DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE- 3, GUWAHATI vs. M/S. SATYAM ISPAT (NORTH EAST) LIMITED, BANDERDEWA

आयकर अपीलीय अधिकरण गुवाहाटी पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI BENCH AT KOLKATA [वर्ुअल कोटु] [Virtual Court] श्री राजपाल यादव, उपाध्यक्ष (कोलकाता क्षेत्र) एवं डॉ. मनीष बोरड, लेखा सदस्य के समक्ष Before SRI RAJPAL YADAV, VICE PRESIDENT (KZ) & DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 DCIT, Circle-3, Guwahati.........................................Appellant Vs. M/s. Satyam Ispat (North East) Limited…………......Respondent [PAN: AAICS 9640 K] Appearances by: Sh. N.T. Sherpa, JCIT, appeared on behalf of the Revenue. Sh. J.P. Gupta on behalf of R. Goenka, Sr. Adv. appeared on behalf of the Assessee. Date of concluding the hearing : December 20th, 2022 Date of pronouncing the order : March 3rd, 2023 ORDER Per Manish Borad, Accountant Member: Both these appeals filed by the Revenue pertaining to the Assessment Years (in short “AY”) 2011-12 & 2012-13 are directed against separate orders passed u/s 250 of the Income Tax Act,

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-2, Guwahati [in short ld. “CIT(A)”] dated 23.02.2017 arising out of the assessment order framed u/s 153C/143(3) of the Act dated 31.03.2015. 2. The Revenue is in appeal before this Tribunal raising the following grounds: Assessment Year: 2011-12: “(i) For that the Ld. CIT(A) was not justified in law as well as in facts in deleting addition of Rs. 2,00,00,000/- on account of Share Capital. (ii) For that the Ld. CIT(A) was not justified in law as well as in facts in deleting addition of Rs. 8,00,00,000/- on account of Share Premium. (iii) For that the Ld. CIT(A) was not justified in law as well as in facts in deleting addition of Rs. 28,00,000/- on account of Share Capital. (iv) Any other ground or grounds that may be raised at the time of hearing.” Assessment Year: 2012-13: “(i) For that the Ld. CIT(A) was not justified in law as well as in facts in deleting addition of Rs. 64,00,000/- on account of Share Capital. (ii) For that the Ld. CIT(A) was not justified in law as well as in facts in deleting addition of Rs. 2,56,00,000/- on account of Share Premium. (iii) Any other ground or grounds that may be raised at the time of hearing.” 3. From perusal of the grounds, we notice that two issues are raised by the Revenue for our consideration; (a) deletion of addition of Rs. 10 Cr for AY 2011-12 and Rs. 3.20 Cr for AY 2012-13 made by ld. AO u/s 68 of the Act towards unexplained cash credit in the form of share capital and share premium, (b) deletion of addition

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. for unexplained cash of Rs. 28 lakh seized during the course of search. 4. We first take up the issue relating to the addition u/s 68 of the Act. Facts in brief are that a search and seizure operation was carried out on 06.12.2012 u/s 132 of the Act in the case of Satyam Group of companies. The assessee company is part of Satyam Group of companies and is engaged in the business of manufacture of M.S. Billet & TMT Bars. Original return of income u/s 139 of the Act submitted on 12.09.2011 showing total income at Rs. 4,37,040/- after claiming the deduction u/s 80IC of the Act at Rs. 6,96,64,484/-. Subsequent to the search notice u/s 153C of the Act was issued and in compliance return was again submitted followed by serving of notices u/s 143(2) & 142(1) of the Act. Similar was the case for AY 2012-13 for which original return was filed on 29.09.2012 declaring income at Rs. 15,83,850/- after claiming deduction u/s 80IC of the Act at Rs. 2,32,28,761/- and similar proceedings were carried out u/s 153C of the Act as were made for AY 2011-12. 5. Now, so far as the issue under consideration is concerned, ld. AO observed that the assessee had issued equity shares of the face value of Rs. 10/- and charged share premium of Rs. 40/- from various share applicants but those in dispute before us are as follows: For AY 2011-12 Sl. No. Name Share Capital Share Premium 1 Gajanan Dealers Pvt. Ltd. 1.50 Cr 6 Cr 2 Rich Valley Traders Pvt. Ltd. 40 lakh 1.60 Cr 3 Sarovar Dealers Pvt. Ltd. 10 lakh 40 lakh Total 2 Cr 8 Cr

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited.

