Search-to-handover exclusion applies only to the portion within the limitation period, so assessments beyond recalculated limitation are time-barred.

Clause (xii) of Explanation (1) to Section 153 permits exclusion of the search-to-handover interval only to the extent that that interval falls within the assessee's statutory limitation period, subject to the 180 day cap; periods outside the limitation window are not excluded. Applying that rule to the facts produced a recalculated limitation date earlier than the assessment date, so the assessment under Section 143(3) was found to be time barred and was quashed, with the appeal allowed for the assessee.

---

---

Issues: Whether the assessment order dated 27/09/2024 passed under Section 143(3) of the Income-tax Act, 1961 for A.Y. 2022-23 is barred by limitation under Section 153(1) read with Clause (xii) of Explanation (1) to Section 153 of the Income-tax Act, 1961.

Analysis: The statutory time limit for completion of assessment for the relevant A.Y. is governed by Section 153(1) and the fourth proviso reducing the period to twelve months for A.Ys commencing on or after 1.4.2022. Clause (xii) of Explanation (1) to Section 153 permits exclusion, not exceeding 180 days, of the period commencing from the date of a search under Section 132 until the date on which the seized books or documents are handed over to the assessing officer having jurisdiction over the assessee. The exclusion applies only to that portion of the period which falls within the assessee's limitation period; time lost outside the limitation period is not automatically excluded. In the instant facts, the search commenced on 04/01/2023 and seized material was handed over on 22/08/2023. The limitation period for the assessment began on 01/04/2023 and ended on 31/03/2024. Only the period from 01/04/2023 to 22/08/2023 (144 days) falls within the limitation period and is therefore eligible for exclusion under Clause (xii), subject to the 180-day cap. Applying that exclusion to 31/03/2024 extends the limitation to 22/08/2024; the assessment dated 27/09/2024 therefore falls beyond the computed limitation and is time-barred.

Conclusion: The assessment order dated 27/09/2024 under Section 143(3) is barred by limitation and is quashed; the appeal is allowed in favour of the assessee.

Ratio Decidendi: For assessments where a search under Section 132 has taken place, Clause (xii) of Explanation (1) to Section 153 of the Income-tax Act, 1961 allows exclusion of only that portion of the search-to-handover period which falls within the assessee's statutory limitation period (subject to the 180-day maximum); exclusion is not available for periods outside the limitation period, and an assessment passed after the recalculated limitation is time-barred.

---