Section 330
Section 330: firm dissolved or business discontinued
Section 330 stops a firm's dissolution or the discontinuance of its business or profession from being used to avoid assessment or penalty. It treats the firm as if it were still in existence for assessment purposes and fixes liability on the partners who were there at the time.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
Assessment continues despite dissolution or discontinuance
Sub-section (1): where a firm is dissolved or its business or profession has been discontinued, the Assessing Officer shall make an assessment of the total income of the firm as if no such dissolution or discontinuance had taken place, and all the provisions of the Act - including those relating to levy of penalty or any other chargeable sum - apply so far as may be to that assessment.
Penalty can still be imposed
Sub-section (2): regardless of the generality of sub-section (1), if the Assessing Officer, Joint Commissioner (Appeals) or Commissioner (Appeals), in the course of any proceeding regarding such a firm, is satisfied that the firm was guilty of any of the acts specified in Chapter XXI, a penalty may be imposed or its imposition directed under that Chapter.
Partners remain jointly and severally liable
Sub-section (3): every person who was a partner of the firm at the time of dissolution or discontinuance, and the legal representative of any such person who has since died, is jointly and severally liable for the tax, penalty or other sum payable, and all provisions of the Act apply, so far as may be, to that assessment or the imposition of penalty or other sum.
Proceedings can continue from where they stood
Sub-section (4): where the dissolution or discontinuance takes place after proceedings for a tax year have already commenced, those proceedings may be continued against the persons referred to in sub-section (3) from the stage they had reached at the time of dissolution or discontinuance, and all provisions of the Act apply accordingly.
Sub-section (5): this section does not affect the provisions of Section 302(4).
Frequently asked questions
Does dissolving a firm stop the tax department from assessing it?
No. Section 330(1) requires the Assessing Officer to assess the dissolved or discontinued firm's total income exactly as if the dissolution or discontinuance had not taken place.
Who is liable for the firm's tax after dissolution?
Every person who was a partner at the time of dissolution or discontinuance, and the legal representative of any partner who has since died, are jointly and severally liable under Section 330(3).
Can a penalty still be levied on a dissolved firm?
Yes - Section 330(2) allows a penalty to be imposed under Chapter XXI if the Assessing Officer, Joint Commissioner (Appeals) or Commissioner (Appeals) is satisfied the firm was guilty of an act specified in that Chapter.
Related sections
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Get help responding to an assessment of a dissolved firmLast updated 9 September 2026