§ 321
Chapter XVII — Special Provisions Relating To Certain Persons
Association dissolved or business discontinued
Income-tax Act, 2025
If an association of persons (AOP) stops its business or is dissolved, the tax officer must assess its total income as if the closure never occurred, applying all normal tax and penalty provisions.
All members (or their legal heirs) are jointly and severally liable for any tax, penalty or other sums due.
If tax proceedings had already started before the closure, they continue against the members from the point they were left off.
📜 Official text of the section +
321. (1) Where any business or profession carried on by an association of persons
has been discontinued or where an association of persons is dissolved, the
Assessing Officer shall make an assessment of the total income of the association
of persons as if no such discontinuance or dissolution had taken place, and all the
provisions of this Act, including the provisions relating to the levy of a penalty or
any other sum chargeable under any provision of this Act shall apply, so far as may
be, to such assessment.
(2) Regardless of the generality of sub-section (1), if the Assessing Officer or the
Joint Commissioner (Appeals) or the Commissioner (Appeals) in the course of any
proceeding under this Act in respect of any such association of persons as is referred
to in that sub-section is satisfied that the association of persons was guilty of any
of the acts specified in Chapter XXI, he may impose or direct the imposition of a
penalty as per the provisions of that Chapter.
(3) Every person who was at the time of such discontinuance or dissolution a member
of the association of persons, and the legal representative of any such person who
is deceased, shall be jointly and severally liable for the amount of tax, penalty or
other sum payable, and all the provisions of this Act, so far as may be, shall apply
to any such assessment or imposition of penalty or other sum.
(4) Where such discontinuance or dissolution takes place after any proceedings in
respect of a tax year have commenced, the proceedings may be continued against
the persons referred to in sub-section (3) from the stage at which the proceedings
stood at the time of such discontinuance or dissolution, and all the provisions of
this Act shall, so far as may be, apply accordingly.
(5) Nothing in this section shall affect the provisions of section 302(4).
Company in liquidation.
Plain-language summary — not the official text. Refer to the bare Act and confirm with a professional for your specific case.