Is it permissible for people to gather to eat and pray and make dua for someone who has passed away? Or is this wrong
That to me almost sounded like asking if breathing is permitted in Islam. And then I realized that you are probably asking because of all those people who go around saying this or that is a bid`a (false innovation).
My attitude toward all religious practices that were not practiced by the Companions and Successors is that they are permissible as long as they do not include making changes to the basics of Islamic practice. So we cannot start performing the obligatory prayers differently than how the Prophet 
and his Companions prayed. But we know that it is permitted to perform extra prayers at any time of day or night except for the few minutes when the sun is rising or setting. So we are free to start performing 8 rakats (in units of two) every day at 2 PM even if none of the early Muslims did that.
The root of the disagreement is that Salafis (except those rare ones who really take the time to understand Ibn Taymiyyah) often believe that Islam is a replacement for our humanity. It becomes a tribalist ideology where you have to act exactly according to their system to prove that you belong to their “tribe”. I discuss this more in my article on why I don’t recommend that IslamQA.info website.
While to mainstream Islamic scholars, once you get the basics of Islam right then you have endless freedom to practice Islam as you like as long as you stick to the permitted things. So there is nothing wrong with gathering to pray for someone even if there is no record of early Muslims doing that. And Ibn Taymiyyah himself says those who gather to celebrate the Prophet’s birthday will have a “great reward” if they do it with sincerity and good intentions, despite this kind of celebration being non-existent among the early Muslims.