Amended and updated notes on section 177 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to Association dissolved or business discontinued.
Chapter XV (Sections 159 to 180A) of the Income Tax Act 1961 deals with the provisions related to liability in special cases. Section 177 of IT Act 1961 provides for Association dissolved or business discontinued.
Recently, we have discussed in detail section 176 (Discontinued business) of IT Act 1961. Today, we learn the provisions of section 177 of Income-tax Act 1961. The amended provision of section 177 is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 177 of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962 as provided by Ministry of Law and Justice, Government of India.
Section-177: Association dissolved or business discontinued
Section 177(1) of Income Tax Act
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 177(2) of Income Tax Act
Without prejudice to the generality of the foregoing sub-section, if the Assessing Officer 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 in accordance with the provisions of that Chapter.
Section 177(3) of Income Tax Act
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 177(4) of Income Tax Act
Where such discontinuance or dissolution takes place after any proceedings in respect of an assessment 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 177(5) of Income Tax Act
Nothing in this section shall affect the provisions of sub-section (6) of section 159.