The Income-Tax Act, 1961

189. Firm dissolved or business discontinued.-

(1) Where any business or profession carried on by a firm has been discontinued or where a firm is dissolved, the ⁴[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.

(2) Without prejudice to the generality of the foregoing sub-section, if the ⁴[Assessing Officer] or the ⁵[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.

(3) 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.

(4) 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.

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

4. Subs. by s. 2, ibid.,for "Income-tax Officer" (w.e.f. 1-4-1988).

5. The words "Deputy Commissioner (Appeals)" omitted by Act 21 of 1998, s. 65 (w.e.f. 1-4-1998). Earlier "Deputy Commissioner (Appeals)" substituted by Act 4 of 1988, s. 2, for "Appellate Assistant Commissioner" (w.e.f. 1-4-1988).

6. The Explanation omitted by Act 18 of 1992, s. 68 (w.e.f. 1-4-1993). Earlier the Explanation reintroduced by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989) and omitted by Act 4 of 1989, s. 71 (w.e.f. 1-4-1989) which was earlier inserted by Act 41 of 1975, s. 52 (w.e.f. 1-10-1975)

¹[189A. Provisions applicable to past assessments of firms.-

In relation to the assessment of any firm and its partners for the assessment year commencing on the 1st day of April, 1992, or any earlier assessment year, the provisions of this Chapter as they stood immediately before the 1st day of April, 1993, shall continue to apply.]

1. Ins. by Act 18 of 1992, s. 69 (w.e.f. 1-4-1993). Earlier section 189A was inserted by Act 4 of 1988, s. 72 (w.e.f. 1-4-1989) which was later omitted by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989).

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