For AY 2012-13 Sl. No. Name Share Capital Share Premium 1 Rich Valley Traders Pvt. Ltd. 9 lakh 36 lakh 2 Sarovar Dealers Pvt. Ltd. 55 lakh 2.20 Cr Total 64 lakh 2.56 Cr 6. During the course of assessment proceedings, the assessee filed the financial statements and other details but ld. AO was not satisfied and due to non-compliance to the letters u/s 133(6) of the Act, he treated the alleged share capital and share premium as unexplained. For reference, the finding of ld. AO for AY 2011-12 is reproduced below: “8.1 The assessee could not furnish any documentary evidence in support of its claim that it had received share capital from the above companies. Requisition letters u/s 133(6) dated 10-03-2015 were issued to the above three Companies to confirm with documentary evidences about their investments in the Satyam Ispat (NE) Ltd. But till the completion of the assessment no reply from their end has been received. As already mentioned above, the Companies from whom the assessee claims to have received the share capital are based in Kolkata. It may be stated here that the assessee Company is not a reputed Company. It is improbable that the Companies from Kolkata would invest such huge amount, and that too with share premium of four times the share capital, in such a small, unknown and un- reputed Company where there is no guarantee of getting their money back and when they have many other scopes of investing their money in other reputed Companies or Banks, etc from where they could expect good returns. It is beyond human probabilities that investors would invest such a huge amount in a small, an unknown and an un- reputed Company. Further, even if the assessee's A/R claims that the payments were received by RTGS, no any bank statements of the above Companies could be furnished to prove the case. 8.2 It may be stated here that as per the provisions of section 68 of the IT Act, 'where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.' Since the assessee Company ' claims that it has received equity share capital, the company is under a burden to explain the nature and source of the share capital received, and for discharging the same, the company has to establish the share holder's identity, genuineness of the transaction and the creditworthiness of the shareholders. However, as already stated above, except for furnishing the list of share applicants whom the assessee claims to have received the share application money from, the Company evidence to prove its claim. In view of the above, the genuineness and creditworthiness of the alleged share applicants remained unverifiable. Therefore, there is reason to doubt the veracity of the transactions. Failure on the part of the assessee to furnish documentary evidence such as return of income and balance sheet of the investor companies / persons and their bank statements and confirmations from the investors clearly indicates that the assessee had actually not received any such Share Capital during the year and the amount shown under the head is Company's own unaccounted money which is introduced in the garb of Share Capital. As shown in the table, the total amount of shares claimed to have been allotted during the year to the above three Companies I Parties amounts to Rs.2,00,00,000/-. In view of the discussions made above, Share Capital of Rs.2,00,00,000/- has been treated as bogus and the amount is brought to taxation as undisclosed income. [Add: 2,00,00,000/-] b) Share Premium: On perusal of the details filed, it is also seen that the assessee has shown an amount of Rs.8,00,00,000/- as Share Premium received during the year. This share premium of Rs.8,00,00,000/- is shown to have received from the Companies shown in the table in Para(a) above. As per details furnished, the assessee claims to have allotted shares at a premium of four times the share capital. For the reasons discussed in (a) above, the Share Premium of Rs.8,00,00,000/- has been treated as assessee's own money invested in the garb of Share Premium and brought to taxation as Undisclosed Income. [Add: Rs.8,00,00,000/-]” 7. Further for AY 2012-13, ld. AO almost gave the similar finding and confirmed the impugned addition. Accordingly, the addition u/s 68 of the Act was made for AY 2011-12 at Rs. 10 Cr

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. (Share capital: 2 Cr + Share premium: 8 Cr) and for AY 2012-13 at Rs. 3.20 Cr (Share capital: 64 lakh + Share premium: 2.56 Cr). 8. Dissatisfied with the order of ld. AO the assessee preferred appeal before ld. CIT(A) and filed complete details in order to prove that the identity and creditworthiness of the share applicants is beyond doubt and genuineness of the transaction is also not in doubt since the assessee company carries sufficient net worth to attract the share premium of Rs. 40/- on the equity shares of face value of Rs. 10/-. Ld. CIT(A) on examining the facts in detail and also after calling for the remand report from ld. AO observed that the assessee has filed sufficient documentary evidences including bank statements, memorandum and article, PAN and address of the applicant companies, income tax return copies. Ld. CIT(A), further, on perusal of the order sheet, available in the assessment records copy of which was filed by the appellant, observed that no enquiries were made by ld. AO in respect of share capital and share premium even though the details of shareholders/applicants were furnished to ld. AO in the course of assessment proceedings. In nutshell, ld. CIT(A) was satisfied with the identity and creditworthiness of the share applicants and the genuineness of the transaction. thus, the alleged transaction not covered under the provisions of u/s 68 of the Act and accordingly deleted the addition. 9. Aggrieved with the order of ld. CIT(A), the Revenue is now in appeal before this Tribunal. 10. Ld. D/R vehemently argued referring to the finding of ld. AO, remand report dated 25.04.2016 sent by ld. AO and further, stated Page 6 of 26

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. that the alleged share applicants are paper companies not having sufficient net worth to make investment. It was also submitted that the assessee did not file the relevant details before ld. AO which could have given the opportunity to ld. AO to conduct necessary enquiry and thus, prayed that the finding of ld. CIT(A) may be reversed. 11. On the other hand, ld. Counsel for the assessee heavily relied on the finding of ld. CIT(A) and also stated that the case under consideration was subsequent to the carrying out of search. No incriminating material was found during the search proceedings pertaining to AY 2011-12 & AY 2012-13. Further, no enquiries were conducted by ld. AO and all the alleged share applicants are having sufficient creditworthiness to invest in the share capital and share premium of the assessee company and no defect has been pointed out by ld. AO even in the remand proceedings in various documents filed before ld. CIT(A). Thus, prayer was made to confirm the finding of ld. CIT(A). 12. We have heard rival contentions and perused the records placed before us. The Revenue is aggrieved with the deletion of addition made u/s 68 of the Act by ld. CIT(A) for the following share capital and share premium received by the assessee during the AY 2011-12 & AY 2012-13: For AY 2011-12 Sl. No. Name Share Capital Share Premium 1 Gajanan Dealers Pvt. Ltd. 1.50 Cr 6 Cr 2 Rich Valley Traders Pvt. Ltd. 40 lakh 1.60 Cr 3 Sarovar Dealers Pvt. Ltd. 10 lakh 40 lakh Total 2 Cr 8 Cr

