Section 330 — Firm dissolved or business discontinued. Successor to s.189 of the 1961 Act.
Section 330 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.
Sub-section (1) requires the Assessing Officer, where a firm is dissolved or a business or profession carried on by it is discontinued, to assess the firm's total income as if no dissolution or discontinuance had taken place, applying all the provisions of the Act, including those on levy of a penalty or other sum chargeable, so far as may be.
Sub-section (2) adds that, regardless of the generality of sub-section (1), where the Assessing Officer, the Joint Commissioner (Appeals) or the Commissioner (Appeals) is satisfied in the course of any proceeding that the firm was guilty of any of the acts specified in Chapter XXI, he may impose or direct the imposition of a penalty as per that Chapter.
Sub-section (3) makes every person who was a partner at the time of the dissolution or discontinuance, and the legal representative of any such person who is deceased, jointly and severally liable for the tax, penalty or other sum payable. Sub-section (4) allows proceedings already commenced for a tax year to be continued against those persons from the stage at which they stood. Sub-section (5) preserves section 302(4).
A dissolved firm cannot be left as a gap in the assessment machinery, or a year's liability could be defeated by winding up. The section keeps the firm assessable as though it still existed, keeps a part-heard proceeding alive against the former partners, and attaches joint and several liability so the Department need not trace each partner's share to recover. The reach to a deceased partner's legal representative closes the last route out.
The section works on two axes: the firm remains assessable as though it still existed, and the liability lands personally on those who were its partners. Because sub-section (3) is joint and several, the whole amount may be recovered from any one former partner, and his remedy against the others is no part of this Act. Sub-section (4) means a dissolution mid-proceeding buys no fresh start — the proceeding resumes at the stage it had reached, against the persons in sub-section (3). Sub-section (5) leaves section 302(4) undisturbed.
A firm of four partners is dissolved while an assessment for an earlier tax year is part-heard. Under sub-section (4) that proceeding continues against the former partners from the stage it stood at, and under sub-section (1) the assessment is made on the firm as though it had never dissolved. If a demand of Rs 25 lakh of tax and a Chapter XXI penalty under sub-section (2) follow, sub-section (3) lets the whole amount be recovered from any one of the four, and from the legal representative of a partner who has since died — not merely each partner's profit-sharing share.
You meet it when a notice, assessment order or demand for a dissolved firm's year arrives addressed to you as a former partner, or as the legal representative of a partner who has died, and in the recovery that follows.
the Assessing Officer shall make an assessment of the total income of the firm, as if no such dissolution or discontinuance had taken place
shall be jointly and severally liable for the amount of tax, penalty or other sum payable
The provisions of this section shall not affect the provisions of section 302(4).
See the full 1961 to 2025 concordance.
See the circulars index.