ANCHOR MARINE TECH SERVICES PTE LIMITED ,MUMBAI vs. DCIT INT. TAXATION CIRCLE-1(1)(2), DELHI

For the year under consideration, the assessee officer found from the ITS-26AS that the assessee, incorporated in Singapore, had received Rs 26,96,91,128/- from an Indian entity L&T. L&T had deducted a TDS @ 4% on the payment made. As the assessee had not filed the return of income under section 139(1) of the Act, the AO issued a notice u/s 148 dated 29.03.2019. The assessee, however, did not comply with various notices. Therefore, the Assessing Officer determined the total income at Rs. 29,96,91,128/- at applicable tax rate for foreign company and computed the tax liability at Rs. 32,18,71,400/- u/s 144 r.w 147 of the I T Act vide assessment order dated 26.02.2020.

When the aggrieved assessee went in appeal before the ld. CIT(A), he confirmed the order of the Assessing Officer in respect of the taxability of the above sum. However, the ld. CIT(A) directed the Assessing Officer to delete the excessive addition made by the Assessing Officer while completing the assessment, i.e. to treat the actual amount of 13,48,45,564/- as taxable income instead of Rs. 29,96,91,128/-stated in the final assessment order.

Being aggrieved with taxability of the above sum on the rates applicable to foreign company, the assessee has preferred the present appeal before us.

The ld counsel of the assessee submitted that no return u/s 139(1) was filed because the assessee was under the bonafide belief that the taxes on such receipts had already been deducted by the deductor in accordance with Act and there is no additional liability of tax on the assessee for such income.

The ld AR of the assessee further submitted that being a resident of Singapore, it was not registered on the online portal of the Indian tax authorities i.e., ITBA portal and therefore it was unaware of any proceedings going on under the Income Tax Act. On account of the above reasons, the assessee was not able to participate in the assessment proceedings taken up by the Assessing Officer.

The communication of passing of the final assessment dated order 29.02.2020 was received by the assessee on its address 3, Shenton Houses, Shenton Way # 07-09, Shenton Houses, Singapore- 68805. On receipt of the above final assessment order, the assessee through its Authorized Representative got itself registered on the Income Tax Portal on March 12, 2020 and filed an appeal before the ld. CIT(A) on March 19, 2020, pursuant to which, the assessee through its authorized representative filed a written submission before the ld. CITA) through the e-filing portal.

The ld AR of the assessee, after narrating the facts of the case, took up the legal ground no 1 raised in the appeal. The ld. counsel for the assessee vehemently argued that the assessment made is void ab initio as the notice u/s 148 was never served to the assessee. She submitted the sequence of events on the issue of service of notice u/s 148 as below:

The ld. counsel for the assessee further submitted that in view of the above factual position, it can be seen that the notice issued u/s 148 of the Act was issued manually but returned undelivered to the office of the Assessing Officer.

Accordingly, it is argued that from the sequence of events tabulated above, it can be seen that no notice u/s 148 of the Act was served on the assessee before the completion of the re-assessment proceedings. It is therefore the specific averment of the assessee that in the absence of service of notice issued u/s 148 of the Act, the completion of assessment under the provisions of Section 147 r.w Section 144 of the Act vide the assessment order dated 26.02.2020 is invalid in view of the provisions of section 148(1) of the Act.

Per contra, the ld. DR relied upon the orders of the authorities below. The ld. DR also referred to the factual report dated 19.07.2023 from the ACIT Circle 1(1)(1), International Taxation, New Delhi which stated that notice u/s 148 was issued through ITBA. It is the contention of the AO that such notices are issued through ITBA only and are clearly visible to the assessee on its E-Filing portal under the pending scrutiny assessment. The AO alleges that it is the assessee who has not checked its portal and has failed to inform the Department about any change in address or update its email id.

