Assessment Can Proceed Except on Issues Pending For Advance Ruling: Delhi High Court

The Delhi High Court has held that income tax assessment proceedings need not be entirely halted merely because certain issues are pending before the Board for Advance Rulings (BFAR). The bench of Justice Dinesh Mehta and Justice Vinod Kumar clarified that only those specific issues referred to the BFAR must be kept in abeyance, while the Assessing Officer (AO) is free to proceed with the remaining aspects of the assessment. The judgment came in a writ petition filed by Mitsubishi Electric India Private Limited challenging the continuation of assessment proceedings for Assessment Year 2023–24. The petitioner had approached the BFAR seeking advance rulings on key tax issues, including the taxability of reimbursements made to its Japanese parent company and the deductibility of customs duty paid under protest. The petitioner had initially filed an application before the Authority for Advance Rulings (AAR), later transferred to the BFAR following statutory amendments. While these applications were pending, the AO continued assessment proceedings under Sections 142(1) and 143(2) of the Income-tax Act, 1961. The company argued that under Section 245RR, once an issue is pending before the BFAR, the AO must halt the entire assessment process. It contended that proceeding with the assessment could lead to conflicting decisions and procedural anomalies, including the possibility of multiple assessment orders for the same year. The tax department, however, argued that Section 245RR applies only to the specific issues pending before the BFAR and not to the entire assessment. It emphasized that several independent matters—such as transfer pricing adjustments, depreciation claims, reconciliation of income, and other deductions—remained outside the scope of the advance ruling applications and should be examined without delay. A Division Bench comprising Justice Dinesh Mehta and Justice Vinod Kumar undertook a detailed analysis of Sections 245Q, 245RR, and Section 153 of the Income-tax Act. The Court held that Section 245RR explicitly bars income-tax authorities from deciding only those issues that are pending before the BFAR. The provision does not mandate a blanket stay on the entire assessment proceedings. A harmonious interpretation of the statute indicates that the AO can continue with unrelated issues while keeping the referred questions in abeyance. The Court rejected the petitioner’s argument that the assessment must be entirely stalled, noting that such an interpretation would unnecessarily delay proceedings and could be misused by assessees. The Court pointed to Section 150 of the Act. It clarified that once the BFAR delivers its ruling, the AO can give effect to it by issuing appropriate reassessment or recomputation orders. The Court also distinguished earlier rulings cited by the petitioner, observing that those cases did not involve the framework of advance rulings under Section 245Q. It further noted that a prior coordinate bench decision aligned with the interpretation adopted in the present case. The Court directed that the AO may proceed with the assessment on all issues except those pending before the BFAR. The pending issues shall be addressed only after the BFAR delivers its ruling. The Court clarified that this interpretation currently applies to resident assessees, leaving the question open for non-residents to be decided in future cases. Case Details Case Title: Mitsubishi Electric India Private Limited Versus Deputy Commissioner Of Income-Tax Circle 16(1) Citation: JURISHOUR-526-HC-2026(DEL) Case No.: W.P.(C) 3327/2026, CM APPLs. 16080/2026, 16081/2026 & 16101/2026 Date: 16.03.2026 Counsel For Petitioner: Manuj Sabharwal Counsel For Respondent: Abhishek Maratha, SSC Click Here To Read Order Read More: Punjab & Haryana High Court Declines Advance Ruling on Poker, Rummy; Directs Due Process Before Coercive Action

Assessment Can Proceed Except on Issues Pending For Advance Ruling: Delhi High Court

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