The AO never heard me but the CIT(A) did. Does the appeal cure the defect?
No. Failure to follow the principles of natural justice at the assessment stage cannot be made good in an appeal. Once it is found that the officer did not give the assessee a proper opportunity of hearing, the assessment order is to be set aside and the matter remanded to the officer for a fresh assessment after a proper opportunity.
Decided by the Supreme Court (Supreme Court of India (S.P. Bharucha, N. Santosh Hegde and Y.K. Sabharwal, JJ.), Civil Appeal Nos. 6517 and 6518 of 1997) on 2001-02-27, reported as (2001) 249 ITR 216 (SC) / [2001] 116 Taxman 491 (SC) / [2001] 166 CTR 509 (SC) - Civil Appeal Nos. 6517 and 6518 of 1997. It bears on section 143, section 143(3) of the Income Tax Act 1961, in Assessment & Scrutiny, Appeals and Faceless Assessment & Appeals matters.
This is what you cite when the department answers a natural-justice objection with 'you had a full hearing before the appellate authority, so no prejudice'. It also decides the remedy, which is the part practitioners forget: the outcome is a remand to the officer, not a deletion of the addition. That cuts both ways — it is the answer to the department, and it is also why a client hoping the addition simply disappears should be told what a successful natural-justice point actually buys. The point recurs constantly in faceless assessment writs, where the complaint is that a personal hearing sought under s.144B was never given.
Binding on every court and authority in India.
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The order is about a page long and narrates almost nothing. What it records is the finding it works from: a statement in the order of the Tribunal, the fact-finding authority, reading 'We will straightaway agree with the assessee's submission that the Income-tax Officer had not given to the assessee proper opportunity of being heard.' Notwithstanding that finding, the Tribunal and the High Court held it unnecessary to set aside the assessment and remand. Two questions had gone to the High Court; the second was not pressed. The first asked whether the Tribunal was justified in not setting aside the assessment order in spite of its own finding that the Income-tax Officer had not given the assessee a proper opportunity of hearing. No assessment years, amounts or additions appear anywhere in the order.
The appeals were allowed. That the assessee could have placed evidence before the first appellate authority or before the Tribunal is of no consequence, because it is the assessment order that counts, and that order must be made after the assessee has been given a reasonable opportunity of setting out his case. The referred question - whether the Tribunal was justified in not setting aside the assessment despite its own finding of a denial of hearing - admitted of only one answer, inherent in the question itself: in the negative and in favour of the assessee. The order under challenge was set aside, and so were the assessment orders, the order of the Commissioner (Appeals) and the order of the Tribunal. The matter was remanded to the assessing authority for fresh consideration, with no order as to costs.
The reasoning is a single step and the Court gave it in one sentence: the availability of a hearing later, before the first appellate authority or the Tribunal, is of no consequence, because it is the assessment order that counts, and that order must be made after the assessee has had a reasonable opportunity of setting out his case. Having a finding of denial from the fact-finding authority itself, the Court treated the answer as inherent in the question.
That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of setting out his case.
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Handle my notice → Ask a CA on WhatsAppNo. Failure to follow the principles of natural justice at the assessment stage cannot be made good in an appeal. Once it is found that the officer did not give the assessee a proper opportunity of hearing, the assessment order is to be set aside and the matter remanded to the officer for a fresh assessment after a proper opportunity. This was decided by the Supreme Court (Supreme Court of India (S.P. Bharucha, N. Santosh Hegde and Y.K. Sabharwal, JJ.), Civil Appeal Nos. 6517 and 6518 of 1997) and bears on section 143, section 143(3) of the Income Tax Act 1961. It is reported as (2001) 249 ITR 216 (SC) / [2001] 116 Taxman 491 (SC) / [2001] 166 CTR 509 (SC) - Civil Appeal Nos. 6517 and 6518 of 1997. This is what you cite when the department answers a natural-justice objection with 'you had a full hearing before the appellate authority, so no prejudice'. It also decides the remedy, which is the part practitioners forget: the outcome is a remand to the officer, not a deletion of the addition. That cuts both ways — it is the answer to the department, and it is also why a client hoping the addition simply disappears should be told what a successful natural-justice point actually buys. The point recurs constantly in faceless assessment writs, where the complaint is that a personal hearing sought under s.144B was never given. If it applies to you, the first step is this: Record the denial contemporaneously — the request for a hearing, the date, the adjournment refused, the reply the portal would not accept.
