Section 189 of Income Tax Act for AY 2023-24

Section 189 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Firm dissolved or business discontinued.

Amended and updated notes on section 189 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 Firm dissolved or business discontinued.

Chapter XVI (Sections 184 to 189A) of the Income Tax Act 1961 deals with the provisions related to special provisions applicable to firms. Section 189 of IT Act 1961 provides for Firm dissolved or business discontinued.

Recently, we have discussed in detail section 188A (Joint and several liability of partners for tax payable by firm) of IT Act 1961. Today, we learn the provisions of section 189 of Income-tax Act 1961. The amended provision of section 189 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 189 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-189: Firm dissolved or business discontinued

Section 189(1) of Income Tax Act

Where any business or profession carried on by a firm has been discontinued or where a firm is dissolved, the Assessing Officer shall make an assessment of the total income of the firm 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 189(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 firm as is referred to in that sub-section is satisfied that the firm 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 189(3) of Income Tax Act

Every person who was at the time of such discontinuance or dissolution a partner of the firm, 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 189(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 person 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 189(5) of Income Tax Act

Nothing in this section shall affect the provisions of sub-section (6) of section 159.


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