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Section 245T of the Income-tax Act, 1961: When an Advance Ruling Becomes Void

Section 245T deals with an advance ruling obtained through fraud or misrepresentation of facts. It empowers the competent authority to declare the ruling void ab initio, with consequences for tax proceedings and limitation periods. The corresponding provision under the Income-tax Act, 2025 is section 386.

Legal position from 1 April 2026: The Income-tax Act, 2025 applies to tax years beginning on or after 1 April 2026. Section 386 now states the rule for the Board for Advance Rulings (BAR). Section 245T remains relevant to earlier rulings and proceedings governed or saved under the 1961 Act. The applicable provision depends on the tax year, date and procedural status of the case.

What is an advance ruling?

An advance ruling is a determination given on a question of law or fact concerning a specified transaction or arrangement under the statutory advance-ruling procedure. It is designed to give an applicant clarity on income-tax consequences before or in relation to the relevant transaction. Under the older Chapter XIX-B framework, applications and pronouncements were governed principally by section 245Q and section 245R.

Section 245T: Explanation of the statutory provisions

Section 245T(1): Fraud, misrepresentation and invalidation

Where the Authority, on a representation by the Principal Commissioner or Commissioner or otherwise, finds that an advance ruling under section 245R(6) was obtained by fraud or misrepresentation of facts, it may pass an order declaring the ruling void ab initio. The statute concerns the manner in which the ruling was obtained; it does not provide for automatic cancellation merely because the Department disagrees with the legal conclusion.

Fraud generally refers to deliberate deception. Misrepresentation of facts refers to the presentation of incorrect or misleading factual information material to the ruling. Whether the statutory threshold is met depends on the facts and the applicable legal process.

Meaning of void ab initio

The Latin expression void ab initio means void from the beginning. Following an order under section 245T(1), the income-tax provisions apply to the applicant as though the advance ruling had never been made, subject to the express statutory exclusion of time described below.

Exclusion of the intervening period

For applying the Act after such a declaration, section 245T(1) excludes the period beginning on the date of the advance ruling and ending on the date of the order declaring it void. This exclusion can affect the calculation of statutory limitation periods. It should not be confused with an unrestricted power to reopen any proceeding: the applicable statutory conditions must still be satisfied.

Section 245T(2): Communication of the order

A copy of the order declaring a ruling void must be sent to the applicant and the Principal Commissioner or Commissioner. This formal communication is important for determining the next procedural steps and any available legal remedy.

Section 245T(3): Board for Advance Rulings

The Finance Act, 2021 introduced a transition from the former Authority for Advance Rulings (AAR) to the Board for Advance Rulings (BAR). Sub-section (3) provides for substituting the expression "Board for Advance Rulings" for "Authority" from the notified date. Readers should apply the version of the provision and notifications relevant to their proceedings.

Corresponding provision: Section 386 of the Income-tax Act, 2025

Under section 386(1), the Board for Advance Rulings may declare an advance ruling pronounced under section 384(6) void from inception if it finds that the applicant obtained it by fraud or misrepresentation. The rule expressly preserves the exclusion of the period from the ruling to the invalidation order when applying the Act as if no ruling had been issued. Section 386(2) requires a copy of the order to be sent to the applicant and the Principal Commissioner or Commissioner.

The 2025 Act also places applications for advance rulings in section 383. The Department explains that the 2025 framework consolidates and renumbers the post-2021 advance-ruling provisions without a substantive or procedural overhaul. Pending proceedings under the repealed Act are addressed by the savings provisions of section 536 of the 2025 Act.

Practical consequences of a ruling being declared void

  1. Loss of protection: The applicant cannot rely on the invalidated ruling as a valid determination for the transaction concerned.
  2. Ordinary tax law applies: Assessment and other relevant provisions apply as if the ruling had not existed, subject to applicable statutory safeguards.
  3. Limitation must be recalculated: The specified intervening period is excluded when computing time limits under the relevant provision.
  4. Written order and service: The decision must be recorded in an order and communicated to the prescribed persons.
  5. Remedies require separate review: The appropriate challenge depends on whether the matter falls under the 1961 or 2025 Act and on the nature of the order. Under the 2025 Act, section 389 provides for appeals concerning specified BAR rulings or orders, subject to its terms.

Illustrative example

Suppose an applicant obtains an advance ruling after presenting a material transaction document inaccurately. If the competent authority finds that the ruling was obtained through fraud or misrepresentation and makes the required order, the ruling may be treated as void from its inception. Tax consequences must then be determined under the applicable Act, while excluding the statutory interval between the ruling and the invalidation order for the relevant limitation computation. This example is illustrative and does not establish that every factual error constitutes misrepresentation.

Frequently asked questions

When can an advance ruling be declared void?

Where an advance ruling was obtained through fraud or misrepresentation of facts, the competent advance-ruling body may declare it void ab initio by order.

What does void ab initio mean under Section 245T?

It means the ruling is treated as invalid from the beginning, with the statutory consequences and limitation-period exclusion specified in Section 245T.

What is the corresponding provision in the Income-tax Act, 2025?

Section 386 governs advance rulings obtained by fraud or misrepresentation under the 2025 Act.

Official legal sources

Updated: 27 October 2026. This article is general legal information, not advice on a particular proceeding. Verify notifications, amendments and procedural requirements for the relevant tax year.