Section 385 of the Income-tax Act, 2025 — Appellate Authority / Assessing Officer Not to Proceed When Advance Ruling Is Pending

In plain language

What Section 385 actually says

Section 385 of the Income-tax Act, 2025 is a short but powerful "traffic rule" inside the advance ruling chapter (Sections 380 to 389). In plain words, it says: once a resident applicant has filed an application for an advance ruling under Section 383(1), no income-tax authority (including the Assessing Officer) and not even the Income Tax Appellate Tribunal is allowed to decide that same issue until the Board for Advance Rulings has dealt with it.

The purpose is simple and sensible: you should not have two different authorities deciding the exact same question at the same time, because that could produce two contradictory answers. Section 385 puts the regular proceedings on "pause" for that specific issue so the advance ruling can go first.

Who does it apply to

• Only resident applicants. The bar in Section 385 is triggered when the applicant is a resident who has approached the Board for Advance Rulings for an issue that is pending (or likely) before the tax department.
• The authorities that must stand down: the Assessing Officer, appellate authorities such as the Joint Commissioner (Appeals) / Commissioner (Appeals), and the Income Tax Appellate Tribunal (ITAT).
• It is issue-specific. Only the particular question referred to the Board is frozen — the rest of the assessment or appeal can carry on.

Key conditions and limits

• A valid application under Section 383(1) must exist. No application, no bar. The freeze starts from the filing of the advance ruling application.
• Same issue. The authority is barred only from deciding the identical issue that is before the Board — not unrelated matters in the case.
• Mutual exclusivity for residents. A resident effectively cannot run both remedies (appeal/assessment AND advance ruling) in parallel on the same point. You choose the advance ruling route, and the normal proceedings wait.
• No fixed rupee threshold. Section 385 itself carries no monetary limit — it is purely procedural. (Eligibility limits, such as the ₹100 crore transaction value for certain specified residents, sit in the definition/eligibility rules under Section 380, not here.)

How it fits with the rest of the advance ruling chapter

• Section 380 defines "advance ruling", the "applicant" and the Board for Advance Rulings.
• Section 383 is the machinery for making the application (form, fee, questions). Section 385 is triggered specifically by an application under Section 383(1).
• Section 384 lets the Board reject applications in certain cases (for example, where the question is already pending before an authority — with a relaxation for public-sector companies, where it involves fair market value of property, or where the transaction is designed for tax avoidance other than under GAAR).
• Section 386/387 deal with the ruling becoming void where obtained by fraud or misrepresentation, and with the binding nature of the ruling.

1961 Act equivalent

Section 385 of the 2025 Act is the re-drafted, simplified successor to Section 245RR of the Income-tax Act, 1961 ("Appellate authority not to proceed in certain cases"). The old Section 245RR referred to applications under Section 245Q(1); the new Section 385 refers to applications under Section 383(1). The substance is unchanged — the Government has only re-numbered and re-worded it as part of the clean-up in the 2025 Act.

Practical implications for taxpayers

• Certainty before the dispute hardens. A resident facing a genuinely debatable question (say, taxability of a cross-border payment) can get an authoritative ruling first, and the AO/Tribunal cannot pre-empt it.
• No forum shopping. You cannot argue the same point simultaneously in appeal and before the Board hoping one goes your way.
• Timing matters. File the advance ruling application before the AO/appellate authority decides the point — once they have decided, the point may no longer be "pending" and the Board may reject it under Section 384.
• Rest of the case continues. Only the referred issue freezes; the department can complete the rest of the assessment or appeal so limitation periods are not endlessly disturbed.