Revenue can appeal expatriate employee remuneration allowance as previous non-challenge was an inadvertent omission.

By | May 26, 2026
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Revenue can appeal expatriate employee remuneration allowance as previous non-challenge was an inadvertent omission.

Issue

Whether the revenue department is barred by the principles of consistency, estoppel, and acquiescence from challenging the allowability of remuneration paid to expatriate employees for the assessment years 2020-21 and 2021-22, solely because it inadvertently failed to appeal the same issue in a preceding assessment year.

Facts

  • The respondent-assessee claimed a tax deduction for business expenditure regarding remuneration paid to its expatriate employees for the assessment years 2020-21 and 2021-22.

  • The Income Tax Appellate Tribunal decided the matter in favor of the assessee by blindly following its own previous order from the assessment year 2014-15.

  • During the internal processing of that foundational assessment year 2014-15 order, the Assessing Officer (AO) left out the expatriate remuneration issue in their official scrutiny report and comments.

  • Due to this administrative oversight, the higher revenue authorities (CIT/PCIT) were never alerted to the issue, completely depriving them of an opportunity to apply their minds and consciously decide whether a high court appeal should be preferred for the assessment year 2014-15.

  • Consequently, no appeal was filed on that ground for the assessment year 2014-15, leading the assessee to argue that the revenue must remain consistent and accept the rule for the subsequent assessment years.

Decision

  • Inapplicability of Consistency Principles: The High Court held that the legal principles of consistency, estoppel, and acquiescence do not apply when the failure to challenge a previous order arises from a single, isolated instance of administrative inadvertence.

  • Oversight vs. Deliberate Acceptance: Since the competent tax authority was kept in the dark by the internal reporting failure of the specific AO, the non-filing of an appeal for the assessment year 2014-15 cannot be construed as a conscious, deliberate acceptance of the Tribunal’s legal position by the department.

  • Appeals Kept Maintainable: Treating the assessment year 2014-15 as a strict administrative exception, the Court ruled that the revenue’s appeals for the assessment years 2020-21 and 2021-22 are fully maintainable and must be heard on their legal merits.

Key Takeaways

  • No Premium on Administrative Errors: An assessee cannot exploit a one-time clerical or human error committed by an Assessing Officer to lock the tax department into an unfavorable legal position permanently.

  • Limits of the Rule of Consistency: While tax authorities should maintain consistency across assessment years, this rule cannot be weaponized against the revenue if its past passivity was entirely accidental rather than a reasoned policy choice.

  • Conscious Decision-Making Required: For estoppel or acquiescence to block an appeal, there must be clear evidence that the competent legal authority (like a Commissioner or Principal Commissioner) reviewed the issue and deliberately chose not to contest it.

HIGH COURT OF DELHI
Principal Commissioner of Income-tax-7
v.
Samsung India Electronics (P.) Ltd.*
Dinesh Mehta and Tejas Karia, JJ.
IT Appeal Nos. 353 and 357 Of 2026
CM APPL. Nos. 29092, 29093, 29094, 29143 and 29144 OF 2026
MAY  6, 2026
Puneet Rai, SSC, Ashvini Kumar and Rishabh Nangia, JSCs for the Appellant. Himanshu S. Sinha, Prashant Meharchandani and Jainender Singh Kataria, Advs. for the Respondent.
ORDER
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 (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 authority. 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. CIT 193 ITR 321 (SC) andCIT v. J.K. Charitable Trust [2009] 308 ITR 161 (SC)/[2009] 1 SCC 196 and judgment of this Court in the case of Pr. CIT v. Power Links Transmission Ltd. (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 J.K. Charitable Trust (supra) and Power Links Transmission Ltd. (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 Radhasoami Satsang, (supra) and J.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 J.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  (SC)/(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.