Natural justice governs discretionary tax penalties; penalty order invalid where no reasonable hearing was given before imposition.

Section 36(1) of the Assam Agricultural Income-tax Act, 1939 was treated as a discretionary penal power, and the absence of an express hearing requirement did not exclude natural justice. Because the assessee was not given a reasonable opportunity before penalty was imposed, the penalty order was procedurally invalid. The revisional order also could not stand once the underlying penalty order was found void. The penalty was therefore quashed for violation of natural justice.

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Issues: Whether the penalty order imposed under section 36(1) of the Assam Agricultural Income-tax Act, 1939 was vitiated for want of notice and opportunity of hearing, thereby attracting the principles of natural justice.

Analysis: Section 36(1) conferred a discretionary penal power on the taxing authority. Even though the provision did not expressly prescribe a hearing, the nature of the power required observance of the principles of natural justice. As no reasonable opportunity was given to the assessee before the penalty was imposed, the original order suffered from a procedural illegality. The revisional order also could not survive once the underlying penalty order was found invalid.

Conclusion: The penalty order was void for violation of natural justice and was quashed.

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