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2022 (3) TMI 771 - AT - Income TaxDisallowance of previous year expenses - crystallisation of expenditure - HELD THAT:- We are of the opinion that these prior period expenses crystallised in the assessment year under consideration and payment has been made at ₹ 28,18,226. This practice of accounting has been followed consistently from year to year by the assessee and there is no change in this practice in this assessment year also. The assessee has been making the provisions for payment of expenses at the end of each year which provision has been paid in the next assessment year. Sometimes there was short provision made by assessee and in view of short provision, when actual bills are received after crystallisation of expenditure, assessee makes the payment. This method is consistently followed by the assessee. Being so, we do not find infirmity in the method of accounting followed by the assessee and it cannot be disallowed on the reason of prior period expenses incurred by the assessee. Accordingly, we allow this ground taken by the assessee. Unexplained investment in building including interest on borrowings - assessee shown total cost of building in its books of account less as against the assessee's valuer's report - HELD THAT:- Valuation report submitted by the assessee is by the assessee's own valuer which cannot be the basis for addition without the AO referring the matter to the DVO for valuation. For this purpose, he relied on various case laws which are kept on record. In the present case, if we consider the difference between the books of account of the assessee and the valuation report including interest cost, difference is very huge at ₹ 1,09,71,118. The AO ought to have referred the matter to the DVO for valuation which he failed to do so. Being so, without referring the matter to the DVO, the AO cannot consider the difference between the entries made by the assessee and its registered valuer to make the addition. The valuation report relied on by the AO for making the addition is not the valuation report which is contemplated u/s. 142A of the Act. To make addition on account of difference in cost of construction, AO is duty bound to reject the books of accounts and refer the matter to the DVO as prescribed u/s. 142A of the Act, which the AO failed to do so. The registered valuer's report of the assessee cannot be the basis for making addition which has to be deleted. Being so, we are inclined to delete the addition made by the AO on this count. This ground is accordingly allowed.
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