Section 284 of the Income-tax Act, 1961: Service of Notice for Discontinued Business

Section 284 under the Income-tax Act, 1961

Section 284, titled Service of notice in the case of discontinued business, applies where an assessment is to be made under Section 176 of the 1961 Act. The Assessing Officer may serve a notice on the person whose income is to be assessed; in the case of a firm or association of persons, on any person who was a member when it was discontinued; or, in the case of a company, on its principal officer.

The provision states that such a notice may contain all or any of the requirements capable of being included in a notice under Section 139(2), and that the provisions of the Act apply, so far as may be, as though it were a notice under that subsection. This is a description of the statutory text and does not imply that the discontinued business escapes assessment or that every former member is automatically liable for the entire tax demand.

Read Section 284 on the Income Tax Department website.

Section 504 under the Income-tax Act, 2025

Section 504 is titled Service of notice in case of discontinued business. Where an assessment is to be made under Section 320, the Assessing Officer may serve a notice on:

1. the person whose income is to be assessed;
2. a person who was a member of the firm or association of persons at the time of discontinuance, where the business was carried on by such an entity; or
3. the principal officer, where the entity is a company.

The notice may contain all or any requirements that may be included in a notice under Section 268(1). The provisions of the 2025 Act apply, so far as may be, as if the notice had been issued under that provision.

The official correspondence identifies Section 284 of the 1961 Act with Section 504 of the 2025 Act. The relevant cross-references also change: Section 176 becomes Section 320, and Section 139(2) becomes Section 268(1) for this purpose.

Who may be served with a notice after closure?

Individual or other person

The Assessing Officer may serve the person whose income is to be assessed, notwithstanding discontinuance of the business.

Firm or association of persons

A notice may be served on a person who was a member of the firm or association at the time the business was discontinued. This rule concerns service of notice; substantive liability and assessment must be determined under the other applicable provisions.

Company

Where the discontinued business is a company, the statute permits service on the principal officer. Questions involving liquidation, dissolution or successor liability may also require examination of separate provisions.

Related provisions and practical implications

Section 176 of the 1961 Act: Addresses the assessment and taxation consequences of a discontinued business or profession, including notification of discontinuance.

Section 320 of the 2025 Act: Deals with discontinued business, including assessment of income up to discontinuance and the requirement to notify the Assessing Officer within 15 days. It also addresses certain receipts after discontinuance.

Section 268(1) of the 2025 Act: Is the notice-related provision expressly cross-referenced in Section 504.

Sections 282 and 283 of the 1961 Act: Concern service of notice generally and service in cases involving partitioned Hindu families or dissolved firms and associations, respectively. The corresponding 2025 provisions are Sections 501 and 503.

Practical compliance points

• Keep the date of discontinuance, closure documents, financial records and details of former partners or members available.
• Check the tax year, statutory authority, identity of the recipient and requirements specified in any notice.
• Respond within the applicable time limit, even if the business has ceased operating, and obtain advice where service or jurisdiction is disputed.
• Do not assume that discontinuance itself extinguishes pending tax assessments or obligations.

Official statutory references

• Income-tax Act, 2025 - official Act PDF (see Sections 504, 320 and 268)
• Section 320 - Discontinued business (Income Tax Department)
• Section 284 - Income-tax Act, 1961 (Income Tax Department)
• Income Tax Department - provision correspondence navigator

This article is general legal information. For a specific assessment, examine the applicable tax year, transitional rules, notices and current statutory text.