Limitation bars audit assessment and penalty demands under the Assam VAT regime when proceedings start after the statutory cut-off.

The Gauhati HC noted that under the Assam Value Added Tax Act, 2003, assessment and audit assessment cannot be initiated after the statutory five-year limitation period. Penalty demand notices for alleged failure to furnish audit reports were therefore barred, because the proviso to Section 39 did not apply on the facts and the authorities could not reopen completed returns after limitation had expired. The Court also held that later audit assessments and consequential tax demands, begun after the limitation cut-off, were illegal and unsustainable. The impugned demand and assessment orders were quashed, and the petitioner's liability under those proceedings did not survive.

---

---

Issues: (i) Whether the demand notices imposing penalty under the Assam Value Added Tax Act, 2003 for failure to furnish audit reports were barred by limitation under the statutory five-year period; (ii) Whether the audit assessment and consequential demand orders for the later assessment years could be sustained when initiated after expiry of limitation.

Issue (i): Whether the demand notices imposing penalty under the Assam Value Added Tax Act, 2003 for failure to furnish audit reports were barred by limitation under the statutory five-year period.

Analysis: The returns for the relevant assessment years had already been completed, and the statutory scheme of Section 39 of the Assam Value Added Tax Act, 2003 prohibited assessment after the expiry of five years from the end of the relevant year. The notices proceeded on the alleged non-furnishing of audit reports under Section 62(2) and imposed penalty under Section 62(3). The proviso to Section 39 was inapplicable because no prosecution-based exception arose on the facts. Once the limitation period had expired, it was not open to the authorities to reopen the matter or impose penalty on that basis.

Conclusion: The penalty-based demand notices were barred by limitation and could not be sustained.

Issue (ii): Whether the audit assessment and consequential demand orders for the later assessment years could be sustained when initiated after expiry of limitation.

Analysis: The later notices were expressly for audit assessment under Section 36 of the Assam Value Added Tax Act, 2003, read with the Central Sales Tax framework. The record showed that the limitation period for initiating audit assessment had already expired for each relevant year. As the proceedings were commenced long after the statutory cut-off, the assessment orders founded on such belated audit assessment were illegal and liable to be set aside.

Conclusion: The audit assessment orders and the consequential tax demands for the later assessment years were unsustainable and had to be set aside.

Final Conclusion: The writ petitions succeeded, the impugned demand and assessment orders were quashed, and the petitioner's liability under the challenged proceedings did not survive.

Ratio Decidendi: Once the statutory limitation period for making assessment or audit assessment has expired, the revenue authorities cannot reopen or conclude the assessment by invoking unrelated penalty or audit provisions.

---