Mandatory personal hearing before the deciding officer invalidated a penalty order passed by a successor income-tax authority.

Section 28(3) requires that no penalty order be made unless the assessee has been heard or given a reasonable opportunity of being heard, and that requirement remains mandatory even where a successor Income-tax Officer continues the proceedings under section 5(7C). A hearing before the predecessor does not satisfy the statutory right where the successor is the officer who ultimately decides the matter, because the opportunity must be effective and meaningful before the deciding authority. The assessee's failure to seek reopening or rehearing under the proviso to section 5(7C) does not cure the absence of a fresh hearing. The penalty order was therefore invalid and was struck down in favour of the assessee.

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Issues: Whether a penalty order passed by a successor Income-tax Officer was invalid when the assessee had earlier been personally heard by the predecessor officer, but no fresh personal hearing was granted by the successor and no request was made under the proviso to section 5(7C) for reopening or rehearing.

Analysis: The statutory requirement under section 28(3) that no penalty order be made unless the assessee has been heard or given a reasonable opportunity of being heard is mandatory and independent of the enabling provision in section 5(7C), which permits a successor officer to continue proceedings from the stage left by the predecessor. A personal hearing is meaningful only when given by the officer who ultimately decides the matter, and it cannot be treated as transferred to a successor merely because the predecessor had heard the assessee. The right to demand reopening or rehearing under section 5(7C) does not substitute for the right to be heard under section 28(3), and the absence of such a demand does not validate an order passed without a fresh effective hearing by the deciding officer.

Conclusion: The penalty order was invalid, and the question was answered in the affirmative in favour of the assessee.

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