Chapter XVIII - Appeals, Revisions and Alternate Dispute Resolutions
Section 386
Section 386: advance ruling void in certain circumstances
Section 386 is the safeguard against misuse of the advance ruling process - if a ruling was obtained by fraud or misrepresentation, the Board for Advance Rulings can declare it void from the very beginning, effectively rolling back time as if the ruling had never been made.
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Need advice on Section 386?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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.
(2) A copy of the order made under sub-section (1) shall be sent to the applicant and the Principal Commissioner or Commissioner.
Introduction
An advance ruling obtained by fraud or misrepresentation can be declared void from the outset by an order of the Board for Advance Rulings.
If that happens, the Act applies as though the ruling had never been made, while excluding the period from the ruling date to the voiding order for the purpose specified in section 386(1).
Key takeaways
Ground is fraud or misrepresentation
The Board must find that the applicant obtained the ruling in one of those ways.
Void from outset
The Board may declare the ruling void ab initio by order.
Intervening period excluded
The section excludes the period between ruling and voiding order when applying the Act as if no ruling existed.
Copies must be sent
The order is sent to the applicant and Principal Commissioner or Commissioner.
When a ruling can be voided
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) was obtained by the applicant by fraud or misrepresentation, it may, by order, declare such ruling void ab initio.
The Act applies as if the ruling had never been made, after excluding the period beginning with the ruling date and ending with the order declaring it void, as subsection (1) specifies.
Notice of the order
A copy of the order made under sub-section (1) is sent to the applicant and to the Principal Commissioner or Commissioner.
Applying Section 386 in practice
Trigger and effect. If the Board finds that the applicant obtained a ruling under section 384(6) by fraud or misrepresentation, it may by order declare the ruling void *ab initio*. The Act then applies as if the ruling had never been made, excluding the period from the ruling date to the order date as section 386(1) specifies. The Board's voiding order is not the same as a taxpayer simply disagreeing with the ruling.
Hypothetical example
A transaction document central to the question was knowingly withheld. If the Board finds the ruling was obtained through that misrepresentation, section 386 may apply.
Step-by-step flow for declaring an advance ruling void under Section 386
- 1
Is there a representation by the Principal Commissioner or Commissioner, or other material?
Section 386(1) allows action on such a representation "or otherwise".
- 2
Was the advance ruling pronounced under section 384(6) obtained by the applicant by fraud or misrepresentation?
- No: Section 386 does not apply; the ruling stands.
- Yes: The Board for Advance Rulings may by order declare the ruling void ab initio. Go to the next step.
- 3
Apply the Act as if the ruling had never been made
All provisions of the Act apply to the applicant as if there had been no ruling.
- 4
Exclude the period from the ruling to the void order
When applying those provisions, the period beginning with the date of the ruling and ending with the date of the order under Section 386(1) is excluded.
- 5
Send copies
A copy of the order goes to the applicant and the Principal Commissioner or Commissioner (Section 386(2)).
Practical checklist
Do
- Check whether the challenged ruling was pronounced under section 384(6) and identify the precise alleged fraud or misrepresentation.
- Keep the ruling, application record and any written order declaring it void; record the dates of both orders for the statutory excluded period.
- Check that a copy of the voiding order was sent to the applicant and to the Principal Commissioner or Commissioner.
- retain the application, annexures, material factual disclosures, later correction letters, hearing record and voiding order.
Avoid
- Do not treat every error in an advance ruling as the fraud or misrepresentation ground in this section.
- Do not compute the consequences as though the ruling never existed without excluding the period between ruling and voiding order as subsection (1) requires.
Illustrative example
Worked example: a ruling based on misstated facts
Hypothetical facts (illustration only, not a real taxpayer): A company obtains an advance ruling under section 384(6) on 1 March 2028. Later, the Principal Commissioner makes a representation that the company described the transaction in a materially wrong way. On 30 November 2029 the Board for Advance Rulings finds that the ruling was obtained by misrepresentation. Dates are assumed.
Finding
The Board for Advance Rulings finds misrepresentation and may by order declare the ruling void ab initio.
Effect
The Act applies to the company as if the ruling had never been made.
Excluded period
The period from 1 March 2028 to 30 November 2029 is excluded when applying the Act to the company.
Copies
Copies of the order are sent to the company and the Principal Commissioner.
Outcome
- The company can no longer rely on the ruling.
- Only fraud or misrepresentation in obtaining the ruling triggers Section 386; disagreeing with the ruling is not enough.
Glossary
- Void ab initio
- Declared void from the outset, with the section’s express exclusion of the intervening period when applying the Act.
Frequently asked questions
On what ground can an advance ruling be declared void?
Only where the Board for Advance Rulings finds that the ruling was obtained by the applicant by fraud or misrepresentation.
What happens to the period between the ruling and the order voiding it?
The Act applies as if the ruling had never been made, after excluding the period beginning with the ruling date and ending with the order declaring it void, as subsection (1) specifies.
Does every clerical error void a ruling?
The statutory trigger is fraud or misrepresentation, not error alone.
Need help applying this provision to your situation?
Talk to our tax team about an advance ruling issueLast updated 10 October 2026