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CA Final · Direct Tax Laws & International Taxation · Assessment of Various Entities

Sri Venkatesh Traders, a firm, filed its return for the tax year on time. The Centralised Processing Centre proposes to make an adjustment because the return claims a deduction under a provision of Chapter VIII-C that exceeds the statutory limit expressed as a percentage. Under section 270 of the Income-tax Act, 2025, what must the department do before making this adjustment?

Before making any processing adjustment, the department must send the assessee a communication of the proposed adjustment, in writing or electronically, and consider the response received. If no response comes within thirty days, the adjustment is made and the intimation is then sent. Attendance notices belong to scrutiny, not processing.

  1. AGive the assessee a communication of the proposed adjustment in writing or electronic mode and consider any response receivedCorrect
  2. BObtain prior approval of the Principal Commissioner
  3. CServe a notice requiring the assessee to attend the Assessing Officer's office with evidence
  4. DRefer the matter to the Central Government for approval

Explanation

Section 270(2) requires a communication of the proposed adjustments, in writing or electronic mode, before they are made, and any response received must be considered. A deduction exceeding the statutory limit is an incorrect claim apparent from the return. The attendance notice in option C belongs to the scrutiny route under sub-section (8), not to processing.

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