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2019 (6) TMI 651

As the Revenue could not prove that there was proper issue and service of notice u/s. 148 of the Act on the assessee within the time prescribed i.e. on or before 31.03.2016 for the A.Y. 2009-10, the Ld. CIT(A) has rightly concluded that the reopening u/s. 147 is bad in law. On this ground alone the assessment framed u/s. 143(3) r.w.s 147 of the Act is liable to be quashed. Even on merits the CIT(A) examined the addition made by Assessing Officer with references to the evidences furnished by the assessee and the averments of the Assessing Officer and concluded that the assessee has proved the identity, genuineness, creditworthiness of the creditor Once the assessee furnished all the details in respect of the loan transactions assessee has discharged its initial burden and the burden shifts to the assessee. It was held that no addition can be made only on the basis of information received from the investigation wing without there being any evidences to disprove the loan transactions from the creditors. See M/S SHREE LAXMI ESTATE PVT LTD, M/S SHREE LAXMI DEVELOPERS VERSUS ITO, WD. 15 (3) (3) , WD. 26 (3) (2) , MUMBAI [2017 (12) TMI 1699 - ITAT MUMBAI]. The decision relied on by the Ld .....

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th the submissions made by the assessee the Assessing Officer treated share application money received from these two shareholders amounting to ₹ 3,44,45,000/- as unexplained cash credit u/s. 68 of the Act. In the Assessment Order, Assessing Officer observed that the DDIT (Inv.) unit-4(1) of Kolkata found that the shareholder company M/s. Arena Textiles and Industries Pvt. Ltd., is not found in the address given and they could not found the address to serve summons u/s. 131 of the Act, therefore, DDIT(Inv.) unit concluded that the shareholder is only a paper company. Assessing Officer also observed that the survey u/s. 133A of the Act was conducted in the case of Mantosh Kumar Yadav by the DDIT(Inv.) unit-3(1) & 2 of Kolkata wherein the statements were recorded stating that Mantosh Kumar Yadav is the Director of 66 Companies and all the companies are paper companies and M/s. Arena Textiles and Industries Pvt. Ltd., is one of such company. Thus, the Assessing Officer proceeded to treat the share application money as unexplained cash credit. 5. On appeal the Ld.CIT(A) quashed the re-assessment on the ground that there is no proper service of notice u/s. 148 of the Act and t .....

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eness and creditworthiness of the transactions. Reliance is placed in the case of CIT v. NRE Iron and Steel (P.) Ltd., (Supreme Court). 8. Ld. Counsel for the assessee strongly placing reliance on the order of the Ld.CIT(A) submits that Assessing Officer has claimed that notice was sent through speed post on 30.03.2016. However, no proof is submitted that the notice was sent thorough speed post. Ld. Counsel for the assessee submits that it was stated that the said notice was returned unserved on 04.04.2016 and has deputed inspector on 31.03.2016 for service of notice by affixture. Ld. Counsel submits that this clearly shows that Assessing Officer has received unserved notice on 04.04.2016 but he deputed Inspector on 31.03.2016 to serve the notice on the assessee and this contention by itself is not believable. It is also submitted by the Ld. Counsel for the assessee that the Assessing Officer has not produced any report of the inspector nor any Panchanama for verification. 9. Ld. Counsel for the assessee submitted that it is clearly visible that the Ld. Assessing Officer has purposefully concealed the fact that he had not sent any such so called notice at our address at Bunglow No- .....

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Therefore, this plea of the Assessing Officer does not hold good on the facts and in law. Reliance is placed on the decision of the Hon ble Gujarat High Court in the case of Knubhai M. Patel (HUF) v. Hiren Bhatt [(2010) 43 DTR 329]. 11. Coming to the merits of the case, the Ld. Counsel for the assessee submits that assessee vide letter dated 23.12.2016 has furnished the annual accounts of the shareholder as on 31.03.2009 along with the copies of secretarial compilation report, copy of Form 66 filed with ROC, copy of Form 20B, 23AC and 23ACA filed with ROC for the year ended 31.03.2009, annual accounts for the year ended 31.03.2010, bank statements of the shareholder and the corresponding bank statements of the assessee reflecting the transaction. Therefore, the Ld. Counsel for the assessee submits that since the assessee has furnished all these evidences before the Assessing Officer, it is not correct to say that assessee has not furnished sufficient details. It is submitted that by filing these evidences assessee has proved the identity, genuineness and creditworthiness of the creditor. It is also submitted that the report of the DDIT(Inv.) which was made in Kolkata to prove that .....

