Penalty proceedings survive valid notice despite denial of hearing; authority may resume from the stage of procedural defect.

A valid penalty notice under the income-tax law does not lapse merely because the penalty order is set aside for denial of the statutory opportunity of hearing. The underlying proceedings survive to the extent the initiating notice was lawful, and the authority may resume the matter from the stage where the procedural defect occurred. An express remand is unnecessary where only the final order is invalidated for breach of hearing requirements. The Supreme Court held that the Income-tax Officer could continue the penalty proceedings and lawfully determine whether penalty should be imposed.

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Issues: Whether the Income-tax Officer could continue penalty proceedings from the stage at which the defect occurred after the penalty order had been set aside for want of a hearing under the penalty provision.

Analysis: The notice initiating penalty proceedings under the penalty clause remained operative, and the defect arose only when the assessee was denied the statutory opportunity of being heard. Setting aside the penalty order for that reason did not terminate the proceedings altogether. It merely removed the invalid order and left the Income-tax Officer free to resume the matter from the stage where the illegality supervened. An express remand was not necessary because the earlier notice and proceedings survived for the limited purpose of being completed in accordance with law.

Conclusion: The Income-tax Officer was entitled to continue the proceedings from the stage of the procedural defect and lawfully determine the penalty, if any.

Final Conclusion: The challenge to the resumed penalty proceedings failed, and the dismissal of the appeal left the Revenue's position undisturbed.

Ratio Decidendi: Where a penalty order is set aside for denial of the statutory opportunity of being heard, the underlying proceedings do not abate if the initiating notice was validly issued; the authority may continue the proceedings from the point at which the procedural illegality occurred.

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