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

Sundaram Traders filed its return for the tax year on time. The return was processed under section 270(1) and the CPC proposes an adjustment for an arithmetical error. Before the adjustment is made, what must the department do, and what happens if the assessee does not respond?

The department must first communicate the proposed adjustment to the assessee in writing or electronically. If the assessee does not respond within thirty days of the communication being issued, the adjustment is made and the intimation is then sent. The prior communication is mandatory even for arithmetical errors.

  1. ACommunicate the proposed adjustment in writing or electronic mode; if no response is received within thirty days, the adjustment is made and the intimation is sentCorrect
  2. BCommunicate the adjustment; if no response is received within fifteen days, the adjustment is made
  3. CMake the adjustment first and communicate it with the intimation, since no prior communication is required for arithmetical errors
  4. DObtain the prior approval of the Principal Commissioner before any adjustment is made

Explanation

Section 270(2) requires a communication of the proposed adjustments, in writing or electronic mode, before they are made. The response is considered, and if none arrives within thirty days of issue, the adjustments are made and the intimation follows. Fifteen days is wrong because the statutory period is thirty days.

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