MAGUDAPATHY PICTURES v. ASSISTANT COMMISSIONER OF INCOME TAX
[Citation -2005-LL-1231]

Citation 2005-LL-1231
Appellant Name MAGUDAPATHY PICTURES
Respondent Name ASSISTANT COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 31/12/2005
Assessment Year 1986-87, 1987-88
Judgment View Judgment
Keyword Tags opportunity of being heard • reasonable opportunity • concealment of income • period of limitation • mala fide intention • condition precedent • pre-existing right • issuance of notice • unregistered firm • returned income • right to appeal • income returned • issue of notice • payment of tax • quantum appeal • assessed tax • tax payment • advance tax • sales-tax • tax due
Bot Summary: The CIT(A) has given his finding in para 4 which reads as under: The appeal has been filed on 8th May, 1989, under s. 249(4)(a), no appeal shall be admitted unless at the time of filing of the appeal, the assessee h a s paid the tax due on the income returned. Although such appeal has been preferred after that date i.e. 1st April, 1989, the Hon ble Kerala High Court cited above has held as under : Whether, on the facts and in the circumstances of the case, The CIT(A) is right and within the jurisdiction in entertaining the appeal and also in deciding the same on merits and also in view of the words at the time of filing of the appeal occurring in s. 249(4) of the IT Act, the Tribunal is right in law in holding that if an appeal filed after 1st April, 1989, the provision prior to 1st April, 1989, will apply The same is the subject-matter of adjudication in IT Ref. InHoosein Kasam Dada Ltd. vs. State of Madhya Pradesh 4 STC 114 : AIR 1953 SC 221, while considering a similar position relating to change of law affecting the right to appeal and requiring payment of tax admitted to be due as condition precedent for entertaining the appeal, the apex Court held that a right of appeal is not merely a matter of procedure. As the old law continues to exist for the purpose of supporting the pre-existing right of appeal that old law must govern the exercise and enforcement of that right of appeal and there can then be no question of the amended provision preventing the exercise of that right. Further the Hon ble apex Court in the case of Hoosein Kasam Dada Ltd. vs. State of Madhya Pradesh held that imposition of restriction by the amendment of section could not affect the assessee s right of appeal from a decision in proceedings which commenced prior to such amendment and right of appeal was free from such restriction under s. 249(4) of the Act as it stood at the time of commencement of the proceedings. As the old law continues to exist for the purpose of supporting the pre- existing right of appeal that old law must govern the exercise and enforcement of that right of appeal and there can then be no question of the amended provision preventing the exercise of that right. At the outset it is seen that the quantum appeal has been set aside to the file of CIT(A) to decide whether the appeal is maintainable or not, in view of the facts and circumstances narrated in that case.


MAHAVIR SINGH, J.M. ORDER These three appeals by assessee are arising out of three different orders of CIT(A), Madurai, and pertain to asst. yrs. 1986-87 and 1987-88. 2 . ITA No. 452/Mad/1 99 3 is against assessment framed under s. 143(3) r/w s. 144 of IT Act, 1961. ITA No. 303/Mad/2000 is against penalty order under s. 271(1)(c) of Act, for concealment of income and ITA No. 246/Mad/1 99 3 is against assessment under s. 143(3) of Act. 3 . First we will deal with ITA No. 452/Mad/1 99 3. only issue in assessee s appeal is against dismissal of appeal by CIT(A) as "not maintainable", as admitted tax was not paid as per provisions of s. 249(4)(a) of IT Act, 1961. Before CIT(A), AO reported that assessee has not paid admitted tax on income before date of filing of appeal. assessee, in appeal memo, details of payment of tax are shown as follows: "Yes, no due. Rs. 500 paid under s. 140A." CIT(A) has seen from record that assessee has filed return o f income as unregistered firm showing income of Rs. 20,780 and admitted tax was more than Rs. 500. On these facts letter was sent to assessee to state whether it has paid full amount of admitted tax before filing of appeal or not. But no response was received from assessee by CIT(A). Accordingly he has not admitted appeal as assessee has not paid tax due on return income. CIT(A) has given his finding in para 4 which reads as under: "The appeal has been filed on 8th May, 1989, under s. 249(4)(a), no appeal shall be admitted unless at time of filing of appeal, assessee h s paid tax due on income returned. Upto 31st March, 1989, appellate authority had discretion to exempt appellant