Assessment of AOP, BOI, or AJP Formed for a Short Duration
Introduction
If the Assessing Officer believes that an Association of Persons (AOP), Body of Individuals (BOI), or Artificial Juridical Person (AJP) is likely to dissolve within the current assessment year or shortly thereafter, tax on its total income can be levied before dissolution. This ensures prompt tax collection before the entity ceases to exist.
Income Taxable in the Previous Year Itself
Normally, the income of a previous year is chargeable in the next following assessment year. However, this general principle is subject to some exceptions in which income is charged to tax in the previous year itself.
One exception arises when it appears to the Assessing Officer that any AOP or BOI or AJP, formed for a particular event or purpose is likely to be dissolved in the assessment year in which it was formed or immediately after such assessment year. In this situation, the total income of such AOP or BOI or AJP for the relevant financial year (from the 1st day of the previous year and up to the probable date of dissolution) shall be charged to tax in that year itself.
Separate Assessments and Tax Rates
- Income is taxed at the rates in force for that assessment year.
- Separate assessments are made for each completed financial year or part thereof.
Issue of Notice
- The Assessing Officer issues a notice underSection 142(1)(i), requiring the entity to furnish returns for:
o Each completed previous year.
o Estimated income from the start of the financial year to the likely dissolution date.
Filing of Return and Consequences of Non-Compliance
- The return must be filed within the period specified in the notice, which cannot be less than seven days.
- If no return is filed:
o Best judgment assessment under Section 144 applies.
o Penalty under Section 271 may be levied.
o Prosecution under Section 276CC may be initiated.