201415 (being proforma for scrutiny report on the Tribunal’s order) and submitted that while preparing the comments/reports with respect to the order dated 31.08.2020 passed by the Tribunal, the Assessing Officer(AO) had totally escaped the issue of allowability of remuneration paid to the expatriate employees and the entire exercise leading to the decision of filing the appeal upto the formulation of substantial questions of law did not take this issue into account and such issue remained in oblivion and thus no challenge in this regard was made.
4. He asserted that in subsequent Assessment Year (AY) viz 2015-16, the Tribunal had followed its earlier decision taken for AY 2014-15 and allowed the remuneration paid to the expatriate employees and against such order of the Tribunal, the Income Tax Department has preferred an appeal, in which this issue has been raised (Diary Number: 1041326/2025 dated 12.02.2025).
5. He further submitted that for the AY 2020-21 and 2021-22 the Tribunal has again followed its decision dated 31.08.2020 for AY 2014-15 and decided this issue in favour of the respondent-assessee, for which the present appeals have been preferred questioning the allowability of the remuneration paid to the expatriate employees.
6. He argued that since no decision either to file appeal on such count or not to file appeal was taken by the Department, it cannot be said that the Principal Commissioner of Income Tax (Appeals) (CIT(A)) is estopped or precluded from filing appeal on this issue.
7. He further argued that the principles of res judicata do not apply in matters relating to income tax and it is a settled position of law that each Assessment Year is a separate unit and every order has to be taken and considered separately.
8. Mr. Sinha, learned counsel for the respondent-assessee on the other hand submitted that due to omission or otherwise, whatever maybe the reason, if the Department has chosen not to file appeal against the issue of allowability of the remuneration paid to expatriate employees in the appeal filed for AY 2014-15, it cannot take a different view of the matter and it cannot raise such ground in the appeal for subsequent period. In support of his contention, learned counsel relied upon the judgments of Hon’ble the Supreme Court rendered in the case of Radhasoami Satsang v. Commissioner of Income-tax reported in [1992] 60 Taxman 248 (SC) and Commissioner of Income Tax, Central, Kanpur v. J.K. Charitable Trust, Kamal Tower, Kanpur, reported in [2009] 1 SCC 196 and judgment of this Court in the case of Principal Commissioner of Income Tax v. Power Links Transmission Ltd. reported in [2022] taxmann.com 542 (Delhi).
9. Learned counsel took the Court through circular No.7/2011 dated 24.05.2011 issued by the Central Board of Direct Taxes (CBDT) and argued that when the CBDT, whose instructions and circulars are binding over the authorities under the Income Tax Act has issued a step-by-step procedure to scrutinise the order to be challenged, the appellant is bound by the same.
10. He highlighted that annexure-II, particularly item No.3(iv) appended with the circular clearly requires an AO to highlight in the scrutiny report, whether similar issue was involved in the case of the assessee in earlier year and if such fact and particulars have not been mentioned by the AO in scrutiny report for AY 2014-15, he himself is to be blamed. And the decision of not filing appeal taken by the Principal Commissioner of Income Tax (PCIT) for the AY 2014-15 has to be followed in subsequent year(s) to maintain consistency and to adhere to the law laid down by Hon’ble the Supreme Court in the case of Radhasoami Satsang (Supra) and JK Charitable Trust (Supra) and Powerlink transmission (Supra) by this Court.
11. Heard learned counsel for the parties and perused the relevant material, including the circular dated 24.05.2011 issued by the CBDT and the judgments cited at bar.
12. Before delving upon the issue in hand and adverting to the judgments cited by Mr. Sinha, we have to first consider the fundamental question – what do we mean by consistency in decision making? According to us, consistency presupposes a conscious decision taken by the decision maker and if a conscious decision has been taken in a particular set of facts, the same should be followed. And not otherwise.
13. In the instant case, we find that while sending the scrutiny report to the CIT, the concerned AO, due to inadvertence or otherwise, has not even mentioned the factum of the appeal being allowed qua the remuneration paid to the expatriate employees. Since such issue was never brought to the notice of the CIT and PCIT, being the competent authorities to take decision qua filing the appeal, it cannot be said that the competent authority had chosen not to file an appeal on the issue of allowability of remuneration paid to expatriate employees.
