Breach of hearing requirement can justify de novo assessment rather than outright annulment, with issues reopened afresh.

An ex parte income-tax assessment made without service of notice under section 143(2) may be set aside for fresh assessment after due notice and hearing, because the defect breaches audi alteram partem but does not necessarily destroy the assessing authority's jurisdiction. The proper consequence depends on the facts, and outright annulment is not the only available course. Where the assessment is remitted for de novo consideration, isolated findings on quantum and registration should not be retained, as the assessee must be allowed to contest all issues afresh in the renewed proceedings.

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Issues: (i) Whether an ex parte assessment made without service of notice under section 143(2) of the Income-tax Act, 1961, should be annulled outright or set aside for fresh assessment after opportunity of hearing; (ii) Whether the Commissioner (Appeals)'s specific findings on quantum and registration could stand when the assessment itself was set aside for fresh disposal.

Issue (i): Whether an ex parte assessment made without service of notice under section 143(2) of the Income-tax Act, 1961, should be annulled outright or set aside for fresh assessment after opportunity of hearing.

Analysis: The assessment was made ex parte without a proper pre-decisional hearing, which offended the rule of audi alteram partem. However, the defect did not destroy the Income-tax Officer's basic jurisdiction to complete the assessment. The appellate authority was competent to correct the procedural illegality by setting aside the assessment and directing a fresh assessment after due notice and a reasonable opportunity of being heard. The proper consequence depended on the facts, and outright annulment was not the only permissible course.

Conclusion: The assessment was liable to be set aside for fresh assessment and not annulled outright; this was in favour of the Revenue on this issue.

Issue (ii): Whether the Commissioner (Appeals)'s specific findings on quantum and registration could stand when the assessment itself was set aside for fresh disposal.

Analysis: Once the assessment was found to have been made without affording the assessee an opportunity of hearing, the matter had to go back entirely for de novo consideration. In that situation, it was improper to retain isolated findings on particular issues, since the assessee was entitled to urge all matters afresh before the assessing authority. The registration aspect was also to be dealt with in accordance with law in the fresh proceedings.

Conclusion: The specific findings on quantum and registration were set aside and the matter was remitted for fresh consideration in favour of the assessee on this issue.

Final Conclusion: The appeal succeeded only to the extent that the appellate order was treated as setting aside the assessment in its entirety for fresh disposal after notice and hearing, while the direction for a de novo assessment was sustained.

Ratio Decidendi: Where an assessment is made in breach of the requirement of reasonable opportunity of hearing, the defect may justify setting aside the assessment with a direction for de novo assessment rather than outright annulment, and an appellate authority may also direct the assessing authority to reconsider the matter afresh unless the statute forbids such course.

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