Chapter XXIII - Miscellaneous
Section 504
Section 504: service of notice in case of a discontinued business
Section 504 tells the Assessing Officer who to serve a notice on when making an assessment under section 320 for a business, firm, association of persons or company that has since been discontinued.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
Where an assessment is to be made under section 320, the Assessing Officer may serve on the—
(a) person whose income is to be assessed; or
(b) person who was a member of a firm or association of persons at the time of its discontinuance, in the case of a firm or an association of persons; or
(c) principal officer, in the case of a company,
a notice containing all or any of the requirements which may be included in a notice under section 268(1) and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that section.
Introduction
Discontinuance of a business does not, by itself, remove the Assessing Officer’s ability to serve a notice for an assessment under section 320. Section 504 identifies the recipient according to the kind of person or entity involved.
The notice may contain requirements of a section 268(1) notice. The Act’s corresponding rules apply, as far as possible, as though issued under that section.
Key takeaways
Assessment link
Section 504 operates where an assessment is to be made under section 320.
Recipients differ
The possible recipient is the assessed person, a former member of a discontinued firm or association, or the principal officer of a company.
Notice content
The notice may carry all or any requirements that can appear in a notice under section 268(1).
Who can be served
Where an assessment is to be made under section 320, the Assessing Officer may serve a notice on:
- the person whose income is to be assessed; or
- the person who was a member of a firm or association of persons at the time of its discontinuance, in the case of a firm or an association of persons; or
- the principal officer, in the case of a company.
How the notice operates
The notice may contain all or any of the requirements that can be included in a notice under section 268(1), and the provisions of the Act apply, so far as may be, as if it were a notice issued under that section.
Applying Section 504 in practice
Connection to section 320. Where assessment of a discontinued business is to be made under section 320, the Assessing Officer may serve a section 268(1)-type notice on the person whose income is assessed, a person who was a firm/AOP member when business stopped, or the company's principal officer, as applicable.
Step-by-step flow for applying Section 504
- 1
Is an assessment to be made under Section 320 (discontinued business)?
- No: Section 504 does not apply.
- Yes: Go to the next step.
- 2
On whom may the Assessing Officer serve the notice?
(a) the person whose income is to be assessed; (b) for a firm or association of persons, a person who was a member of it at the time of its discontinuance; or (c) for a company, its principal officer.
- 3
What may the notice contain?
All or any of the requirements that may be included in a notice under Section 268(1).
- 4
How does the notice operate?
The provisions of the Act apply, so far as may be, as if the notice were a notice issued under Section 268.
Practical checklist
Do
- Identify the section 320 discontinued-business assessment and the person to whom the notice may be served.
- Check the recipient category: income earner, former firm or association member, or company principal officer.
- document discontinuance and its date, legal form, the proper recipient and what the notice actually requires.
Avoid
- Do not assume the notice can only be addressed to the discontinued entity itself.
Illustrative example
Worked example: a discontinued partnership business
Hypothetical facts (illustration only, not a real taxpayer): A partnership firm discontinued its business during a tax year. The Assessing Officer decides to make an assessment under Section 320. Ms. Kapoor was a partner of the firm at the time of discontinuance.
Section 320 assessment
An assessment is to be made under Section 320, so Section 504 applies.
Person served
Under Section 504(b), the Assessing Officer may serve the notice on Ms. Kapoor because she was a member of the firm at the time of its discontinuance.
Contents
The notice may contain all or any of the requirements that a Section 268(1) notice may include.
Effect
The Act applies, so far as may be, as if it were a notice under Section 268.
Outcome
- A notice served on Ms. Kapoor is a notice the Assessing Officer may serve under Section 504.
- Section 504 uses "may" and names "person who was a member"; it does not itself require service on every former partner.
Frequently asked questions
Who does the Assessing Officer serve a notice on for a discontinued firm?
A person who was a member of the firm or association of persons at the time of its discontinuance, under Section 504(b).
Who is served notice for a discontinued company under this section?
The principal officer of the company, under Section 504(c).
Must a notice always go to every former partner?
The section permits service on a qualifying former member.
Need help applying this provision to your situation?
Talk to our tax team about a notice you receivedLast updated 10 October 2026