Reassessment against a successor can continue under existing section 34 proceedings without fresh notices when succession is discovered later.

A valid notice under section 34 to the original assessee can lawfully set reassessment in motion, and if succession is discovered during those proceedings, section 26(2) permits assessment of the successor without starting afresh. The timing of the succession after the close of the relevant year does not invalidate the assessment, because the successor is assessed as if the business had been carried on throughout the year of account. Fresh notices under sections 22(2), 22(4) and 23(2) are not required once reassessment has already begun under section 34.

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Issues: (i) Whether income that had escaped assessment could be assessed under section 34 on the successor of the person who would have been liable if no succession had occurred; (ii) Whether such assessment was invalid because the succession occurred after the close of the year in which the income escaped assessment; (iii) Whether, after notice under section 34 had been served on the original assessee and a return had been made, proceedings against the successor had to be started de novo by fresh notices under sections 22(2), 22(4) and 23(2).

Issue (i): Whether income that had escaped assessment could be assessed under section 34 on the successor of the person who would have been liable if no succession had occurred.

Analysis: The notice under section 34 had been validly served on the original assessee while he was alive and able to respond. That notice lawfully initiated the reassessment process. Once the proceedings were so set in motion, the successor could be brought within the assessment under section 26(2) when the Income-tax Officer found, in the course of the assessment, that the business had passed to another person.

Conclusion: Yes. The escaped income could be assessed on the successor; the answer was in the affirmative.

Issue (ii): Whether such assessment was invalid because the succession occurred after the close of the year in which the income escaped assessment.

Analysis: Under section 26(2), the material considerations are the date of assessment and the year of account. The successor is to be assessed as if she had carried on the business throughout the year of account and had received its profits. The fact that the succession occurred after the year in question did not defeat the assessment.

Conclusion: No. The assessment was not invalidated by the timing of the succession; the answer was in the negative.

Issue (iii): Whether, after notice under section 34 had been served on the original assessee and a return had been made, proceedings against the successor had to be started de novo by fresh notices under sections 22(2), 22(4) and 23(2).

Analysis: A fresh commencement of proceedings was not required. Service of notice under section 34 attracted the assessment machinery, and the successor could be assessed in the same proceedings when discovered during their course. The statute did not insist on a new notice under section 22(2) to begin proceedings afresh against the successor.

Conclusion: No. Proceedings against the successor did not have to be started de novo; the answer was that they could continue in the existing proceedings.

Final Conclusion: The reference was answered in favour of the Revenue, and the successor was held liable to assessment within the existing reassessment proceedings.

Ratio Decidendi: A valid notice under section 34 to the original assessee enables the assessment proceedings to continue, and where succession is discovered in the course of those proceedings, section 26(2) permits assessment of the successor without a fresh commencement of proceedings.

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