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galow No. A/8, SVP Nagar, Near Versova Tel Exchange, Andheri (W), Mumbai-53. Whereas I have reason to believe that your income for the assessment year 2OO9-1O has escaped assessment within the meaning of Section 147 of the Income-tax Act. I, therefore, purpose to assessee/ reassess / recompute the income / loss / depreciation-allowance-under-section-................... for the said assessment year and I hereby require you to deliver to me before the expiry of 30 days from the date of service of this notice, a return in the prescribed form of your Income /the-income of:.................., in respect of which you are assessable for the said assessment year. (DHIRAJ KUMAR) Asstt. Commissioner of Income-tax, Circle-2, Thane 3.7 When objection of the Appellant was forwarded along with application under rule 46A to the Assessing Officer, the learned Assessing Officer has submitted counter comments stating that notice u/s 148 was issued on 30.03.2016 through speed post and further ward inspector was deputed on 31.03.2016 for service of notice through affixture. Since there was no one at the premises as mentioned by Assessing Officer it was served through affixture. However, it is very evi .....

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ture has been successfully challenged by the appellant. 3.9. It is further important to note that in order u/s 127 address of the assessee has been correctly mentioned. Further one important point is also noticed that same Assessing Officer namely, Shri Dhiraj Kumar ACIT Cir-2, Thane, has passed an assessment order of AY 2013-14 on 18.03.2016 mentioning the correct address as "Bunglow No. A/8, SVP Nagar, Mr., Versova Tel. Exchange, Andheri (W), Mumbai 400 053.", then it is not understood as to how same Assessing Officer could issue notice u/s 148 on 30.03.2016 on different address i.e. "403, Atlanntis B, Inder Darshan, Cross Road, Oshiwara, Andheri (W), Mumbai-400053". These facts and evidence groves beyond doubt that notice u/s 148 dated 30.03.2016 was not issued on proper address, nor was served properly on the appellant, when notice has not been issued on proper, correct and latest Known address, escapement assessment proceeding is bad in law, illegal. 3.10 The contention of the Appellant that no such affixture was made on 31.03.2016, nor was any report of inspector given to the appellant or no person was found at old address was not correct, is found worth c .....

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ed the identity, genuineness, creditworthiness of the creditor observing as under: 3.11. As regards merit and addition of share capital of ₹ 3,44,45,000/- made u/s 68 as unexplained cash credit, it is pertinent to mention that learned Assessing Officer has failed to demonstrate any contrary evidence accept general reply of DDIT that M/s Arena Textiles Industries Pvt.Ltd. was not found at given address and there was a general statement of Mr. Mantosh Kumar Yadav of giving accommodation entry. It can be seen from the evidence on record that by letter dated 23.12.2016 appellant has categorically mentioned as under:- "Arena Textiles And Industries is a Non Banking Finance Company (Registration No. B 05.06555). The annual Accounts of the Company for the year ended 31.03.2009 along with copies of the Secretarial Compliance Report. Copy of Form 66 filed with the ROC, copies of Form 206, 23AC and 23 ACA filed with the ROC for the year ended 31.03.2009 and Annual Accounts of the Company for the year ended 31.03.2010 have been filed vide our letter dated 19th December 2016." "The Share Capital & Reserves of the Company as at 31.03.2009 is ₹ 4,815.44 lakhs and i .....

