Recovery after annulled assessment fails, while heirs may be proceeded against without fresh notice under the deceased-assessee scheme.

Certificate recovery proceedings could not continue once the underlying ex parte assessment had been set aside and remitted for fresh assessment, because no subsisting valid demand remained; recovery could proceed only after a fresh valid assessment and demand. In contrast, the deceased assessee provision was applied to permit proceedings against the heirs without a fresh notice, on the footing that notice under section 34(1A) incorporated the requirements of section 22. The assessment challenge was also held not maintainable under article 226 where statutory appellate remedies had already been pursued and the objection was not taken at the proper stage.

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Issues: (i) Whether certificate recovery proceedings could continue after the assessment on which they were based had been set aside and the matter remitted for fresh assessment; (ii) Whether, after the assessee died, the department could validly proceed against the heirs under section 34(1A) of the Indian Income-tax Act, 1922, without serving a fresh notice on them, and whether the assessment challenge was maintainable under article 226 of the Constitution of India in view of the alternative statutory remedy.

Issue (i): Whether certificate recovery proceedings could continue after the assessment on which they were based had been set aside and the matter remitted for fresh assessment

Analysis: Once the ex parte assessment was set aside, there was no subsisting valid demand on which the petitioners could be treated as assessees in default. The provisions governing modification of demand or certificate contemplated an existing assessment that was later reduced or varied, not a case where the entire assessment had been annulled. In such a situation, recovery proceedings could not lawfully proceed until a fresh valid assessment was made and a demand followed.

Conclusion: The certificate proceedings were liable to be quashed and could not continue.

Issue (ii): Whether, after the assessee died, the department could validly proceed against the heirs under section 34(1A) of the Indian Income-tax Act, 1922, without serving a fresh notice on them, and whether the assessment challenge was maintainable under article 226 of the Constitution of India in view of the alternative statutory remedy

Analysis: The Court held that section 24B(3) of the Indian Income-tax Act, 1922 applied where a person died without furnishing the return required pursuant to a notice under section 34(1A), because such a notice incorporated the requirements of section 22. On that construction, the heirs could be proceeded against without a fresh notice. The Court further held that the challenge to the assessment could not be entertained under article 226, since the petitioners had already pursued the statutory appellate remedies and had not raised the objection at the earlier stage when it could have been taken.

Conclusion: No fresh notice under section 34(1A) was required, and the assessment challenge was rejected.

Final Conclusion: The writ succeeded only to the extent of stopping recovery on the basis of the annulled assessment, while the challenge to the assessment itself failed.

Ratio Decidendi: Recovery proceedings cannot continue where the underlying assessment has been wholly set aside, and a legal representative can be proceeded against under the relevant deceased-assessee provision without a fresh notice if the statutory scheme already incorporates the requirements of the original notice.

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