Mandatory hearing under income-tax penalty notice requirements rendered the penalty order invalid for lack of proper opportunity to be heard.

Section 28(3) of the Income-tax Act, 1922 was held to impose an explicit and mandatory requirement of a hearing, or at least a real opportunity of being heard, before penalty action could be taken. A mere option to file a written explanation or appear in person was not enough, and the differing wording of related procedural provisions showed that the Legislature intended distinct safeguards in different contexts. Because no proper hearing or reasonable opportunity was afforded, the notice failed to satisfy the statutory condition and the penalty order was treated as ultra vires and liable to be set aside.

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Issues: Whether the notice issued under Section 28(3) of the Income-tax Act, 1922, satisfied the statutory requirement of hearing or reasonable opportunity of being heard, and whether the penalty order founded on that notice was valid.

Analysis: The requirement in Section 28(3) was held to be explicit and mandatory. The statutory language contemplated a hearing before the taxing authority, or at least a real opportunity to be heard, and not merely an option to submit a written explanation or appear in person. The difference in phraseology between Section 28(3) and other provisions of the Act, including Section 31(3)(h) and Section 33(4), showed that the Legislature used different expressions for different procedural safeguards. As the assessee had not been afforded a hearing or a reasonable opportunity of being heard, the penalty proceedings did not satisfy the statutory condition.

Conclusion: The notice under Section 28(3) was invalid for non-compliance with the mandatory requirement of hearing, and the penalty order was ultra vires and liable to be set aside.

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