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mething more than bare suspicion to support the assessment under section 143(3) vide; {Dhakeswari Cotton Mills Ltd. v. CIT,(1954)26 ITR 775,782(SC); Raj Mohan Saha v. CIT, (1964)52 ITR 231 (Assam). Also see, CIT V. Gokaldas Hukumchand, (1943)11 ITR 462,469(Bom) … … 3.16 Recently, in the case of CIT vs. Gagandeep Infrastructure Pvt.Ltd [ INCOME TAX APPEAL N0.1613 OF 2014] it was held by the Hon'ble Bombay High Court that, "Bogus share capital/premium; The proviso to s.68(which creates and obligation on the issuing Co to explain the source of share capital & premium) has been introduced by the Finance Act 2012 with effect from 01.04.2013 and does not have retrospective effect. Prior therto, as per Loverly Exports 317 ITR 218(SC), if the A 0 regards the share premium as bogus, he has to assess the shareholders but cannot assess the same as the issuing company's unexplained cash credit. 3.17 In the similar case of M/s Easy Mercantile Pvt. Ltd. vs DCIT (ITA. No. 6035/Mum/2011 for A.Y. 2008-09), wherein addition were made based on the statement of the one director of many companies, the Hon'ble ITAT, Mumbai has deleted such addition making the following .....

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um/2015; and deleted the addition. Thus in the light of above factual analysis, reference of evidences and judicial / propositions, it is held that escapement assessment of AY 2009-10 has been started without proper issue and service of notice u/s 148 and without refuting the factual objection of the appellant, hence such escapement assessment order under appeal deserves to be quashed, as held by Hon'ble High Court in the case of German Remedies Ltd. vs. DCIT (2006) 202 CTR Bom 369. Further, on merit also addition is not sustainable because Assessing Officer has not brought on record any contrary evidence against the claim of the appellant or evidences on record. Respectfully following the decision of Hon'ble Jurisdictional High Court in the cases of Orchid Industries Pvt. Ltd .[1433 of 2014], Arceli Realty Limited [ 6492/Mum/2016], CIT vs. M/s Gagandeep Infrastructure Pvt.Ltd.(I.TA No.1613 of 2014), CIT vs. Creative World Telefilms Ltd.(2011) 333 ITR 100(Bom) and other judgements over such issues, mentioned earlier, the additions made of ₹ 3,44,45,000/- u/s 68 of the IT. Act, 1961, is deleted. 15. The Hon'ble Supreme Court in the case of CIT v. Orissa Corporation .....

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as the undisclosed income of the Company. 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the Income Tax act. The assessee has to prima facie prove (1) the identity of the creditor / subscriber; (2) the genuineness of the transaction, namely: whether it has been transmitted through banking or other indisputable channels: (3) the creditworthiness or financial strength of the creditor/subscriber: (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices: (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assess cc nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assess cc. (7) The Assessing O .....

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and submits that the Assessee had discharged its onus. The Assessee had produced the PAN of all the creditors along with the confirmation, Bank Statement showing payment of share application money and relevant record is produced with regard to the allotment of shares to those parties. The share application form, allotment letter, share certificate are also produced. Even the balance-sheet, profit and loss account, the books of account of these creditors were produced on record showing that they had sufficient funds for investing in the shares of the Assessee. The learned counsel relies on the judgment of the Division Bench of this Court in case of CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 80 taxmann.com 272/247 Taxman 245/394 ITR 680 (Bom.) and the order of the Apex Court in case of CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195. 4. We have considered the submissions. 5. The Assessing Officer added ₹ 95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses .....

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edits were made in their books of accounts. (v) The creditors had also placed on record receipts of commission as well as the gift deeds in respect of gifts made to the donors. (vi) The identity and addresses of sub creditors was also available. 14. With this material on record in our view as far as the assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the credit worthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the A.O. that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved .....

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avit establishing identity of the lender, copy of ledger giving detail towards loan taken during the year and subsequent repayments and Copy of ITR - V filed establishing Creditworthiness of the Lender. However, Assessing Officer did not accept the evidences furnished by the assessee and also the retraction statement of Shri Pravin Kumar Jain, ignoring all the evidences Assessing Officer concluded that the assessee has not explained the transactions as genuine and therefore he has added the unsecured loans as unexplained income of the assessee. Correspondingly he has also disallowed the interest thereon. Before the Ld.CIT(A) assessee furnished all the information regarding the unsecured loans as mentioned above. The Ld.CIT(A) considering the submissions and the findings furnished by the assessee deleted the additions observing as under: - 6.2 HELD: - I have carefully perused the Assessment Order, written arguments of the appellant, counter arguments of the ld. AR and have considered the evidences on record and assessment record called for during the appellate proceedings. I find that eh Ld. Assessing Officer has merely doubted the loans taken by the appellant from (1) Mohit Interna .....

