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Validity of notice under Section 28(3) of the Income-tax Act for imposing a penalty on the assessee. Detailed Analysis: 1. The case involved a reference under Section 66(2) of the Income-tax Act regarding the validity of a notice issued to the assessee under Section 28(3) and the subsequent imposition of a penalty based on that notice. The assessee, a Hindu undivided family engaged in business, failed to file a return of income despite a notice under Section 22(2) being served. An assessment was made under Section 23(4), following which a notice under Section 28(3) was issued by the Income-tax Officer for imposing a penalty. 2. The Appellate Assistant Commissioner initially set aside the penalty order, citing insufficient compliance with Section 28(3). However, upon appeal by the Income-tax Officer, the Tribunal remanded the case back to the Appellate Assistant Commissioner. The new officer held that the assessee had been given a reasonable opportunity to be heard, leading to a further appeal to the High Court under Section 66(2) for a direction to state a case. 3. Section 28(3) of the Income-tax Act requires the assessee to be heard or given a reasonable opportunity of being heard before imposing a penalty for income concealment. The notice issued to the assessee called for a written or in-person explanation regarding the penalty imposition. The Court deliberated on whether this notice complied with the mandatory hearing requirement of Section 28(3, emphasizing the necessity of a hearing by the taxing authority or an opportunity for the assessee to be heard. 4. The Court highlighted the difference in language used in various sections of the Act concerning the right to be heard or show cause. Referring to provisions like the first proviso to clause (h) of sub-section (3) of Section 31 and sub-section (4) of Section 33, it concluded that Section 28(3) unequivocally mandated a hearing for penalty imposition. The failure to provide the assessee with a hearing or a reasonable opportunity to be heard rendered the penalty order ultra vires. 5. Consequently, the High Court held that the assessee was not liable to pay the penalty imposed by the Income-tax Officer, and the order levying the penalty was set aside. Any penalty already paid was to be refunded to the assessee, who was also awarded the costs of the application along with a hearing fee. 6. Justice P.V.B. Rao concurred with the decision, affirming the setting aside of the penalty order and the refund of any amount paid by the assessee.
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