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. For AY 2012-13 Sl. No. Name Share Capital Share Premium 1 Rich Valley Traders Pvt. Ltd. 9 lakh 36 lakh 2 Sarovar Dealers Pvt. Ltd. 55 lakh 2.20 Cr Total 64 lakh 2.56 Cr 13. We notice that the assessee filed complete details to explain the said credit received in the form of share capital and share premium. It is impleaded by the assessee that ld. AO has not issued any letter u/s 133(6) of the Act and no incriminating material was found during the course of search pertaining to the said addition. 14. Before us, ld. Counsel for the assessee has referred to the following written submission filed before ld. CIT(A) challenging the said addition and for reference we are reproducing below the submissions made for AY 2011-12: “GROUND NO. 4 and 5: (ADDITION ON ACCOUNT OF ALLEGED BOGUS SHARE CAPITAL AND SHARE PREMIUM) (i) Ground nos. 4 & 5 are taken up together as the grounds on which the additions have been made by the assessing officer are similar. (ii) While making the assessment, the assessing officer has added the following amounts in the total income of the appellant:- (a) Alleged bogus share capital Rs.20000000/- (b) Alleged bogus share premium Rs.80000000/- The assessing officer has held that no details/ documents were furnished by the appellant in support of share capital and share premium. The assessing officer in para 8.1 of his order has mentioned requisition u/s 133(6) of the Act were issued on 10.03.2015 to the three companies from whom share capital and share premium was received by the appellant. But till completion of the assessment, no reply was received from them. Hence, he held that the share capital of Rs.20000000/- was not actually received by the appellant. He, therefore treated it as bogus. The assessing officer further held that

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. the share premium of Rs.80000000/- was appellant’s own money invested in the garb of share premium. He, therefore, added these amounts in the total income of the appellant. (iii) It is respectfully submitted that the addition made by the assessing officer is totally misconceived, without any basis/ materials and therefore, neither sustainable on facts nor in law for the reasons mentioned hereinafter. (iv) A perusal of the assessment order would show that no incriminating document/material relating to the share capital/share premium/share application was found and/or seized in the case of the appellant. The assessing officer has neither referred to nor relied upon any such document while making the assessment. (v) It is respectfully submitted that the additions made in respect of share capital and share premium are not sustainable even on facts for the reasons given below:- (a) The details of share capital and share premium were submitted by us to the assessing officer in course of the assessment proceedings as noted by the assessing officer at page 3 of the assessment order. The evidences in support of the share capital/ premium could not be furnished to the assessing officer as these were misplaced and were not traceable in course of the assessment proceedings. Moreover, the appellant was not given proper and meaningful opportunity of being heard as explained herein before in this written submission. (b) We are enclosing herewith the following details for your kind perusal: (i) Chart showing name & address of the share holders/ applicants, no. of shares applied for/ allotted face value of shares, premium paid, mode of payment, PAN No., CIN nos. of the applicant companies. (ii) Copies of our statements with the following banks showing the receipt of share capital/ application money:- (a) HDFC Bank (b) State Bank of India (C.A.) (c) State Bank of India (C.C.) (iii) Copies of Memorandum & Articles of Association and audited balance sheets in respect of corporate share holders/ applicants.

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. (iv) Copies of returns of allotment filed by us in respect of shares allotted during the previous year relevant to the assessment year under appeal. (c) The assessing officer has mentioned in the assessment order that requisition u/s l33(6) of the Act was issued to share holder companies on 10.03.2015 but till completion of the assessment no reply was received from them. In this connection it is submitted that the appellant was never confronted with the result of notices u/s 133(6) of the Act sent to the share holder companies. This is in gross violation of the principles of natural justice more so section 142(3) of the Act. Secondly, merely not responding to notices issued u/s 133(6) of the Act, by the share holder companies, no adverse inference can be drawn against the appellant company. Despite furnishing the names, addresses, more of receipt of the share capital (RTGS), no further enquiries were made by the assessing officer. (d) A perusal of the order sheet (copy enclosed) would show that no enquiries were made by the assessing officer in respect of share capital/ share premium even though admittedly, the details of share holders/ applicants were furnished to the assessing officer. (e) A perusal of the details filed would prove beyond any reasonable doubt the identity of share holders/ applicants, their credit worthiness and genuineness of the transactions. In view of the above, no addition was warranted on account of share capital and share premium received by the appellant. Hence, the same may kindly be deleted. (vi) Prayer under Rule 46A of the Income Tax Rules 1962: The documents submitted in support of ground nos. 4 and 5 are in the nature of additional evidences. As submitted hereinbefore in the preceding paragraphs, the appellant’s assessment was completed without the appellant being given proper and meaningful opportunity of being heard. Also, the appellant was prevented by sufficient cause for not submitting these documents in course of the assessment proceedings. Hence, the appellant’s case is covered by clause (b), (c) and (d) of Sub-Rule (1) of Rule 46A of the Income Tax Rules, 1962. In view of the above, it is prayed that the above referred additional evidence may kindly be admitted as these go to the root of the issues Page 10 of 26

