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The task of automatic image annotation involves assigning relevant multiple labels/tags to query images based on their visual content. One of the key challenge in multi-label image annotation task is the class imbalance problem where frequently occurring labels suppress the participation of rarely occurring labels. In this paper, we propose to exploit the multi-scale behavior in hypergraph heat diffusion framework for the automatic image annotation task. The proposed novel technique enables to model the higher order relationship among images in the feature space and provides a multi-scale label diffusion mechanism to address the class imbalance problem in the data.