Delhi HC Quashes Notice u/s 148 of Income Tax Act for Improper Service on Foreign Entity [Read Order]

The High Court of Delhi, quashed the reassessment notice issued under Section 148 of the Income Tax Act,1961 against the petitioner, a Singapore-based entity, due to improper service.

St Engineering Aerospace Engines Pte Ltd, petitioner- assessee, received a notice under section 148A(b) of the Income Tax Act on 31.03.2023, stating that income for AY 2019-20 had escaped assessment. The notice mentioned that the petitioner received Rs. 40,14,48,223/- from M/s Spicejet Ltd. as FTS/FIS, but no Tax Deducted at Source(TDS) was deducted, and the petitioner did not file an ITR for that year. The Revenue asked the petitioner to explain why the income should not be taxed.

On 03.05.2023, the Assessing Officer (AO) passed an order under section 148A(d), noting that no response was received from the petitioner. As a result, a notice under section 148 was issued.

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On 25.10.2024, a notice under section 142(1) was sent. The petitioner challenged the re-assessment in the Bombay High Court, which paused the proceedings on 18.11.2024. A reminder notice was issued on 17.02.2025, asking for a response by 25.02.2025.

The petitioner claimed to have received this notice at its Singapore address, stating it was the first communication for AY 2019-20. The petitioner then requested copies of earlier notices and orders, which the Revenue sent by email on 28.02.2025.

The petitioner’s counsel argued that the petitioner, a Singapore-based entity, had no PAN, IT Portal credentials, or prior communication from the Revenue, except for a notice dated 17.02.2025. It was claimed that the assessment proceeded without considering the agreement with M/s Spicejet Ltd. and that remittances for MRO services carried out outside India should not be taxed as income that escaped assessment.

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The counsel also referred to the Indo-Singapore Double Taxation Avoidance Agreement (DTAA), stating the remittances should not be considered FTS.

In response, the Revenue’s counsel argued that the petitioner did not respond to the notices or file an ITR for the relevant AY. He stated that the petitioner could challenge the assessment later through appellate proceedings. He also emphasized that the petitioner had the burden to prove the remittances were not FTS and, having failed to comply with the law, could not seek intervention on natural justice grounds.

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The division bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela found that the Revenue did not prove the notices under sections 148A(b), 148A(d), and 148 were served on the petitioner in Singapore. It was undisputed that the petitioner had no PAN or IT Portal credentials and was a foreign company covered by the DTAA.

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Since the facts raised by the petitioner had not been considered by the AO, the court decided not to address the taxability of MRO services and remittances. The court noted that the petitioner had not received the notice under section 148A(b) of the Act.

The court decided to send the matter back to the stage of considering the notice under section 148A(b). It quashed the order under section 148A(d) and the notice under section 148, allowing the petitioner three weeks to file a response. The AO would proceed with the case according to the law after receiving the response.

In short,the writ petition was disposed of.

To Read the full text of the Order CLICK HERE

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