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. involved in this appeal and are required to be admitted for doing substantial justice in the matter.” 15. Further, we find that ld. CIT(A), after considering the submissions of the assessee and also after calling for the remand report from ld. AO since various details filed by the assessee were not considered by ld. AO, deleted the addition u/s 68 of the Act for alleged bogus share capital and share premium observing as follows: “12.2. I have considered the submissions made before me by the appellant. I have also perused the assessment order and the remand report sent by the Assessing Officer. In his remand report the Assessing Officer has simply stated that the addition was made on the basis of findings recorded in the assessment order. However, he has further stated that he had no objection to the admission of any fresh or additional evidence if it was considered to be relevant for disposal of the issue. 12.3. I find that the appellant had submitted the details of share capital and share premium in course of the assessment proceedings. This fact has been noted by the Assessing Officer in para 8 of his order. The appellant could not submit the documents in support of share capital/premium as these were not readily traceable at the time of assessment proceedings. The appellant has further submitted that it was not given proper and meaningful opportunity of being heard to produce the documents in support of share capital/premium. The appellant has submitted before me the following details/documents in support of the share capital/premium:- (i) Chart showing name & address of the share holders/applicants. No. of shares applied for/allotted face value of shares, premium paid, mode of payment, PAN No., CIN nos. of the applicant companies. (ii) Copies of the appellant's statements with the following banks showing the receipt of share capital/application money: (a) HDFC Bank (b) State Bank of India (C.A.) (c) State Bank of India (C.C.)

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. (d) Copies of Memorandum & Articles of Association and audited balance sheets in respect of corporate share holders/ applicants. (e) Copies of returns of allotment filed by the appellant in respect of shares allotted during the previous year relevant to the assessment year under appeal." A prayer under Rule 46A of the Income Tax Rules, 1961 has been made by the appellant for admission of these documents as additional evidence. These documents were sent to the Assessing Officer while calling for the remand report. As stated above, the Assessing Officer has not objected to the admission of these additional evidences. Considering the facts and circumstances of the case, I admit the additional evidences now produced by the appellant as these are required to be admitted for doing substantial justice in the matter. 12.4. The Assessing Officer has mentioned in his order that there was no response from the three company share holders to whom notices were issued u/s.133(6) of the Income Tax Act, 1961 to confirm the investment made by them in the appellant company. The appellant has contended that it was never confronted with the result of notices issued to those company share holders and thus there was a gross violation of the provisions of Section 142(3) of the Act. A perusal of the order sheet, a copy of which has been filed by the appellant, show that there is no order sheet entry regarding issue notices u/s. 133(6) of the Act to the company share holders as mentioned by the Assessing Officer. It further shows that no enquiries were made by the Assessing Officer in respect of share capital/premium even though the details of share holders/applicants were furnished to the Assessing Officer. Even otherwise, drawing an adverse inference, only because the creditor/subscriber fails or neglects to reply notice u/s.133 (6) of the Act, is not justified. This is a settled proposition by the various judicial pronouncements. 12.5. The appellant has filed complete details of share holder companies viz - their names & addresses, No. of shares applied for/allotted, face value of shares, premium paid, mode of payment, their PAN No., CIN No., copies of Memorandum & Articles of Association, audited balance sheets and copy of return of allotment. A perusal of the bank statements filed by the appellant show that all the transactions have taken place through banking channels. On examination of these details/documents, I do not find any reason to

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. doubt the identity of the share holders, their credit worthiness and the genuineness of the transactions. It is settled law that once an assessee provides details regarding identity of the share applicants/holders, their permanent account numbers, bank details, balance sheets, A/D receipt in support of filing of income tax returns, copies of Memorandum & Articles of Association etc., the share application money/capital cannot be treated as unexplained in the hands of the assessee. This view has been taken in the following cases: (i) Principal C.I.T. vs. Soft-line Creations Pvt. Ltd. (2016)387 R 636 (Delhi) (ii) C.I.T. vs. Kamdhenu Steel & Alloys Ltd. (2014) 361 ITR 220 (Delhi) (iii) C.I.T. vs. Lovely Exports Pvt. Ltd. 319 ITR (St.) 5 (S.C.) 320 (iv) C.I.T. vs. Sameer Bio-Tech Pvt. Ltd. 325 ITR 294 (Delhi) (v) C.I.T. vs. Five Vision Promoters Pvt. Ltd. (2016) 380 ITR 289 (Delhi) (vi) C.I.T. vs. Dwarkadhish Investment Pvt. Ltd. 330 R 298 (Delhi) (vii) C.I.T. vs. Divine Leasing & Finance Ltd. (2008) 299 ITR 268 (Delhi) In view of my above discussion, I delete the addition made in respect of share capital and share premium. This ground of appeal is, therefore, allowed. Ground No.6 (a), (b) and (c): These grounds pertain to disallowance of deduction under section 80IC of the Income Tax Act, 1961 on the following subsidies: (i) Transport Subsidy: Rs.7,12,77,865/- The above disallowance was made by the Assessing Officer by holding that the above subsidies were not derived from the appellant's manufacturing activities.” 16. The above finding of ld. CIT(A) take note of all relevant details which are generally required to prove the identity, creditworthiness of the share applicants and the genuineness of the transaction. So far the identity is concerned, there remains no dispute as it is duly supported by address proof, PAN, details available on Ministry of Page 13 of 26

