I'd suggest ensuring that each user has their email defined in the Users Screen per below;

This option is already set. Still poping up SMTP auth. failed error intermittently. Should be issue from Microsoft ? Or TLS  version. I checked TLS for this email and it is using TLS 1.1

This is nothing to do with the setting in the system users screen.  It's a Pacific Technologies add-in and I don't believe it uses that setting.  However, it looks more likely to be your email service.  Perhaps look at the logs in the 365 service.

Okay. will do and let you know. I have resetted pw again of that donotreply email. Lets see.

Existing email worked fine with all other application such as SAGE HRMS but not SAGE 300. I found it is intermittent issue. I removed the email from email option and add another email. Started working fine with different email.

Error came again with different email as well. Not able to find resolution. can anyone help?

I checked this one but issue still persist.

Update from our vendor company who provides us PW Web modue:

The issue is related to the emailing process not selecting TLS 1.2, and instead defaulting to version 1.1.  Microsoft’s recent changes to force 1.2 have now caused this issue to manifest itself.

It is not sage300's issue anymore but MS issue.

Our vendor company provided us TLS 1.2 patch file for sage300 to fix this issue for now.