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CS Professional · Advanced Direct Tax Laws and Practice · Transfer Pricing and General Anti Avoidance Rules (GAAR)

Under Section 168 of the Income-tax Act, 2025, an advance pricing agreement obtained by fraud is declared void ab initio. What follows under that section?

The Act applies to the person as though the agreement had never been made, and the time between the agreement and the order is excluded when computing limitation periods. Section 168(8) also extends any remaining period of less than sixty days to sixty days.

  1. AThe agreement continues to bind the tax authorities until it expires
  2. BThe Act applies to the person as if the agreement had never been entered into, and the period from the agreement date to the order date is excluded for limitationCorrect
  3. COnly the arm's length price is recomputed and the rest of the Act is unaffected
  4. DThe agreement becomes valid again for a further five years

Explanation

Section 168(8) says that on a void ab initio declaration, all provisions of the Act apply as if the agreement was never entered into, and the period from the agreement date to the order date is excluded from limitation, with a minimum of sixty days remaining if less would be left. The other options contradict this.

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