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. Corporate Affairs for the corporate share applicants. So far as the creditworthiness is concerned, we find that all the companies have sufficient net worth to cover up the investments made in the assessee company. For instance, we take note that in the case of Gajanan Dealers Pvt. Ltd. as on 31.03.2010 it had a net worth of Rs. 22.81 Cr against which the investments made in the assessee company is Rs. 7.50Cr. Similarly, in the case of Rich Valey Traders Pvt. Ltd. as on 31.03.2010 the net worth stands at Rs. 20.39 Cr which justifies the investment in equity shares at Rs. 2 Cr for AY 2011-12 and at Rs. 45 lakh for AY 2012-13. Also in case of the share applicants namely Sarovar Dealers Pvt. Ltd., net worth as on 31.03.2011 is stated in the balance sheet at Rs. 20.84 Cr which is more than sufficient to explain to investment of Rs. 50 lakh in the assessee company for AY 2011-12. Similarly, Satya Ratan Group is also stated to have sufficient net worth to make the investment. Now, after being satisfied about the identity and creditworthiness of the share applicants we come to the genuineness of the transaction. Ld. AO while making the addition has given a finding which in our view is perverse and not at all relevant to the facts of the case. The finding of ld. AO for one of the year under appeal i.e. AY 2012-13 in para 7.1 of the assessment order reads as under: “7.1 The assessee could not furnish any documentary evidence in support of its claim that it had received share capital from the above persons / companies, except Ratan Sharma. It may be stated here that the assessee Company is not a reputed Company. It is improbable that the Companies would invest such huge amount, and that too with share premium of four times the share capital, in such a small, unknown and un-reputed Company where there is no guarantee of getting their money back and when they have many other scopes of investing their money in other reputed Companies or Banks, etc from where they could expect good returns. It is beyond Page 14 of 26

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. human probabilities that investors would invest such a huge amount in a small, an unknown and an un-reputed Company. Further, even if the assessee's A/R claims that the payments were received by RTGS, no any bank statements of the above Companies could be furnished to prove the case.” 17. In the above finding of ld. AO, he states that the assessee company is a small, unknown and unreputed company where there is no guarantee of getting their money back and further stated that it is beyond human probability that investors would invest such a huge amount in a small, unknown and unreputed company. We fail to find any merit in this observation of ld. AO and it seems to be merely surmises and conjectures since from perusal of the audited balance sheet of the assessee company which we are quite sure that the same was available with ld. AO also, find that during the FY 2010-11 the turnover of the assessee company was Rs. 143.45 Cr and net profit for the year was Rs. 3.74 Cr. The fixed assets appearing in the balance sheet under ‘Gross’ block of Assets are Rs. 42.67 Cr. We do not understand that in what manner ld. AO has examined the balance sheet of the assessee company to come to such a perverse conclusion that it is an unknown and unreputed company. We find that the assessee issued the share capital of face value of Rs. 10/- and charged a share premium of Rs. 40/- per share, so in total Rs. 50/- was received for each equity share. Now, leaving aside the profitability of the company and the future prospects of the assessee company even if we consider the share capital and reserve and surplus which includes capital investment subsidy as well as accumulated profits, the book value of the company comes at Rs. 51.96 per equity share which truly justifies the share premium of Rs. 40/- charged by the company. Analysis of the financial statements Page 15 of 26

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. clearly indicates that the assessee is carrying out business of a very good magnitude and turnover has also increased post the receiving of fresh share capital as is evident that in FY 2009-10 the turnover was Rs. 105.70 Cr and which has increased to Rs. 143.45 Cr during the FY 2010-11 and the same growth continues for AY 2012-13. We are, thus, satisfied with the genuineness of the transaction of share capital and share premium received by the assessee from the alleged share applicants coupled with the identity and creditworthiness of the share applicants. Our view is further supported by plethora of judicial pronouncements and some of them have been considered by this Tribunal in the recent decision in the case of ITO vs. Mainak Suppliers Pvt. Ltd. in ITA No.38/Kol/2021 order dated 28.12.2022 which reads as follows: “9. We have heard the rival contentions and gone through the material placed on record. Admittedly, it is a fact on record that notices u/s. 133(6) of the Act were issued by Ld. AO to all the sixteen share subscriber companies and all of them had duly replied directly to the ld. AO, along with relevant documents and details. Copies of the replies duly acknowledged under seal and stamp of the office of the Ld. AO are placed on record. We note that Ld. AO without even going through and discussing these details submitted by the sixteen subscriber companies, insisted for personal appearance to prove the identity, creditworthiness of the subscriber companies and the genuineness of the transactions. 9.1. To our mind, ld. AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details received in his office from all the sixteen subscriber companies and also pointing out as to what further investigation was needed by him by way of recording of statement of the directors of the assessee and the subscriber companies. We draw our force from the decision of the Hon’ble Bombay High Court in the case of PCIT vs. Paradise Inland Shipping Pvt. Ltd. [2017] 84 taxmann.com 58 (Bom) wherein it was held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish its case. Page 16 of 26

