M. CHOCKALINGAM & ANOTHER vs COMMISSIONER OF INCOME-TAX,MADRAS & ANOTHER

The Supreme Court held that under Section 35 of the Income Tax Act, 1922, the Income Tax Officer must provide notice and an opportunity to be heard to the assessee before rectifying an assessment that results in enhanced tax liability. The Court found a violation of the principles of natural justice as the appellants were not given a hearing prior to the imposition of penal interest under Section 18A(8). The Court ruled that the fifth proviso to Section 18A(6) applies to cases under Section 18A(8), thus allowing for discretion in rectification proceedings.