The order is about a page long and narrates almost nothing. What it records is the finding it works from: a statement in the order of the Tribunal, the fact-finding authority, reading 'We will straightaway agree with the assessee's submission that the Income-tax Officer had not given to the assessee proper opportunity of being heard.' Notwithstanding that finding, the Tribunal and the High Court held it unnecessary to set aside the assessment and remand. Two questions had gone to the High Court; the second was not pressed. The first asked whether the Tribunal was justified in not setting aside the assessment order in spite of its own finding that the Income-tax Officer had not given the assessee a proper opportunity of hearing. No assessment years, amounts or additions appear anywhere in the order. The matter was decided on 2001-02-27 by the Supreme Court (Supreme Court of India (S.P. Bharucha, N. Santosh Hegde and Y.K. Sabharwal, JJ.), Civil Appeal Nos. 6517 and 6518 of 1997). On those facts the Supreme Court held as follows. The appeals were allowed. That the assessee could have placed evidence before the first appellate authority or before the Tribunal is of no consequence, because it is the assessment order that counts, and that order must be made after the assessee has been given a reasonable opportunity of setting out his case. The referred question - whether the Tribunal was justified in not setting aside the assessment despite its own finding of a denial of hearing - admitted of only one answer, inherent in the question itself: in the negative and in favour of the assessee. The order under challenge was set aside, and so were the assessment orders, the order of the Commissioner (Appeals) and the order of the Tribunal. The matter was remanded to the assessing authority for fresh consideration, with no order as to costs.
The reasoning is a single step and the Court gave it in one sentence: the availability of a hearing later, before the first appellate authority or the Tribunal, is of no consequence, because it is the assessment order that counts, and that order must be made after the assessee has had a reasonable opportunity of setting out his case. Having a finding of denial from the fact-finding authority itself, the Court treated the answer as inherent in the question. In the words reproduced by the source cited on this page: "That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of setting out his case."
It was decided by the Supreme Court on 2001-02-27 and is reported as (2001) 249 ITR 216 (SC) / [2001] 116 Taxman 491 (SC) / [2001] 166 CTR 509 (SC) - Civil Appeal Nos. 6517 and 6518 of 1997. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 143, section 143(3), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeals were allowed. That the assessee could have placed evidence before the first appellate authority or before the Tribunal is of no consequence, because it is the assessment order that counts, and that order must be made after the assessee has been given a reasonable opportunity of setting out his case. The referred question - whether the Tribunal was justified in not setting aside the assessment despite its own finding of a denial of hearing - admitted of only one answer, inherent in the question itself: in the negative and in favour of the assessee. The order under challenge was set aside, and so were the assessment orders, the order of the Commissioner (Appeals) and the order of the Tribunal. The matter was remanded to the assessing authority for fresh consideration, with no order as to costs. It arises in Assessment & Scrutiny, Appeals and Faceless Assessment & Appeals matters, on section 143, section 143(3) of the Income Tax Act 1961, and was decided by Supreme Court of India (S.P. Bharucha, N. Santosh Hegde and Y.K. Sabharwal, JJ.), Civil Appeal Nos. 6517 and 6518 of 1997. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Take the objection before the appellate authority rather than only arguing the merits, so that the finding of denial is on the record; that finding is what triggers the remand. Ask in terms for the assessment order to be set aside and remanded, which is the relief this decision supports, and do not overclaim deletion. Where the defect is in a faceless assessment, plead the specific statutory step that was missed as well as the general natural-justice point; this decision supplies the principle, not the s.144B analysis.
