Invalid assessment due to lack of notice to legal representatives; assessments annulled for procedural irregularities.

The court found that the assessment completed by the Income-tax Officer (ITO) without serving notice to all legal representatives of the deceased assessee was invalid. The Appellate Assistant Commissioner (AAC) was justified in annulling the assessment as the assessments should have been made in the name of the rightful legal representative, Smt. Dayawati Gupta. The Tribunal upheld the AAC's decision, stating that the assessments were rightly annulled due to procedural irregularities. The court emphasized that the assessment should have been set aside for being redone de novo rather than being annulled.

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Issues Involved:
1. Validity of the assessment completed by the Income-tax Officer (ITO) without serving notice to all legal representatives of the deceased assessee.
2. Whether the Appellate Assistant Commissioner (AAC) was justified in annulling the assessment.

Summary:

Issue 1: Validity of the assessment completed by the ITO without serving notice to all legal representatives of the deceased assessee.

The ITO discovered that the deceased assessee, Mohanlal, failed to disclose material facts, leading to escaped income assessment. After issuing a notice u/s 148, Mohanlal filed a return and subsequently died. The ITO issued a notice u/s 142(1) to the deceased, which was received by his son, Gyan Prakash Gupta. Despite being informed of the legal representatives, the ITO did not issue notices to all of them. The AAC found the assessment orders void ab initio due to the lack of notice to all legal representatives, including Smt. Dayawati Gupta, in whose favor a will was executed.

Issue 2: Whether the AAC was justified in annulling the assessment.

The AAC annulled the assessments on the grounds that:
1. No assessments could be completed in the name of Gyan Prakash Gupta.
2. The property was bequeathed to Smt. Dayawati Gupta, and any assessment should have been made in her name.
3. The ITO was informed of the legal representatives but did not issue notices to them.

The Tribunal agreed with the AAC, dismissing the appeal by the Commissioner of Income-tax, stating that the assessments were rightly annulled. The Tribunal did not address other points raised.

Legal Provisions and Case Law:

- Section 142: Notice u/s 142(1) was issued to the deceased, which is procedurally incorrect.
- Section 143: Mandates serving notice before making an assessment.
- Section 153: Time-limit for completing assessments.
- Section 159: Deals with the liability of legal representatives, deeming them as assessees.

The court examined various case laws:
- Estate of Late Rangalal Jajodia v. CIT: Assessment proceedings do not cease due to want of notice but are liable to be corrected.
- Kamalesh Kumar Mehta v. CIT: Failure to issue notice to legal representatives does not annul the assessment but requires setting it aside.
- Sant Baba Mohan Singh v. CIT: Failure to issue notice does not annul the assessment but requires setting it aside.
- Rattan Lal Tiku v. CIT: Non-compliance with section 143(2) vitiates the order but does not annul it.
- CIT v. Sumantbhai C. Munshaw: Procedural omissions do not affect the initial jurisdiction but require correction.
- Jai Prakash Singh v. CIT: Assessment without notice to all legal representatives is invalid but should be set aside, not annulled.

Conclusion:

The court concluded that the AAC should have set aside the assessment instead of annulling it. The failure to serve notice u/s 143(2) is an irregularity that invalidates the assessment but does not render it ab initio void. The correct order by the AAC should have been to set aside the assessment for being redone de novo. The court answered the question in the negative, in favor of the Revenue and against the assessee, with no order as to costs.

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