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. 9.2. We also draw our force from the decision of Hon’ble Jurisdictional High Court of Calcutta in the case of Crystal Network Pvt. Ltd. vs. CIT (supra) which held as under: “We find considerable force from the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the CIT(Appeals) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the produce of the assessee or not. When it was found by the CIT(Appeal) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact finding." 10. We also take note of the fact that all the share subscriber companies have filed their return of income with the department which have been either processed u/s. 143(1) of the Act for which intimations have been issued or have been assessed u/s. 143(3) or 147 on substantive basis, for which the respective intimation/assessment orders are placed on record in the paper book. We also take note of the fact that all the sixteen share subscriber companies have responded to the notice issued u/s. 133(6) of the Act and Ld. AO has not bothered to discuss or point out any defect or deficiency in the documents furnished by the share subscribing companies. These evidences furnished by them have been neither controverted by the Ld. AO during the assessment proceedings nor anything substantive brought on record to justify the addition made by him. Ld. AO has simply added the amount of share capital and share premium on the ground that assessee has not produced the directors/shareholders. Ld. AO has ignored the reply given in response to notice issued u/s. 133(6) of the Act which are on record under duly acknowledged seal and stamp of his good office. From the perusal of the order of Ld. CIT(A), we note that Ld. CIT(A) has perused the evidence in the nature of documents and details and on their examination has deleted the addition made by the Ld. AO. Thus, going by the records placed by the assessee and by all the share subscribing companies in response to notices issued u/s 133(6), it can Page 17 of 26

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. be safely held that the assessee has discharged its initial burden and the burden shifted on the ld. AO to enquire further into the matter which he failed to do so. 10.1. Ld. CIT(A) has elaborately appreciated the evidence and details placed on record and has given his factual findings, crux of which is contained in para 8.1 of his order, which is extracted below for ease of reference: “8.1. Basically the law requires documentary evidences on record in dealing with the issue of authenticity. It is not the case of the AO that necessary documentary evidences are not on record but the only major reliance placed on his action is based on non-attendance of the directors of the appellant company along with directors of subscriber companies before him u/s 131 of the Act. It is no longer res integra that such non-attendance should be considered as a factor which should be used by the AO in coming to an adverse conclusion against the appellant. On an overall analysis of the issue, I find that the AO has not made out his case with cogent material on record that the appellant could come under the purview of section 68 of the Act with regard to share capital as reflected in the balance sheet when there is no finding with any cogent material evidence that the same was actually bogus in nature. It is accordingly observed that creditworthiness of the share subscribers to make investment in the share capital of the appellant company cannot be a disputed matter as per material facts on record. The aforesaid facts underlined by evidences clearly prove the identity of the share applicants, their creditworthiness and source of funds, as well as the genuineness of the transactions being investments in the share capital issued by the appellant, which was subscribed to by each of them. Thus, it is proved beyond any-doubt or dispute that the share applicants are actually found to have subscribed to the share capital issued by the appellant during the year under consideration as clearly evident not only from their respective books of accounts but also from their audited accounts filed with the income tax authorities in relation to their own income tax assessments and the sources of such funds are also explained by each of the share applicants in their replies addressed to the AO. However, the AO had not brought these indisputable facts on record but acted on his whims and fancies. It is observed that the burden which la on the appellant, in relation to section 68 of the Act, has been duly discharged by it and nothing further remains to be proved by it on the issue. Hence, I am inclined to accept the arguments tendered by the AR of the appellant in this respect. In view of the above, I have no hesitation to hold that the impugned addition made by invoking Page 18 of 26

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. the provisions of s. 68 by the AO is not justified in the circumstances and accordingly, direct him to delete such addition of Rs.21,08,00,000/- made on this account. Thus, these grounds of the appeal are allowed.” 10.2. Further, we note that ld. CIT(A) has taken into consideration the creditworthiness of all the sixteen subscriber companies by going through the records and the net worth of each of them (refer the details tabulated above). It is also noted that all the investing companies have substantial own funds available with them to make investment in the assessee. In this respect, all the investing companies have also explained their source of funds in their reply to notices issued u/s. 133(6) of the Act. 10.3. From the perusal of the paper book and the replies filed by share subscribing companies in response to notice u/s. 133(6) of the Act, it is vivid that all the share applicants are (i) income tax assessees, (ii) they are filing their income tax returns, (iii) share application form and allotment letter is available on record, (iv) share application money was paid by account payee cheques, (v) details of the bank accounts belonging to share applicants and their bank statements are on record, (vi) in none of the transactions, there are any deposit of cash before issuing cheques to the assessee, (vii) all the share applicants are having substantial creditworthiness represented by their capital and reserves. 10.4. For expressing our views as aforesaid, we draw our force also from the decision of Hon’ble jurisdictional High Court of Calcutta in the case of PCIT vs. Shree Leathers in ITAT/18/2022 (IA No. GA/02/2022) dated 14.07.2022 wherein Hon’ble High Court succinctly dealt with the aspect whether notices u/s. 133(6) of the Act are issued which are duly acknowledged or responded but ignored by the AO leads to perversity in the assessment order. Relevant extract from the said decision is reproduced as under: “…Bearing the above legal principles in mind, if we examine the case on hand, it is clear that the assessing officer issued show cause notice only in respect of one of the lender M/s. Fast Glow Distributors. The assessee responded to the show cause notice and submitted the reply dated 22.12.2017. The documents annexed to the reply were classified under 3 categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The assessing officer has brushed aside these documents and in a very casual manner has stated that

