Security forces had launched a search operation in Bhawan village in Zachaldara area of Handwara last night following information about the presence of militants in the area, a police official said.
The official said a brief exchange of firing took place between the two sides even as reinforcements of security forces were rushed to the area to prevent the militants from escaping.
"An officer of the rank of Lt Colonel has been injured in the encounter in Handwara area of Kupwara today," an army official said.
This is second incident of an army officer getting hit in an anti-militancy operation in Kashmir within a week.
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As the operation entered the third day today, the Special
Forces of the army maximised the force, using mortar shells to flush out the terrorists, the officials said.
During the intense gunfight, the top floor of the building caught fire which forced the ultras to shift towards one side of the complex where they were nuetralised, the police official said.
In Delhi, CRPF Director General Prakash Mishra said the attack "appears to be" the handiwork of Lashker-e-Taiba (LeT) terror outfit.
Maj Gen Dutta said the building appeared to be a pre-determined target where they rushed into after attacking a CRPF convoy.
"They were carrying a large quantity of arms and ammunition... They were seen running into the building with big bagpacks," the army officer said.
As the security forces mounted an assault on the building yesterday, they met with stiff resistance from the ultras who are holding vantage points inside the building.
"The terrorists had a huge opportunity to hide inside the big complex....They had an advantage. They could see our movements," the GOC said.
Even as the gunbattle was underway, hundreds of residents from nearby Pampore town and adjoining areas tried to march towards the encounter site but were asked by security forces to disperse.
At least three persons sustained minor injuries in the clashes, the official added.
Army lost three elite commandos -- two Captains and a Lance Naik -- in the gunfight.
Captain Pawan Kumar was killed in a pre-dawn exchange of fire with terrorists yesterday while he was leading a team of special forces in clearing the third floor of the building after sanitising first and second floor, Maj Gen Dutta said.
Captain Tushar Mahajan and Lance Naik Om Prakash also sustained fatal injuries in the afternoon yesterday.
"Homage was paid to the valour and sacrifice of the martyrs in a solemn ceremony held at Badami Bagh Cantonment.
Late Captain Tushar Mahajan and Lance Naik Om Prakash were members of the team that had launched an operation on Feb 21 against the terrorists who ambushed CRPF personnel and took refuge in the EDI Building and were instrumental in clearing major portion of the multi storeyed building where the terrorists had hidden.