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nfirmation from the parties. filed Audit Reports of the parties alongwith copy of their ITR, and bank statements. In these circumstances, the onus had shifted to the assessing officer. If the assessing officer was still not satisfied, he had the option of making enquiries from the alleged lenders by summoning them. However as seen from the assessment order, he did not do any such thing. Further, if the assessing officer was satisfied with what had been given to him by the appellant, he was duty bound to specify what more material he wanted from the appellant to furnish. The assessing officer never asked for any further material. This leads to the inescapable conclusion that the Assessing Officer could not think of any further material to ask for and proceeded to reject the appellant s claims, relying upon the information/ material, which he never even brought to the notice of the appellant for any rebuttal. The unequivocal conclusion is that all the three ingredients having been satisfied. 6.5. The AO did not consider the evidences provided by the appellant as satisfactory. According to him, submissions and statements given by Sh. Pravin Kumar Jain confirmed that they had issued on .....

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dition made of ₹ 20,00,000/- on account of unexplained unsecured loans and ₹ 2,35,246/- made on account interest on the same. The grounds of appeal are allowed. 10. On a plain reading of the Assessment Order, we find that the Assessing Officer has gone only by the statement recorded from Shri Pravin Kumar Jain who said to have been deposed that he is only providing accommodation entries and no real business is carried on by the entities. The Assessing Officer has not made any efforts to make independent enquiries with the lender companies. We also observe from the Assessment Order that the Assessing Officer has not provided the statements of Shri Pravin Kumar Jain to the assessee for its rebuttal. Nothing is placed on record to suggest that the information furnished by the assessee in the form of copy of affidavit, establishing identify of the lender, copy of the ledger giving details of loans confirmation taken and also repayment in subsequent years, copy of bank statement highlighting the natures of loan taken and repayment in subsequent years to establish the genuineness of the transactions copy of ITR -V filed establishing creditworthiness of the lender are non-genu .....

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addition. In spite of request by the assessee the Assessing Officer did not provide any cross-examination of the parties who have made the submissions. All these aspects have been considered by the Ld.CIT(A) and deleted the addition observing as under: 5.9. From the assessment order, it transpires that the AO has solely relied upon the statement of Mr. Pravin Kumar Jain and did not carry out any worthwhile independent inquiry in the matter. He has totally ignored the documentary evidences submitted by the appellant. The AO in the assessment order has admitted existence of these details. The AO has not pointed out any defect in the above mentioned documentary evidences submitted during assessment proceedings. Without pointing out any lacuna in the evidences submitted by the appellant, the sources and the genuineness of transaction cannot be doubted. Once evidences related to a transaction is submitted before the A.O., the onus shifts on him to prove these as non-genuine. The A.O. has not discharged the onus casted on him. In my opinion, merely based on the statement of a third person without any corroborative evidence will not make the loan transactions, in question, as accommodatio .....

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ther supporting evidences filed by the assessee were neither proved to be false or untrue. The Hon'ble ITAT Mumbai in the case of ITO vs Anand Shelters Pvt.Ltd. (2012) 20 Taxmann.com 153 has enumerated certain principles which would be extremely useful in understanding the issue in hand. It has been stated in the said judgment that over the years, law regarding cash credits have evolved and has taken a definite shape. A few aspects of law u/s.68 can be enumerated. 1. Sec. 68 can be invoked when there is a credit of amounts in the books maintained by the assessee, such credit is a sum of money during the previous year and either the assessee offers no explanation about the nature and source of such credits or the explanation by the assessee in the opinion of the AO is not satisfactory. 2. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be formed objectively with reference to the material on record. 3. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner. 4. The onus of proof is not static. The initial burden lies on the assessee to establish the identit .....

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income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 5.16. After considering the totality of facts, the rival submissions, the applicable law and on the basis of discussions mentioned above, I have come to the conclusion that nature and source of credit in the books of account of appellant stands explained. Consequently, addition u/s. 68 cannot be sustained. Therefore, A.O. is directed to delete the addition of ₹ 1,27,50,000/-. This ground of appeal is allowed. 8. On a careful reading of the order of the Ld.CIT(A), we do not find any infirmity in the order passed in deleting the addition made u/s. 68 of the Act and the consequential interest on the credits. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by .....

