Penalty proceedings require fresh hearing when a successor officer resumes the matter without clear notice to the assessee.

Section 129 permits a successor income-tax to continue a proceeding from the stage left by a predecessor, but the assessee retains the right to a reopening or rehearing before continuation. In penalty matters, the statutory requirement of a reasonable opportunity of being heard under section 274 must be strictly observed. The article states that where the successor officer continued the penalty proceeding without specifically informing the assessee and without granting a fresh hearing, the continuation and penalty order were unsustainable.

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Issues: (i) Whether the Income-tax Officer could continue the penalty proceeding from the stage left by his predecessor without specifically informing the assessee of that intention; (ii) whether a penalty order under section 271(1)(a) could be passed by the successor-Income-tax Officer without giving the assessee a fresh opportunity of being heard.

Issue (i): Whether the Income-tax Officer could continue the penalty proceeding from the stage left by his predecessor without specifically informing the assessee of that intention.

Analysis: Section 129 permits a succeeding income-tax authority to continue a proceeding from the stage left by the predecessor, but the proviso preserves the assessee's right to demand reopening or re-hearing before the proceeding is continued. Penalty proceedings were treated as quasi-judicial and quasi-criminal, requiring strict observance of the statutory opportunity of hearing. On the facts, the assessee had no knowledge that the successor officer intended to proceed from the earlier stage, and no specific intimation was given.

Conclusion: The continuation of the penalty proceeding without specifically informing the assessee was not valid, and the issue was decided in favour of the assessee.

Issue (ii): Whether a penalty order under section 271(1)(a) could be passed by the successor-Income-tax Officer without giving the assessee a fresh opportunity of being heard.

Analysis: Section 274 forbids imposition of penalty unless the assessee has been heard or given a reasonable opportunity of being heard. Although section 129 allows continuation by a successor officer, that power does not dispense with the hearing requirement in penalty matters. The earlier notice issued by the predecessor did not authorise the successor to impose penalty without a fresh hearing, especially where the assessee had not responded and there was no record of knowledge of the change in incumbent.

Conclusion: The successor-Income-tax Officer had no authority to pass the penalty order without affording a fresh opportunity of being heard, and the issue was decided in favour of the assessee.

Final Conclusion: The reference was answered for the assessee on the controlling question of law, and the penalty order by the successor officer was held unsustainable for want of a fresh hearing in accordance with the Act.

Ratio Decidendi: In penalty proceedings, the statutory requirement of a reasonable opportunity of being heard must be strictly complied with, and a successor officer cannot continue and conclude the matter without ensuring that the assessee has notice and a real opportunity to seek a re-hearing where the proceeding is resumed from an earlier stage.

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