Limitation period for assessment: exclusion of in-limitation search-to-handing-over days can extend the deadline, barring late orders.

Assessment for A.Y. 2022-23 was held time barred because the limitation period is computed under the fourth proviso to Section 153 and excludes only the portion of the search-to-handing-over interval that falls within the limitation period, subject to a 180 day cap. With search on 04/01/2023 and handing over on 22/08/2023, 144 days fell inside the limitation year commencing 01/04/2023; adding those excluded days extended the deadline to 22/08/2024, rendering the 27/09/2024 assessment order beyond time and thus barred and quashed.

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Issues: (i) Whether the assessment order passed under section 143(3) for A.Y. 2022-23 is barred by limitation in view of Section 153 of the Income-tax Act, 1961 and Clause (xii) of Explanation (1) thereto.

Analysis: The applicable limitation for A.Y. 2022-23 is twelve months from the end of the year in which the income was first assessable, as provided by the fourth proviso to Section 153 of the Income-tax Act, 1961. Clause (xii) of Explanation (1) to Section 153 provides for exclusion, up to 180 days, of the period commencing from the date a search under Section 132 is initiated to the date on which the books of account and seized material are handed over to the assessing officer having jurisdiction over the assessee. Where the period between search and handing over spans two financial years and only part of that period falls within the limitation period for the assessment, only the portion that falls within the limitation period can be excluded. In the present case, the search was on 04/01/2023 and the seized material was handed over to the assessee's assessing officer on 22/08/2023. The limitation period for A.Y. 2022-23 commenced on 01/04/2023 and expired on 31/03/2024; the portion of the seized-material-handling period that falls within this limitation period is from 01/04/2023 to 22/08/2023 (144 days). Clause (xii) permits exclusion only of the time lost during the limitation period, subject to the 180-day cap. Adding the excluded 144 days to 31/03/2024 extends the time limit to 22/08/2024. The assessment order dated 27/09/2024 was therefore outside the computed limitation period and is barred by limitation.

Conclusion: The assessment order under Section 143(3) for A.Y. 2022-23 is barred by limitation and is quashed. The appeal is allowed in favor of the assessee.

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