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. mere filing PAN details, balance sheet does not absolve the assessee from his responsibility of proving the nature of transaction. There is no discussion by the assessing officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee has discharged his initial burden and the burden shifts on the assessing officer to enquire further into the matter which he failed to do. In more than one place the assessing officer used the expression "money laundering." We find such usage to be uncalled for as the allegations of money laundering is a very serious allegations and the effect of a case of money laundering under the relevant Act is markedly different. Therefore, the assessing officer should have desisted from using such expression when it was never the case that there was any allegations of money laundering. Paragraph 5.4 and 5.5 of the assessment order are all personal perception and opinion of the assessing officer which needs to be ITAT 18 OF 2022 ignored. Much reliance was placed on the statement of Shri Ashish Kumar Agarwal, which statement has been extracted in full in the assessment order and it cannot be disputed that there is no allegation against the assessee company in the said statement. There is no evidence brought on record by the assessing officer to connect the said entry operator with the loan transaction done by the assessee. Therefore, the statement is of little avail and could not have been the basis for making allegations. The assessing officer ignored the settled legal principle and in spite of the assessee having offered the explanation with regard to the loan transaction, no finding has been recorded as regards the satisfaction on the explanation offered by the assessee. Therefore, the assessing officer ignored the basic tenets of law before invoking his power under Section 68 of the Act. Fortunately, for the assessee, CIT(A) has done an elaborate factual exercise, took into consideration, the creditworthiness of the 13 companies the details of which were furnished by the assessee. More importantly, the CIT noted that all these companies responded to the notices issued under Section 133 (6) of the Act which fact has not been denied by the assessing officer. On going through the records and the net worth of the lender companies, the CIT has recorded the factual findings that the net worth of those companies is in crores of rupees and they have declared income to the tune of Rs. 45,00,000/- and 75,00,000/-. Therefore, the assessing officer if in his opinion found the explanation offered by the assessee to be not satisfactory, he should have recorded so with reasons. We find that there is no discussion on the explanation offered ITAT 18 OF 2022 by the assessee qua, one of the lenders. Admittedly, the assessee was not issued any show cause Page 20 of 26

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. notice in respect of other lenders. However, they are able to produce the details before the CIT(A) who had in our view rightly appreciated the facts and circumstances of the case. As pointed out earlier, the assessing officer brushed aside the explanation offered by the assessee by stating that merely filing PAN details, balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the assessing officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply dated 22.12.2017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such finding, we have to hold that the order passed by the assessing officer was utterly perverse and rightly interfered by the CIT(A). The Tribunal re-appreciated the factual position and agreed with the CIT(A). The tribunal apart from taking into consideration, the legal effect of the statement of Ashish Kumar Agarwal also took note of the fact that the notices which were issued by the assessing officer under Section 133 (6) of the Act to the lenders where duly acknowledged and all the lenders confirmed the loan transactions by filing the documents which were placed before the tribunal in the form of a paper book. These materials were available on the file of the assessing officer and there is no discussion on this aspect. Thus, we find that the tribunal rightly dismissed the appeal filed by the revenue.” 11. In respect of reliance placed by the revenue on the decision of Hon’ble Supreme Court in the case of PCIT vs. NRA Iron & Steel Pvt. Ltd. 412 ITR 161 (SC), we note that Hon’ble Supreme Court in para 8.2 of the said decision has made the following observations: “8.2 As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit- worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer CIT v. Precision Finance (P) Ltd. [1995] 82 Taxman 31/[1994]208 ITR 465 (Cal.): Proof of Identity of the creditors; Capacity of creditors to advance money; and Genuineness of transaction This Court in the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR Page 21 of 26

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. 938 (SC) laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source." 11.1. Further, in para 9 of the said decision, Hon'ble Supreme Court has observed as under: "9. The Judgments cited hold that the Assessing Officer ought to conduct an independent enquiry to verify the genuineness of the credit entries. In the present case, the Assessing Officer made an independent and detailed enquiry, including survey of the so-called investor companies from Mumbai, Kolkata and Guwahati to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions. The field reports revealed that the share-holders were either non-existent, or lacked credit-worthiness." 11.2. Thereafter, Hon'ble Supreme Court summed up the principles which emerged by deliberating upon various case laws as under: "11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Office is duty bound to investigate the credit- worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of namelenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established.

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act.” 11.3. Hon'ble Supreme Court, thus, held that once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then, AO is duty bound to conduct an independent enquiry to verify the same. However, as noted above, ld. AO in this case has not made any independent enquiry to verify the genuineness of the transactions. Assessee, having furnished all the details and documents before the ld. AO and the ld. AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As observed above, the assessee having discharged its initial burden casted upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, it shifted on the ld. AO to examine the evidences furnished and even make independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee by confronting with the same to the assessee. In view of this, the aforesaid decision of the Hon'ble Supreme Court in the case of PCIT vs. NRA Iron and Steel Pvt. Ltd., in our humble view, is not applicable to the facts and circumstances of the case in hand. 12. Considering the facts and circumstances of the case and the material placed on record, we find that assessee has discharged its onus to prove the identity and creditworthiness of the share subscribing companies and the genuineness of the transactions. Accordingly, considering these facts and in the light of the judicial precedents referred above, we find no reason to interfere with the fact- based findings given by the Ld. CIT(A) and uphold his decision to delete the addition made by the Ld. AO towards share capital and share premium u/s. 68 of the Act. Accordingly, grounds taken by the revenue in this respect are dismissed. 13. In the result, appeal of the revenue is dismissed.” 18. We, therefore, respectfully following the above decision as well as our finding of fact discussed in the preceding paras, fail to find any infirmity in the finding of ld. CIT(A) deleting the addition for unexplained cash credit of Rs. 10 Cr for AY 2011-12 and Rs.