Still good law. Followed by the Bombay High Court in Tulsidas Khimji (P.) Ltd. v. ACIT [2025] 176 taxmann.com 696 / 306 Taxman 274 (Bombay), decided 15 July 2025 (B.P. Colabawalla and Firdosh P. Pooniwalla, JJ., Writ Petition No. 2547 of 2024), whose case review records this decision as followed. Read the follower for what it is: the decision was cited by counsel at para 3 for the proposition that an assessment order passed without serving the show-cause notice proposing variation offends natural justice, and the Court at para 5 quashed the faceless assessment order and remanded the matter to the National Faceless Assessment Centre at the show-cause notice stage, expressly keeping the merits open. Nothing found overrules or doubts the decision. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order has been read in its own text and cross-checked against the law report at [2001] 249 ITR 216 (SC); AIR 2001 SC 1391 and (2001) 9 SCC 725 are also given for it. THE ORDER IS VERY SHORT — roughly a page — and that shortness is worth knowing before it is leaned on. It contains no case review block, no cases referred to, no facts, no assessment years, no figures and no section numbers at all. Sections 143 and 143(3) are carried on this entry as practice tags for the assessment stage it governs, and not as provisions the Court cited; s.251 and s.254, which have been attached to it elsewhere, appear nowhere in it either. What it decides is narrow and firm: where the fact-finding authority has itself found that the Income-tax Officer gave no proper opportunity of hearing, the fact that the assessee could have led evidence in appeal is of no consequence, because it is the assessment order that counts. It does NOT tell you what amounts to a denial of hearing. A PARAPHRASE WARNING. The sentence this case is most often quoted for in the commentaries — that the Tribunal 'must set aside the assessment order and remand the same to the officer' — is not language the Court used. It is a paraphrase, and quoting it as the Court's words invites the obvious answer. Three cautions for anyone editing or citing this entry. First, on the numbering. Some copies render the body as two numbered blocks — the first beginning 'It is unnecessary to go into great detail' and carrying the sentence taken from the Tribunal's order, the second beginning 'That the assessee could have placed evidence'. Others render the order as unnumbered flowing prose. The numbering is not settled either way, and the quotation on this page is therefore located by description rather than by a paragraph number. Second, a misprint. Some copies render the key sentence as 'a reasonable opportunity of selling out his case'. The word is 'setting', as the later judgments quoting the passage confirm, and the text quoted on this entry is correct as it stands. Third, the coram is uncertain. The order as printed carries no coram, no signature block and no case numbers, and one automated attribution names only two judges — an attribution of a kind that has dropped a judge elsewhere and is not evidence against the entry. Neither the third judge nor the Civil Appeal Nos. 6517 and 6518 of 1997 given in 'bench' and 'reported' has been checked against a text that prints them. Read both as unconfirmed until [2001] 249 ITR 216 (SC) or (2001) 9 SCC 725 is opened, since those print the coram. The order says nothing about what counts as a proper opportunity - it works from a finding of denial already made below - and nothing about how the principle interacts with s.144B or with the first proviso to s.251(1)(a). It does not consider whether a remand is always the right relief where the denial is partial rather than total, and it gives no guidance on a case where the assessee has in fact suffered no prejudice. It states no assessment years, amounts or additions, so nothing about it is fact-specific enough to distinguish on. The corpus holds sahara-india-firm-v-cit-142-2a on the related point that the post-decisional hearing under s.142(3) does not cure the absence of a pre-decisional one; that is a different section and a different stage. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals were allowed. That the assessee could have placed evidence before the first appellate authority or before the Tribunal is of no consequence, because it is the assessment order that counts, and that order must be made after the assessee has been given a reasonable opportunity of setting out his case. The referred question - whether the Tribunal was justified in not setting aside the assessment despite its own finding of a denial of hearing - admitted of only one answer, inherent in the question itself: in the negative and in favour of the assessee. The order under challenge was set aside, and so were the assessment orders, the order of the Commissioner (Appeals) and the order of the Tribunal. The matter was remanded to the assessing authority for fresh consideration, with no order as to costs.
TaxSphere, “Tin Box Company v CIT”, https://taxnotice.vittsphere.com/caselaw/case/tin-box-company-v-cit-hearing-before-the-ao/ (validity last checked 2026-08-22)
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