Time limit for issuance of audit observations in form ADT-02

[Ramanathan Seshan]

Dear Experts,

We received ADT-01 on 03-01-2024, intimating us about the conduct of a departmental audit for FY 2021–22, with a request to submit the relevant details by 23-01-2024. We submitted the required information on 23-01-2024.

Subsequently, we received the audit observations in Form ADT-02 on 25-07-2025.

In this context, would the issuance of ADT-02 be considered time-barred under Section 65 of the CGST Act read with Rule 101 of the CGST Rules? As per my understanding, the audit should be completed within 3 months from the date of commencement (extendable to 6 months with approval). In our case, the gap between submission and issuance of ADT-02 is over 18 months.

Would appreciate views or experiences from others on similar timelines.

Regards,

S Ram

AI Summary

Audit time limit: issuance of formal audit observations may be challenged as time-barred but can be rebutted by commencement rules.
An audit report in Form ADT-02 may be contested as time-barred, but the statutory explanation defining commencement of audit (the later of when records called for are made available or when audit is actually instituted at the place of business) gives the department scope to argue that audit completion was within time. Audit memoranda and ADT-02 are distinct: the former is a preliminary opportunity to settle objections, while issuance of ADT-02 triggers adjudicatory proceedings; taxpayers should reply to ADT-02 and raise both time-bar and substantive defences.