Company in liquidation
[Section-322 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 322(1) of Income Tax Act 2025
322(1) Every person,—
- (a) who is the liquidator of any company which is being wound up, whether under the orders of a court or otherwise; or
- (b) who has been appointed the receiver of any assets of a company, (herein referred to as the liquidator),
shall, within thirty days after he has become such liquidator, give notice of his appointment as such to the Assessing Officer who is entitled to assess the income of the company.
Section 322(2) of Income Tax Act 2025
322(2) The Assessing Officer shall, after making such inquiries or calling for such information as he may deem fit, notify to the liquidator within three months from the date on which he receives notice of the appointment of the liquidator the amount which, in the opinion of the Assessing Officer, would be sufficient to provide for any tax which is then, or is likely thereafter to become, payable by the company.
Section 322(3) of Income Tax Act 2025
322(3) The liquidator—
- (a) shall not, without the leave of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, part with any of the assets of the company or the properties in his hands until he has been notified by the Assessing Officer under sub-section (2); and
- (b) on being so notified, shall set aside an amount, equal to the amount notified and, until he so sets aside such amount, shall not part with any of the assets of the company or the properties in his hands.
Section 322(4) of Income Tax Act 2025
322(4) The provisions of sub-section (3) shall not debar the liquidator from parting with such assets or properties for the purpose of––
- (a) the payment of the tax payable by the company; or
- (b) making any payment to secured creditors whose debts are entitled under law to priority of payment over debts due to Government on the date of liquidation; or
- (c) meeting such costs and expenses of the winding up of the company,
as are in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, reasonable.
Section 322(5) of Income Tax Act 2025
322(5) If the liquidator fails to give the notice as per sub-section (1), or fails to set aside the amount as required by sub-section (3), or parts with any of the assets of the company or the properties in his hands in contravention of the provisions of that sub-section, he shall be personally liable for the payment of the tax which the company would be liable to pay.
Section 322(6) of Income Tax Act 2025
322(6) In relation to sub-section (5), if the amount of any tax payable by the company is notified under sub-section (2), the personal liability of the liquidator under that sub-section shall be to the extent of such amount.
Section 322(7) of Income Tax Act 2025
322(7) Where there are more liquidators than one, the obligations and liabilities attached to the liquidator under this section shall attach to all the liquidators jointly and severally.
Section 322(8) of Income Tax Act 2025
322(8) The provisions of this section shall have effect irrespective of anything to the contrary contained in any other law in force, except the provisions of the Insolvency and Bankruptcy Code, 2016.
FAQs on Section 322 of Income Tax Act 2025
Who is considered a “liquidator” under Section 322 of the Income Tax Act, 2025?
A liquidator includes any person who is the liquidator of a company being wound up (whether by court order or otherwise) or a receiver appointed for any assets of the company.
What is the timeline for a liquidator to inform the Assessing Officer about their appointment?
The liquidator must notify the Assessing Officer within thirty days of becoming the liquidator.
What does the Assessing Officer do upon receiving the notice from the liquidator?
The Assessing Officer must notify the liquidator within three months of the tax amount payable or likely to be payable by the company.
Can the liquidator part with company assets before receiving the tax liability notification?
No, the liquidator cannot part with any assets or properties of the company without prior approval from the specified income-tax authority and until the Assessing Officer notifies the tax amount.
What must the liquidator do after receiving the tax liability notification from the Assessing Officer?
The liquidator must set aside an amount equal to the notified tax liability and cannot part with the assets or properties until this amount is set aside.
Are there any exceptions where the liquidator can part with assets before setting aside the tax amount?
Yes, the liquidator may part with assets to pay tax, pay secured creditors with statutory priority, or cover reasonable costs and expenses of winding up, as approved by the specified tax authority.
What are the consequences if the liquidator fails to give notice or set aside the notified tax amount?
The liquidator becomes personally liable for the company’s tax liability.
To what extent is the liquidator personally liable if they fail in their duties under Section 322?
The liquidator’s personal liability is limited to the amount notified by the Assessing Officer under sub-section (2).
If there are multiple liquidators, how is liability shared under Section 322?
All liquidators are jointly and severally liable for the obligations and liabilities imposed under this section.
Does Section 322 override other laws?
Yes, Section 322 overrides any conflicting provisions in other laws, except for those in the Insolvency and Bankruptcy Code, 2016.
Is the liquidator’s obligation affected by whether the company is wound up voluntarily or by court order?
No, the obligation to comply with Section 322 applies regardless of how the company is being wound up.
What authority grants permission for the liquidator to part with assets before tax notification?
The permission must be obtained from the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner.
Does the notification by the Assessing Officer under sub-section (2) bind the company on the exact tax payable?
The notification is an estimate meant to safeguard tax dues and may not represent the final tax assessment.
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