14. We are of the view that since neither any decision was taken in this regard nor any question was proposed by the Department in the memo of appeal nor was such issue decided by this Court in the appeal (ITA 425/2024) relating to corresponding order of the Tribunal (9481/Del/2019), it cannot be said that the issue has attained finality.
15. The reliance on the judgment rendered in the cases of M/s Radhasoami Satsang, (supra) and K. Charitable Trust, Kamal Tower (supra) by learned counsel for the respondent is misplaced, inasmuch as, in Radhasoami Satsang (supra), the exemption from income tax in favour of the assessee was firstly allowed by the appellate authority, whereafter it was consistently granted by none other than the AO himself from Assessment Year 1939-40 onwards. In other words, the Revenue in said case allowed the said position to continue by not challenging the order across a period of over two decades, even accepting refund applications of the assessee on the footing that its income was exempt. And it was for the first time, refused in Assessment Year 1964-65 and it was in such factual backdrop that the principle of consistency was applied and it was held by the Apex Court that in the absence of any change in circumstances, the Revenue was bound by its own previous stand.
16. Similarly, in the case of K. Charitable Trust (supra), the factual scenario dealt by Hon’ble the Supreme Court was that the High Court had decided the question in favour of the assessee for Assessment Years 1972-73 and 1973-74 and no appeal had been preferred by the Revenue against those decisions across the entire span from Assessment Year 1983-84 to Assessment Year 2007-08 (a period of approximately twenty-four to twenty-five years). It was due to this continued and accepted position of not changing this position and the concession made by the learned counsel for the appellant-revenue that the fact situation in all the assessment years was same, said order was passed by the Supreme Court.
17. The positions in the aforesaid cases is materially different from the present case, where the omission to challenge the issue in the assessee’s case arose only in respect of a single Assessment Year, namely AY 2014-15, and that too, on account of the inadvertence of the concerned Assessing Officer, who did not disclose the fact that the Tribunal had allowed the remuneration to the expatriate employees, thereby depriving the competent authority of any occasion to apply its mind as to whether an appeal ought to be preferred on that ground or not.
18. Insofar as the argument of learned counsel for the respondent-assessee characterising the Revenue’s non-filing of appeal for AY 2014-15 as a form of acquiescence is concerned, such plea too is misconceived. As acquiescence inheres a positive or affirmative action. There has to be an informed decision of not taking any action or giving concession to invoke principles of acquiescence.
19. The doctrine of acquiescence, as held by Hon’ble the Supreme Court in the case of Prabhakar v. Joint Director, Sericulture Department and Anr. reported in (2015) 15 SCC 1, is a species of estoppel and applies when a party having a right in question stands by and sees another dealing with its right in a manner inconsistent with that right. There has to be a deliberate, informed forbearance from asserting the right and the party cannot afterwards complain. Acquiescence cannot arise from inaction born of ignorance.
20. As directed on the previous hearing, the counsel for the appellant has produced relevant record relating to the decision of filing appeal for AYs 2014-15, 2015-16 and 2020-21 and 2021-22, we find that while dealing with the case for appeal for AY 2014-15, the CIT and PCIT had no knowledge of the issue whatsoever, as it was not brought to fore in the scrutiny report. They were, therefore, never in a position to make any decision, affirmative or otherwise qua filing the appeal.
21. Furthermore, it is pertinent that immediately in the very next Assessment Year i.e. AY 2015-16, the Revenue has preferred an appeal raising this very issue, demonstrating the intention to contest the question and accordingly against the decision of the Tribunal dated 29.07.2024, the Department has preferred an appeal raising this issue.
22. According to us, if the principles of consistency are to be construed purposively, the Department’s stand that except for AY 2014-15, after AY 2015-16 they have challenged the allowability of salaries paid to the expatriate before the High Court, conforms to the principles of consistency.
23. Treating AY 2014-15 as an exception, which can be ignored, for the reasons aforesaid, we are of the view that the present appeal on question No. ‘A’ as proposed in the memo of appeal is maintainable.
24. Needless to clarify that we have not examined the issue on its merit and have simply decided the preliminary objection. Therefore, both the rival counsel shall be free to address this Court on the merits of the issue on the next date of hearing.
25. List this case on 23.07.2026.
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