Service of notice in case of discontinued business

Section 504 — SERVICE OF NOTICE IN CASE OF DISCONTINUED BUSINESS

Section 504 of the Income-tax Act, 2025 corresponds to s. 284 of the Income-tax Act, 1961.

STATUTORY ARCHITECTURE

Section 504 deals with service of notice where an assessment is to be made under s. 320, the provision on discontinued business. It allows the Assessing Officer to serve, on the person whose income is to be assessed or on a specified representative of a discontinued firm, association of persons or company, a notice containing all or any of the requirements that may be included in a notice under s. 268(1). The provisions of the Act then apply, so far as may be, as if the notice were a notice issued under s. 268.

KEY ELEMENTS

• Trigger: an assessment is to be made under s. 320.
• Clause (a): the notice may be served on the person whose income is to be assessed.
• Clause (b): in the case of a firm or an association of persons, it may be served on a person who was a member of the firm or association at the time of its discontinuance.
• Clause (c): in the case of a company, it may be served on the principal officer.
• Content of the notice: all or any of the requirements which may be included in a notice under s. 268(1).
• Deeming: the provisions of the Act apply, so far as may be, as if the notice were issued under s. 268.

CHANGES FROM THE 1961 ACT

The counterpart is s. 284 of the 1961 Act. The three categories of person on whom notice may be served are the same, now set out as clauses (a) to (c). The reference to an assessment under s. 176 of the 1961 Act becomes an assessment under s. 320. The 1961 text linked the notice to the requirements of a notice under s. 139(2) of the 1961 Act; the 2025 text links it to a notice under s. 268(1). Otherwise the provision is substantively the same.

PRACTITIONER NOTES

• Where a firm or association of persons has discontinued, any person who was a member at the time of discontinuance can be served; the section does not require service on all members.
• Because the notice is treated as a notice under s. 268, the requirements permitted by s. 268(1) (for example, to furnish a return, to produce accounts or documents, or to furnish information in writing) may be included in it, and the provisions of the Act apply, so far as may be, as if the notice were a notice under that section.
• For a company, the section names the principal officer as the person to be served.
• The discretion is in the words "may serve"; the section enables service on these persons and does not itself fix any time limit.

CROSS-REFERENCES

• s. 320 — discontinued business; the assessment under it is the trigger for this section.
• s. 268(1) — the notice whose requirements may be included in the notice under this section.
• s. 284 of the 1961 Act — the corresponding provision.
• s. 176 and s. 139(2) of the 1961 Act — the assessment and notice provisions referred to in s. 284 of the 1961 Act.