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anshu Suresh Pandhare vs. ITO [ITA No.5185/Mum/2012 dated 05.10.2016 (Mumbai)] Dilsa Distributors Combines vs. ITO [ITA No.5849/Mum/2011 dated 06.09.2013 (Mumbai)] Aim Properties & Investments Pvt. Ltd vs. Income Tax Officer [ITA No.7426/Mum/2012 dated 04.12.2013 (Mumbai] He further placed reliance on the following judgments: Nemi Chand Kothari vs. CIT [2004] 136 Taxman 213 (Gau) Vijay Kumar Talwar vs. CIT [2011]330 ITR 1 (SC) 8. The learned DR, on the other hand, relied on the decisions of the Hon'ble Delhi High Court in the case of Principal CIT vs. Bikram Singh ITA.No. 55/2017 & CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. in ITA.No.525/2014. 9. We have gone through the orders relied upon by the learned DR. We noted that the decision of the Delhi High Court in the case of Bikram Singh, the assessee could not discharge the onus as laid down by section 68 of the Act. Similarly, in the case of CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. (supra), the additions have been made u/s. 68 in respect of the share capital received by the assessee from various companies and during the course of investigation, it was found that the share capital has been r .....

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find any illegality or infirmity in the orders of the CIT(A). It is accordingly, confirmed for both the years under appeal. 13. In the result, the appeals filed by the Revenue are dismissed. 22. Similarly, we find that in the case of M/s. Shree Laxmi Estate Pvt ltd., v. ITO in ITA.No. 5954/Mum/2016 and M/s. Shree Laxmi Developers v. ITO in ITA.No. 2562/Mum/2017 dated 29.12.2017, the Bench held that once the assessee has discharged his initial burden the burden shifts to the Assessing Officer to prove otherwise. The Coordinate Bench considered the submissions as well as the material placed before the lower authorities and concluded that when once the assessee furnished all the details in respect of the loan transactions assessee has discharged its initial burden and the burden shifts to the assessee. It was held that no addition can be made only on the basis of information received from the investigation wing without there being any evidences to disprove the loan transactions from the creditors. While holding so, it has been observed as under: - 4. The first issue that came up for our consideration is addition made by the AO towards unsecured loan u/s 68 of the Act. The AO made add .....

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neficiary of bogus accommodation entries provided by Shri Praveenkumar Jain through his bogus companies. The AO has made additions u/s 68 of the Income-tax Act, 1961 on the ground that though the assessee has furnished necessary evidences to prove identity of the parties, but failed to establish genuineness of transactions and creditworthiness of parties in the backdrop of clear findings of Investigation Wing that those companies are hawala companies involved in providing accommodation entries. The AO has brought out facts in the light of statement of Shri Pravinkumar Jain deposed before the Investigation Wing to make addition. Except this, there is no contrary evidence in the possession of the AO to disprove the loan transactions from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd. On the other hand, the assessee has furished various details including confirmation letters from the parties, their bank statements alongwith their financial statements to prove identity, genuineness of transactions and creditworthiness of the parties. The assessee also furnished evidences to prove that the parties have responded to the notices issued u/s 133(6) by AO by filing various detail .....

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initial burden cast u/s 68 by filing identity, genuineness of transaction and creditworthiness of the parties. Once, the assessee has discharged its initial burden, the burden shifts to the AO to prove otherwise. In this case, the AO made addition only on the basis of information received from Investigation Wing, but not based on any evidence to disprove the loan transaction from above companies are ingenuine. Therefore, we are of the view that there is no reason for the AO to treat loans from above 2 companies as unexplained credits u/s 68 of the Act. ….. …. 11. In this view of the matter and considering the ratio of the case laws discussed above, we are of the considered view that the assessee has discharged identity, genuineness of transactions and creditworthiness of the parties. Therefore, there is no reason for the AO to make addition towards loan u/s 68 of the Act. Hence, we direct the AO to delete addition made towards loans alongwith interest u/s 68 of the Act. 23. Similar view has been taken by the Coordinate Bench in the case of M/s. Shree Laxmi Developers v. JCIT in ITA.No. 6090/Mum/2017 dated 07.03.2018, wherein it has been held as under: - 8. The next is .....

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