Association dissolved or business discontinued
[Section-321 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 321(1) of Income Tax Act 2025
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.
Section 321(2) of Income Tax Act 2025
321(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.
Section 321(3) of Income Tax Act 2025
321(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.
Section 321(4) of Income Tax Act 2025
321(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.
Section 321(5) of Income Tax Act 2025
321(5) Nothing in this section shall affect the provisions of section 302(4).
FAQs on Section 321 of Income Tax Act 2025
What happens to the assessment of income when an association of persons is dissolved or its business is discontinued?
The Assessing Officer will assess the total income of the association of persons as if there had been no dissolution or discontinuance. All the provisions of the Income Tax Act, 2025, including those related to penalty or other sums, shall apply accordingly.
Can penalties be imposed after dissolution or discontinuance of the association of persons?
Yes, even after dissolution or discontinuance, if the Assessing Officer, Joint Commissioner (Appeals), or Commissioner (Appeals) is satisfied that the association was guilty of any acts specified in Chapter XXI, they may impose or direct the imposition of penalties under that Chapter.
Who is liable to pay tax, penalty, or other sums in case of dissolution or discontinuance?
Every person who was a member of the association at the time of dissolution or discontinuance, and the legal representatives of any deceased such person, are jointly and severally liable to pay the tax, penalty, or other sums due.
What happens to ongoing assessment proceedings if dissolution or discontinuance occurs mid-way?
The ongoing proceedings can be continued against the persons referred to in Section 321(3) from the stage they were at the time of dissolution or discontinuance, and all provisions of the Act shall apply as if no such interruption occurred.
Does Section 321 override the provisions of Section 302(4)?
No, Section 321 explicitly states that nothing in it affects the provisions of Section 302(4).
Refresh Page