Prior notice and hearing are mandatory for penalty, while absent dealers cannot demand a fresh notice on adverse material.

Where assessment notices were duly served but the dealer did not appear, the assessing authority was not required to issue a further notice separately confronting all adverse material already in its possession. However, penalty could not be imposed unless the governing provision's requirement of prior notice and a reasonable opportunity of hearing was satisfied. On the admitted facts, no penalty notice was issued and the earlier notices did not indicate a proposed penalty, so the penalty order was unsustainable and was quashed, while the assessment otherwise stood.

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Issues: (i) Whether the assessing authority was obliged to separately communicate the material relied upon when the assessee did not appear despite notice; (ii) Whether penalty could be imposed without issuing a notice or affording the dealer a reasonable opportunity of being heard under the governing provision.

Issue (i): Whether the assessing authority was obliged to separately communicate the material relied upon when the assessee did not appear despite notice.

Analysis: The notices need not spell out the entire reasoning or the specific material proposed to be used. Where notices were duly addressed and served, and the assessee chose not to appear before the assessing authority, the authority was not required to issue a fresh notice specifically drawing attention to the material already in its possession. The obligation to confront the dealer with adverse material arises when the dealer participates in the proceedings.

Conclusion: This issue was decided against the assessee.

Issue (ii): Whether penalty could be imposed without issuing a notice or affording the dealer a reasonable opportunity of being heard under the governing provision.

Analysis: The statutory provision governing penalty expressly requires that the dealer be given a reasonable opportunity of being heard before penalty is directed. On the admitted facts, no notice for penalty was issued, and the earlier notices did not indicate that penalty was proposed. In the absence of such notice and opportunity, the penalty order could not be sustained.

Conclusion: This issue was decided in favour of the assessee.

Final Conclusion: The assessment was sustained except to the extent of the penalty, which was quashed for want of the requisite notice and hearing.

Ratio Decidendi: A penalty provision requiring a reasonable opportunity of being heard cannot be invoked without prior notice, while a dealer who does not appear despite service of notice cannot insist on a further notice specifically confronting the material relied upon.

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