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. 3.20 Cr for AY 2012-13. Thus, Revenue’s common ground nos. 1 & 2 raised for AY 2011-12 & AY 2012-13 are dismissed. 19. Now, we take up the issue relating to the deletion of addition for unexplained cash of Rs. 28 lakh for AY 2011-12. In the grounds of appeal, it seems that the Revenue has inadvertently mentioned the addition of the alleged sum on account of share capital whereas perusal of the assessment order indicates that it relates to the cash seized during the course of search which has been treated by ld. AO as unexplained cash. Facts in brief that an amount of Rs. 28 lakh was seized during the course of another search operation conducted on 12.03.2011. Ld. AO during the course of assessment proceedings observed that the assessee has shown the seized cash in its balance sheet and claimed that the said amount is duly accounted for in the books of accounts. However, ld. AO was not satisfied and made the addition. 20. Aggrieved, the assessee preferred appeal before ld. CIT(A) and succeeded. 21. Aggrieved, the Revenue is now in appeal before this Tribunal. Ld. D/R supported the order of ld. AO. On the other hand, ld. Counsel for the assessee supported the finding of ld. CIT(A). 22. We have heard rival contentions and perused the records placed before us. Revenue’s ground is that ld. CIT(A) erred in deleting the addition of Rs. 28 lakh made by ld. AO towards cash seized during the course of search. We notice that the assessee during the course of the proceedings before lower authorities and before us has stated that the alleged cash was part of the cash in hand of the assessee company and duly accounted for in the books Page 24 of 26

I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. of accounts and some part of the cash was seized by the Department but it was not any unaccounted/undisclosed cash of the assessee. Considering the submissions made by the assessee relief was given by ld. CIT(A) observing as follows: “11.2 I have considered the submissions made before me. I have also perused the assessment order and the remand report sent by the Assessing Officer on this issue. I find that in his very first statement recorded on 12.03.2011 u/s.132 (4) of the Income Tax Act, 1961, Shri Banwarilal Jat, from whose possession the cash was seized had admitted that the cash belonged to M/s. Satyam Ispat (North East) Ltd. i.e. the appellant company. Subsequently, on 23.05.2011 the statement of Shri Kamal Sharma, Director of the appellant company was recorded u/s.131 of the Income Tax Act, 1961. In his statement Shri Kamal Sharma also admitted that the said cash of Rs.28,00,000/- found and seized by the Department during the course of search on 12.03.2011 belonged to the appellant company and the source of the said amount was accumulation of cash sales and collection from various sundry debtors. Shri Kamal Sharma further stated that the said cash of Rs.28,00,000/- was duly recorded in the books of accounts of the appellant company i.e. M/s. Satyam Ispat (North East) Ltd. The appellant has submitted a copy of its audited balance sheet as on 31- 03-2011 for my perusal. I find that the seized cash of Rs.28,00,000/- has duly been reflected in the audited balance sheet under the head cash & bank balances (cash seized by I.T. Department Rs.28,00,000/-). In view of the above stated facts, I hold that the nature of possession and the source of acquisition of Rs.28,00,000/- seized by the Department on 12.03.2011 stands explained. The addition of Rs.28,00,000/- made by the Assessing Officer is, therefore, deleted.” 23. The above finding of ld. CIT(A) stands unrebutted by ld. D/R. We have also examined the audited balance sheet and find that the alleged cash seized by the Revenue authorities is duly recorded in the financial statement and is part of the cash in hand available with the assessee in the due course of business. Thus, we fail to

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I.T.A. Nos.: 86 & 87/GTY/2017 Assessment Years: 2011-12 & 2012-13 M/s. Satyam Ispat (North East) Limited. find any infirmity in the finding of ld. CIT(A). Revenue’s ground no. 3 raised for AY 2011-12 is dismissed. 24. Remaining grounds of appeal for AY 2011-12 & AY 2012-13 are general in nature which need no adjudication. 25. In the result, the appeals filed by the Revenue for AY 2011- 12 & AY 2012-13 are dismissed. Kolkata, the 3rd March, 2023 Sd/- Sd/- [Rajpal Yadav] [Manish Borad] Vice President Accountant Member Dated: 03.03.2023 Bidhan (P.S.) Copy of the order forwarded to: 1. DCIT, Circle-3, Guwahati. 2. M/s. Satyam Ispat (North East) Limited, NH-52, Banderdewa, Dist: Papumpare, Arunachal Pradesh-791 123. 3. CIT(A)-2, Guwahati. 4. CIT- 5. CIT(DR), Guwahati Bench, Guwahati. //True copy // By order

Assistant Registrar ITAT, Kolkata Benches Kolkata

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