Section 385 Income Tax Act 2025: Can Tax Authorities Decide an Issue Pending Advance Ruling?
Section 385 restricts an income-tax authority or the Income Tax Appellate Tribunal from proceeding to decide an issue for which a resident applicant has made an advance ruling application under Section 383(1). The restriction concerns the same issue placed before the advance ruling mechanism, not automatically every issue in the applicant's tax affairs.
Law: Section 385, Income-tax Act, 2025 (text as amended by Finance Act, 2026).
Official source: Income Tax Department - amended Income-tax Act, 2025.
What does Section 385 say?
No income-tax authority or the Appellate Tribunal shall proceed to decide any issue for which an application has been made by an applicant, being a resident, under section 383(1).
This is the complete operative text of Section 385. It contains no separate subsections, monetary threshold or independently stated limitation period.
When does the restriction apply?
The statutory restriction is triggered by an application under Section 383(1) made by an applicant who is a resident. An income-tax authority or the Appellate Tribunal must not proceed to decide the issue covered by that application.
| Element | What Section 385 requires | Practical significance |
|---|---|---|
| Applicant | Applicant must be a resident. | The provision expressly limits this restriction to resident applicants. |
| Application | Application made under Section 383(1). | Identify the question actually submitted for advance ruling. |
| Covered decision-maker | Any income-tax authority or the Appellate Tribunal. | The restriction is not confined to a single appellate level. |
| Covered subject | The issue for which the application was made. | Other unrelated issues are not automatically covered by this provision. |
| Prohibited action | Proceeding to decide that issue. | Section 385 is framed as a restriction on decision of the specified issue. |
What Section 385 does and does not provide
- Issue-specific protection: The text concerns the question submitted in the resident applicant's advance ruling application; it does not state that the entire assessment or appeal is stayed.
- Application-based trigger: The provision refers to an application made under Section 383(1). It does not say that the advance ruling must already have been pronounced.
- Not a universal bar for non-residents: Section 385 expressly refers to an applicant being a resident. Do not assume its wording extends to every non-resident application.
- Other procedural provisions remain relevant: Admission, rejection, withdrawal, and the Board's decision-making process are governed by Section 383 and Section 384. The consequences of a rejected, withdrawn or concluded application require examination of the applicable law and case circumstances; Section 385 does not expressly set out a separate termination rule.
Relevant statutory expressions
- Applicant
- The person falling within the categories defined in Section 380(b), who applies for an advance ruling. Section 385 specifically requires that applicant to be a resident.
- Application
- An application for an advance ruling made under Section 383(1), as referred to in Section 380(c).
- Advance ruling
- A ruling concerning a question falling within the categories described in Section 380(a); its precise scope depends on the relevant category.
- Board for Advance Rulings
- The Board constituted under Section 381, as defined in Section 380(d).
- Appellate Tribunal
- The Income Tax Appellate Tribunal established under Section 361.
- Income-tax authority
- A statutory authority under the Act; the term must be read with the Act's provisions defining income-tax authorities.
Practical illustrations
Example 1: Same issue pending before an income-tax authority
A resident applicant seeks an advance ruling on a specified tax treatment under Section 383(1). If that precise issue is before an income-tax authority, Section 385 prevents the authority from proceeding to decide it while the statutory restriction applies.
Example 2: Separate issues in the same matter
An application concerns the tax character of a specified transaction. A separate, unrelated deduction is also disputed in the assessment. Section 385 does not, by its own wording, prohibit deciding the unrelated deduction merely because an advance ruling application exists.
Example 3: Question pending before the Appellate Tribunal
A resident applicant has submitted an eligible question for advance ruling, and the same issue arises in a Tribunal appeal. The Tribunal must consider the restriction in Section 385 before proceeding to decide that issue. Whether the application is admissible remains subject to Section 384, including its restrictions on questions already pending in other proceedings.
Frequently asked questions
Does Section 385 apply to all advance ruling applicants?
No. Its express wording applies to an applicant being a resident who has made an application under Section 383(1).
Does filing an advance ruling application automatically stay the whole assessment?
No such blanket stay is stated in Section 385. The statutory restriction is against proceeding to decide the issue for which the application was made.
Does the restriction cover the ITAT?
Yes. Section 385 expressly names the Appellate Tribunal as well as income-tax authorities.
Must the Board have already issued a ruling?
No. Section 385 refers to an application that has been made under Section 383(1), rather than requiring a ruling to have been issued.
How does Section 385 relate to Section 384?
Section 384 governs the Board's consideration and admission or rejection of applications, including specified pending-proceeding restrictions. Section 385 addresses whether tax authorities or the Tribunal may proceed to decide the issue covered by a resident's application. Both provisions should be read together.
Related provisions and official reference
Read Section 380 (interpretation), Section 381 (Board), Section 383 (application), Section 384 (procedure), and Section 386 (rulings void in certain circumstances). For the authoritative wording, consult the official amended Act.
Note: This article is an explanatory guide. For a particular proceeding, examine the exact question in the application, the applicant's residential status, and the current procedural position.