TaxTMI 
TaxTMI 
Accelerated Assessment upon Business Discontinuance ; Clause 320 of Income Tax Bill, 2025 Vs. Section 176 of the Income-tax Act, 1961
X X X X Extracts X X X X
X X X X Extracts X X X X
....t otherwise occur due to discontinuance, dissolution, retirement, or death of the taxpayer, and to provide a framework for accelerated assessment and collection. The significance of these provisions lies in their impact on both taxpayers and the revenue authorities. They provide clarity on assessment, compliance obligations, and the taxability of receipts post-discontinuance, thereby closing potential loopholes in tax administration. This commentary examines Clause 320 of the Income Tax Bill, 2025, in detail, followed by a comprehensive comparative analysis with Section 176 of the Income-tax Act, 1961, highlighting similarities, differences, and the practical implications of the proposed changes. Objective and Purpose The primary objecti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....where the taxpayer might not be available or solvent at the time of the regular assessment. The discretionary nature allows the Assessing Officer to determine whether accelerated assessment is warranted based on the facts and circumstances, such as the likelihood of recovery or the risk of non-compliance. Sub-section (2): Separate Assessments for Each Period The sub-section (2) stipulates that the total income for each completed tax year or part thereof within the discontinuance period shall be taxed at the rates applicable for that year, with separate assessments for each period. This ensures that income is taxed according to the prevailing rates and slabs, maintaining fairness and preventing manipulation. The reference to "completed ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me is to be assessed, or on partners/principal officers in the case of firms or companies, respectively. The notice may include any requirements as in a notice u/s 268(1), and the Act's provisions apply as if it were such a notice. This enables the Assessing Officer to demand returns, information, or documents necessary for assessment, ensuring procedural fairness and due process. Sub-section (7): Issuance of Notices u/ss 268 or 280 Notwithstanding anything in sections 268 or 280, the Assessing Officer may issue notices under those sections requiring the furnishing of returns for any tax chargeable under other provisions, within a period not less than seven days. This grants flexibility and expedites the process, enabling the Assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... taxpayer becomes untraceable or assets are dissipated. For Legal and Accounting Professionals * Advisors must counsel clients on compliance, documentation, and the tax implications of discontinuance. * They must ensure that all relevant receipts, both before and after discontinuance, are properly accounted for and disclosed. Comparative Analysis with Section 176 of the Income Tax Act, 1961 Structural and Substantive Parallels A close reading of Clause 320 and Section 176 reveals that the provisions are largely analogous in structure and substance. Both are titled "Discontinuance of business, or dissolution," and contain the following core elements: * Discretionary accelerated assessment upon discontinuance (Sub-section 1 in both)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rocedural provisions in the new Bill, but the underlying intent remains unchanged: to empower the Assessing Officer to demand returns and information as necessary. * Sub-section Numbering and Consolidation * Clause 320 consolidates the treatment of sums received after discontinuance for both business and profession into sub-sections (4) and (5), whereas Section 176 separates business (sub-section 3A) and profession (sub-section 4). The substance, however, remains the same. * Scope of Application * Both provisions apply to discontinuance due to cessation, retirement, or death, and to both individuals and entities (firms, companies). There is no material difference in scope, but the language in Clause 320 is slightly more streamli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....continuance is due to insolvency or liquidation, the priority and process of tax assessment and collection may require harmonization with insolvency and bankruptcy laws. Conclusion Clause 320 of the Income Tax Bill, 2025, represents a continuation and modernization of the principles embodied in Section 176 of the Income Tax Act, 1961, 1961. Both provisions are essential safeguards for the collection of tax in cases where a business or profession is discontinued, ensuring that income up to the date of cessation is taxed appropriately and that post-discontinuance receipts are not left untaxed. The key changes in Clause 320 are primarily terminological and procedural, reflecting a broader effort to modernize and clarify Indian tax law.....