Principle Of Res Judicata And Consistency In Tax Matters A Brief Analysis From An Indian Perspective

Certainty is a cornerstone of an effective tax system, forming a crucial pillar of the rule of law.

- Adcv SHerry Oommen

It enables taxpayers to plan their finances, ensures smooth compliance, and fosters economic growth. However, achieving certainty in taxation is a challenging task, particularly in India, where tax laws are dynamic, and influenced by policy changes, economic needs, and judicial interpretations. This article delves into the importance of certainty in taxation, and the role of judicial precedents in achieving this objective.

Adam Smith, in his seminal work The Wealth of Nations, emphasised certainty as one of the four canons of taxation. He stated, "The tax which each individual is bound to pay ought to be certain and not arbitrary." Certainty ensures that taxpayers know their obligations, the timelines for compliance, and the consequences of non-compliance. This clarity not only simplifies compliance but also builds trust in the system.

In a recent judgment, the Hon’ble High Court of Kerala in the case of Knowell Realtors (India) Private Limited Vs Assistant Commissioner of Income-tax, Cochin 2024 KHC Online 7162 upheld the doctrine of consistency and uniformity in tax matters. In the said case, the Hon’ble High Court having regard to the previous assessments of the concerned assessee held that the Revenue could not change in position, which has been consistently adopted.

Another facet of the doctrine of consistency is the applicability of the principle of res judicata. The said doctrine of res judicata when translated into English means “a matter decided”. This doctrine mitigates the possibility of multiple, repetitive and vexatious legal proceedings thereby avoiding unnecessary wastage of resources and strain on the legal system ultimately resulting in consistency in proceedings over time. The doctrine of res judicata is based on three Roman maxims which embody the combined result of public policy and private justice, which comprise the following: