BIRLA CARBON U.S.A., INC,U.S.A. vs. THE ASSISTANT COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAX CIRCLE) - 2(1)(1), MUMBAI, MUMBAI

आदेश / ORDER PER BEENA PILLAI, JUDICIAL MEMBER:

Present appeal filed by the assessee arises out of the assessment order framed u/s 143(3) r.w.s. 144C of the Act, dated 09/01/2025 passed by the Learned Assistant Commissioner of Income Tax, Int. Tax Circle -2(1)(1), Mumbai [hereinafter referred to as “the Ld.AO”] for A.Y. 2019-20, on following grounds of appeal:- “1) The re-assessment proceeding under section 148 of the Income-tax Act, 1961 is bad in law. (Refer ground no. 1) 2) The learned AO/ DRP erred in holding that income received from provision of management support services of INR 3,82,41,904 and administrative support services of INR 26,55,05,501is taxable in India (Refer ground no. 2) 3) The learned AO erred in levying of interest under section 234A and 234B of the Act (Refer ground no. 3) 4) The learned AO erred in levying of Fee under section 234F of the Act (Refer ground no. 4 5) The learned AO erred in initiating of penalty proceedings (Refer ground no. 5)” 2. Brief Facts of the case are as under:

The assessee is a company incorporated and fiscally resident in the United States of America and is entitled to the benefits of the India–USA Double Taxation Avoidance Agreement. The assessee is engaged in the business of manufacturing carbon black additives and, under an inter-company agreement, provides managerial and administrative support services to its associated enterprise in India, namely Birla Carbon India Pvt. Ltd. During the relevant assessment year, the assessee received service fees from Birla Carbon India for rendering such support services. According to the assessee, the receipts did not constitute Fees for Included Services under Article 12 of the India–USA DTAA, as the 'make available' condition was not satisfied and, in the absence of a permanent establishment in India, the receipts were not chargeable to tax in India. Consequently, the assessee did not obtain a PAN in India or file a return of income.

2.1. The Ld.AO initiated reassessment proceedings on the basis of the order passed under section 201 of the Income-tax Act in the case of Birla Carbon India, wherein it was held that the service fees paid to the assessee constituted Fees for Included Services under Article 12 of the India–USA DTAA and tax was deductible at source. Without conducting any independent enquiry, the Assessing Officer unilaterally allotted a PAN to the assessee in its erstwhile name, issued notices under sections 148A(b), 148A(d), 148 and 142(1), and eventually passed a draft assessment order on 12/03/2024 under section 144C(1), proposing to tax the receipts of ₹8,11,27,000 as Fees for Included Services.

Against the draft assessment order, the assessee filed objections before the DRP.

2.2. The DRP after considering the submissions of the assessee passed its direction on 29/03/2024 upheld the adjustment proposed by the Ld.AO.

2.3. The objections filed by the assessee before the Dispute Resolution Panel were rejected, pursuant to which the Ld.AO passed the final assessment order under section 143(3) read with section 144C(13), treating the service receipts as taxable in India under Article 12 of the India USA DTAA.

2.4. The Ld.AO on receipt of the DRP direction the Ld.AO passed the final assessment order on 09/01/2025 making of the management Support Service and Administrative Support Services as FTS in the hands of the assessee .

Aggrieved by the order of the Ld.AO, the assessee preferred appeal before this Tribunal.

3.1. The Ld.AR submitted that the reassessment proceedings are without jurisdiction and liable to be quashed for want of valid service of the jurisdictional notices. It was contended that the Ld.AO, without any application, request or authorization from the assessee, unilaterally allotted a PAN to the assessee in its erstwhile name, namely Columbian Chemicals Company, despite the Department being fully aware, from the proceedings under section 201 in the case of Birla Carbon India as well as the Forms 15CA/15CB, that the assessee had changed its name to Birla Carbon U.S.A., Inc. The Ld.AR submitted that the PAN was not only allotted in the incorrect name but was also created using an incorrect address and fictitious email IDs belonging to an unrelated entity, reflecting complete non-application of mind by the Ld.AO. It was further argued that even the jurisdiction assumed by the Ld.AO was contrary to the prescribed jurisdictional framework for non-resident PAN applicants, since, in terms of the PAN allotment guidelines, the default jurisdiction in such cases lies with the Delhi jurisdiction and not Mumbai.

3.2. The Ld.AR further submitted that all the statutory notices issued under sections 148A(b), 148 and 142(1) were sent to incorrect and non-existent email IDs, which admittedly bounced back and were never served upon the assessee. Despite being aware that the notices had not been delivered, the Ld.AO proceeded ex parte without making any effort to effect valid service through alternative modes, although the correct particulars of the assessee were available with the Department. It was argued that mere issuance of notices cannot substitute the mandatory requirement of valid service and that subsequent knowledge of the reassessment proceedings cannot cure the foundational jurisdictional defect. It was also contended that the Ld.AO mechanically initiated reassessment solely on the basis of the order passed under section 201 in the case of Birla Carbon India, without conducting any independent enquiry or recording his own satisfaction.

3.3. On the contrary, the Ld.DR relied on the orders passed by the authorities below.

We have perused the submissions advanced by both sides in the light of records placed before us.

4.1. In the present case, it is an admitted factual position that the Ld.AO, without any application or request from the assessee, unilaterally allotted a PAN in the name that is alledged to be of the assessee. The record further reveals that the PAN was allotted in the assessee's erstwhile name despite the department being aware, through the proceedings under section 201 in the case of Birla Carbon India and the Forms 15CA/15CB, that the assessee had already changed its name to Birla Carbon U.S.A., Inc. More importantly, the electronic communication details incorporated in the PAN database were admittedly incorrect and did not belong to the assessee.

4.2. The departmental records further demonstrate that the notices issued under sections 148A(b), 148 and 142(1) were transmitted to incorrect email IDs and that such communications bounced back. Once the Ld.AO was aware that the notices had not been delivered, it was incumbent upon him to take appropriate steps to effect valid service through other permissible modes. The records do not indicate that any such endeavour was made despite the correct particulars of the assessee being available with the Department. The assessment order merely records that notices were "issued" and is conspicuously silent on the aspect of their valid service.

4.3. The contention of the Revenue that the assessee subsequently became aware of the reassessment proceedings cannot cure the foundational defect in assumption of jurisdiction. Jurisdiction has to be tested with reference to the statutory requirements existing at the stage of initiation of proceedings. Subsequent participation or knowledge cannot validate proceedings which were void at their inception for want of proper service of the jurisdictional notice.

4.4. We also find considerable force in the submission of the assessee that the Assessing Officer proceeded mechanically on the basis of the order passed under section 201 in the case of Birla Carbon India without undertaking any independent examination before invoking the reassessment provisions. The statutory satisfaction contemplated under the Act must be that of the jurisdictional Assessing Officer and cannot merely be borrowed from proceedings conducted in the case of another assessee.

4.5. In view of the aforesaid factual and legal position, we are of the considered opinion that the assumption of jurisdiction under sections 148A(d) and 148 suffers from fundamental legal infirmities. Consequently, the reassessment proceedings, the draft assessment order passed under section 144C(1), the directions of the DRP and the final assessment order cannot be sustained and are liable to be quashed.

Accordingly, Ground no.1 raised by the assessee stands allowed.

Since we have allowed the legal grounds challenging the validity of the reassessment proceedings, the grounds raised on the merits of the addition have become academic and do not call for adjudication.

In the result the appeal filed by the assessee stands allowed.

Order pronounced in the open court on 08/07/2026.

Sd/- Sd/-

ARUN KHODPIA BEENA PILLAI ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai Dated: 08/07/2026 SC, Sr. P.S. Copy to: BIRLA CARBON U.S.A., INC, 1800, WEST OAK COMMONS COURT MARIETTA, GEORGIA, UNITED 1 STATES OF AMERICA - 30062-2253, USA-300622, USA THE ASSISTANT COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAX CIRCLE) - 2(1)(1), MUMBAI, 2 604,6TH FLOOR, KAUTILYA BHAVAN, C-41 TO C-43, G BLOCK, BANDRA KURLA COMPLEX, BANDRA (EAST),, MUMBAI-400051, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE