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Issues Involved:
1. Validity of the assessment made on the deceased assessee without serving notice to legal heirs. 2. Whether the assessment should be annulled or set aside. Issue-Wise Detailed Analysis: 1. Validity of the assessment made on the deceased assessee without serving notice to legal heirs: The appeal concerns the assessment year 1977-78. The deceased assessee, Suraj Bhan, filed a return disclosing a loss of Rs. 1,347. Suraj Bhan passed away on 17th October 1978, and the assessment was completed ex parte on 28th March 1980. Subsequently, an application under Section 146 was filed to reopen the assessment, stating that no notice was served on the legal heirs, making the ex parte assessment improper and invalid. The assessment was canceled by the ITO on 31st March 1980. A new assessment was made on 29th February 1985, determining the total income at Rs. 1,15,160. However, the ITO did not serve notice on the legal heirs, despite being informed about the death and the legal heirs' addresses. The assessment was made in the status of an individual, which was contested by the assessee as invalid and opposed to law, citing the Gauhati High Court judgment in Jai Prakash Singh vs. CIT and the Tribunal's decision in Puran Chand Lakshmi Chand vs. ITO. 2. Whether the assessment should be annulled or set aside: The Department argued that the CIT (A) should not have annulled the assessment but rather set it aside, relying on the Delhi High Court judgment in CIT vs. Roshan Lal & Anr., which suggested that assessments declared invalid could be cured by serving notices on the legal representatives. The Department also cited the Calcutta High Court judgment in Kamlesh Kumar Mehta vs. CIT and the Gujarat High Court judgment in CIT vs. Sumantbhai C. Munshaw, which supported setting aside the assessment rather than annulment. Analysis and Conclusion: The Tribunal carefully considered the rival submissions and the decisions relied upon. It was admitted that the ITO was informed about the death of Suraj Bhan and the legal heirs' details but did not serve notice on them. Section 159 of the IT Act provides that legal representatives are liable to pay any sum the deceased would have been liable to pay. For making an assessment, proceedings taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against them. The Delhi High Court in CIT vs. Roshan Lal & Another held that assessments made without serving notice on the legal representatives are invalid but not nullities if the legal representatives were aware of the proceedings. In the present case, the ITO did not serve notice on the legal representatives, making the assessment invalid and a nullity. The Calcutta High Court in Kamlesh Kumar Mehta vs. CIT and the Gujarat High Court in CIT vs. Sumantbhai C. Munshaw also supported the view that assessments without notice to legal representatives should be set aside, not annulled, unless the legal representatives had knowledge of the proceedings. The Tribunal found that the ITO ignored requests to serve notices on the legal representatives, making the assessments invalid and a nullity. The Gauhati High Court in Jai Prakash Singh vs. CIT held that failure to serve notice on all legal representatives invalidates the proceedings and orders, and it is the duty of appellate authorities to annul the assessment. Therefore, the Tribunal concluded that the CIT (A) rightly annulled the assessment, and the appeal had no merit and should be dismissed.
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