Advance ruling to be void in certain circumstances
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 386(1) of Income Tax Act 2025
386(1) Where on a representation made by the Principal Commissioner or Commissioner or otherwise, the Board for Advance Rulings finds, that an advance ruling pronounced under section 384(6) has been obtained by the applicant by fraud or misrepresentation, then it may by order, declare such ruling to be void ab initio and thereupon, all the provisions of this Act shall apply (after excluding the period beginning with the date of such advance ruling and ending with the date of order under this sub-section) to the applicant as if such advance ruling had never been made.
Section 386(2) of Income Tax Act 2025
386(2) A copy of the order made under sub-section (1) shall be sent to the applicant and the Principal Commissioner or Commissioner.
FAQs on Section 386 of Income Tax Act 2025
What is Section 386 of the Income Tax Act, 2025 about?
Section 386 provides for situations where an advance ruling, once given under Section 384(6), can be declared void if it was obtained by fraud or misrepresentation.
Who has the authority to declare an advance ruling void under Section 386?
The Board for Advance Rulings has the authority to declare an advance ruling void ab initio under Section 386(1).
On what grounds can an advance ruling be declared void?
An advance ruling can be declared void if it was obtained by the applicant through fraud or misrepresentation.
Who can bring such fraud or misrepresentation to the notice of the Board for Advance Rulings?
Such a representation can be made by the Principal Commissioner, Commissioner, or any other source.
What happens once an advance ruling is declared void?
Once declared void ab initio, the advance ruling is treated as if it was never made, and all provisions of the Income Tax Act, 2025 apply accordingly to the applicant.
How is the time period affected when a ruling is declared void?
The period between the date of the advance ruling and the date of the order declaring it void is excluded from tax computations and compliance.
Is the applicant informed about the order declaring the ruling void?
Yes, a copy of the order made under Section 386(1) is sent to the applicant as per Section 386(2).
Is the tax authority also informed about such an order?
Yes, a copy of the order is also sent to the Principal Commissioner or Commissioner.
What is the effect of declaring an advance ruling void ab initio?
The advance ruling is deemed never to have been issued, and the applicant is subjected to the provisions of the Act as if no such ruling ever existed.
Does Section 386 apply to all rulings given under the Income Tax Act, 2025?
Section 386 specifically applies to rulings given under Section 384(6) of the Act.
Can the Board for Advance Rulings act on its own without a representation?
Yes, the Board can act suo motu (on its own) or based on a representation made.
