Section 321: association dissolved or business discontinued

Assessment continues as if nothing changed

Where a business or profession carried on by an association of persons has been discontinued, or the association of persons is dissolved, the Assessing Officer assesses its total income as if no discontinuance or dissolution had taken place - all provisions of the Act, including those on levying a penalty or other chargeable sum, apply, so far as may be, to that assessment.

Penalties can still be imposed

Without limiting the above, if the Assessing Officer, Joint Commissioner (Appeals) or Commissioner (Appeals) is satisfied, in the course of any proceeding, that the dissolved or discontinued association of persons was guilty of any act specified in Chapter XXI, they may impose (or direct the imposition of) a penalty under that Chapter.

Joint and several liability of members

Every person who was, at the time of discontinuance or dissolution, a member of the association of persons - and the legal representative of any such member who has since died - is jointly and severally liable for the tax, penalty or other sum payable; all provisions of the Act apply, so far as may be, to any such assessment or imposition of penalty or other sum.

Proceedings already underway can continue

Where the discontinuance or dissolution occurs after proceedings for a tax year have already begun, those proceedings may be continued against the members/legal representatives referred to above, from the stage they had reached at the time of discontinuance or dissolution.

Does not override Section 302(4)

Nothing in Section 321 affects the provisions of section 302(4) - the estate-limited liability rule for a legal representative.

Frequently asked questions