In its rejoinder, the ld AR of the assessee vehemently argued that the assessee never received the notice u/s 148 dated 29.03.2019. On the issue of notices being available on the ITBA portal, the ld AR stated that the assessee, being a foreign company, became aware of the reassessment proceedings when it received the final assessment order which was sent on correct address by post. It was only after the reassessment proceedings were concluded, the assessee got itself registered on the e-filing portal of Income Tax Department on 12.03.2020. The AR filed a document evidencing the date of registration at page 76 of the supplementary Paper Book. It was also reiterated that the AO did not adhere to the provisions of section 282 read with Rule 127(2)(b) of the Income Tax Rule which pertain to the manner of delivery/service of communications electronically.

It is submitted that the Rule 127(2)(b) provides for using email address available in income tax Return/last income tax return furnished or email address of the company in the Ministry of Corporate Affairs website or any email address made available by the addressee. It is submitted that the email address used by AO is neither from the I T Returns nor furnished by the assessee or available in Ministry of Corporate Affairs site as the assessee is a foreign company and has never filed any return in India. The Ld AR relied on the jurisdictional Delhi High Court in the case of Jyoti Narang (W.P. (C) 9289/2023) for the proposition that notice issued on incorrect email address is not valid.

We have heard the rival submissions and have perused the relevant material on record. We find that the notice u/s 148 dated 29.03.2019 for AY 2012-13 was issued to the assessee on the address: 20 Maxwell Road, 8-10, Maxwell House, Singapore 069113. This notice was returned back with a comment from the Singapore post, that the assessee has moved. We find that the notice u/s 148 dated 29.03.2019 was not received by the assessee as it had moved to a new address 3, Shenton Houses, Shenton Way # 07-09, Shenton Houses, Singapore- 68805.

Thereafter, the Assessing Officer issued notices u/s 142(1) dated 10.10.2019,13.11.2019 and 28.11.2019. These notices u/s 142(1) were issued and sent on email idsales@anchormarinetech.com and not sent by post. Thereafter, the AO issued show cause 06.12.2019 for assessment u/s 144 of the IT Act and sent the same on the e-mail idsales@anchormarinetech.com and not sent by post. Similarly, the draft order was also sent on the e-mail idsales@anchormarinetech.com and not sent by post. Though all the notices u/s 142(1) and 144 were addressed at correct address 3, Shenton Houses, Shenton Way # 07-09, Shenton Houses, Singapore- 68805,they were not sent by post but through email id of the sale department of the assessee. We find that the email id used by the AO were not in compliance with Rule 127(2)(b) as the same was not supplied by the assessee.

In the above factual matrix of the case, we are to adjudicate the effect of mandatory provision of the section 148 of the I T Act. Here, it would be relevant to extract the provisions of section 148(1) of the Act which read as under:

From the reading of the section 148, we come to firm view that the provision of section 148 mandates a legal obligation upon the assessing officer to serve, within the time prescribed u/s 149 of the IT Act, a notice u/s 148 before commencing the re-assessment proceedings. From the facts of the case as evidenced by the sequence of events tabulated above, we find that the assessee was not served with notice under Section 148 of the Act either through post or electronically. The assessee was a foreign company, had never filed IT returns in India and was not registered in the ITBA portal of Income Tax Department. Therefore, the various notices sent through email cannot be considered as being in compliance with the provisions of Rule 127(2)(b). The assessee got itself registered with ITBA portal only on 12.03.2020. Therefore, it cannot be expected that before this date, it was monitoring the ITBA portal and was aware of the IT proceedings against it.

The ld DR of the Revenue has not controverted the fact of non- service of notice u/s 148 upon the assessee. In such a situation, the assessment order is liable to be quashed as it has been passed without assumption of proper jurisdiction by mandatory service of notice u/s 148 of the Act. We are fortified in our view by the jurisdictional Delhi High Court decision in the case of Atlanta Capita(supra) which held that where there is no proper service of notice u/s148, the assessment so framed is liable to be quashed.

In view of the above factual position and our discussion hereinabove, we are of the considered view that the re-assessment order passed without service of notice u/s 148 is bad in law and needs to be quashed. Since we have quashed the re-assessment order, we do not find it necessary to dwell into the merits of the case.

In the result, the appeal of the assessee in is allowed.