from operations of provisions of s. 249(4)(a) for good and sufficient reason to be recorded in writing and on application made by appellant. After 1st April, 1989, appellate authority has no discretion to exempt any appellant from operation of provisions of s. 249(4)(a). Since appeal has been filed on 8th May, 1989, I have to hold that appellant is covered by amended provisions. Even assuming that provisions prior to 1st April, 1989 are applicable, appellant has not filed any application requesting for exemption from operation of s. 249(4)(a). Thus, in either cases, I have to hold that appeal filed by appellant against assessment order for asst. yr. 1986-87 cannot be admitted in view of fact that appellant did not pay tax due on income returned at time of filing of appeal." 4 . Aggrieved assessee filed second appeal before Tribunal. Before us learned counsel of assessee, Smt. Chitra Venkataraman, senior advocate argued on behalf of assessee. On behalf of Revenue, Shri . Dhanaraj, Sh. Venkateshwaralu and Sh. Sunder Singh, learned Departmental Representatives argued. learned counsel of assessee Smt. Chitra Venkataraman argued that upto 31st March, 1989 as admitted by CIT(A), first appellate authority had discretion to exempt assessee from operations of provisions of s. 249(4)(a) of Act for good and sufficient reasons to be recorded in writing on application made by assessee. But after 1st April, 1989, appellate authority has no discretion to exempt assessee from operation of provisions of s. 249(4)(a) of Act. T h e learned counsel of assessee on this argued that relevant assessment year involved in this appeal is 1986-87 and appeal before CIT(A) was filed on 8th May, 1989 and in this case provisions of s. 249(4)(a) of Act, as was before amendment, will apply. learned counsel of assessee also gave details of tax payments which reads as under: "Details of tax payment 1. Admitted income of Rs.20,790 For Tax on admitted Rs. = Rs. 675.00 income: 20,700 For = Rs. 22.50 Rs. 90 = Rs. 697.50 Rs. (Rounding of to Total 20,790 Rs. 698) 2. Payment made along with = Rs. 500 return Payment made = Rs. 200 on 3-8-1 99 3 Total = Rs. 700 3. Payment to be made as per CIT(A) = Rs. 733 Order now (difference is by impugned reason of surcharge inclusion, which is not there in table enclosed 4. By abundant caution further = Rs. 200 payment paid on 27-2- 2000 In view of these facts she argued that difference of Rs. 33 to be paid is by reason of inclusion of surcharge, which is not there is table enclosed. She argued that this difference has arisen due tobona fidereasons that whether surcharge is applicable to present case or not. She further argued that it is admitted fact that assessee before filing of appeal has paid only sum of Rs. 700 and remaining Rs. 33 was not paid. But by abundant caution assessee has further paid sum of Rs. 200 on 27th Feb., 2000. Further she argued that in this case return of income was filed on 31st March, 1987 and notice under s. 143(2) of Act along with questionnaire was issued on or before 30th April, 1988. Even in assessment order it is mentioned that information was asked vide Income-tax Office letter dt. 13th July, 1988 to furnish details of creditors. This means that notice under s. 143(2) of Act was issued prior to 1st April, 1989, when amended provision will be made applicable to filing of appeals. On this aspect she relied on case law of Hon ble apex Court in case ofHoosein Kasam Dada (India) Ltd. vs. State of Madhya Pradesh & Ors. (1953) 4 STC 114 (SC). She further relied on case law of Hon ble apex Court in case ofVijay Prakash D. Mehta & Anr. vs. Collector of Customs (1988) 175 ITR 540 (SC)and Hon ble Kerala High Court in case ofCIT vs. Kerala Transport Co. (2000) 158 CTR (Ker) 551 : (2000) 242 ITR 263 (Ker). 5. On other hand learned Departmental Representative argued that no doubt relevant assessment year involved in appeal is 1986-87 but appeal in this case was filed on 8th May, 1989 to CIT(A) where it is admitted that admitted tax have been paid short by Rs. 33. issuance of notice under s. 143(2) of Act before 1st April, 1989 when amended provisions came into force have no consequence. Accordingly amended provisions of s. 249(4) of Act will apply to present case. He further argued that provisions of s. 249(4) of Act are mandatory and in order to get its appeal admitted by CIT(A), assessee must comply with mandatory requirement of provisions of main sub-s. (4) of s. 249. He further argued that as far as payment of tax due on return of income is concerned, wherever before expiry of period of limitation for filing of appeal or make application under proviso to s. 249(4) of Act for exemption from operation of provisions of cl. (b) of main sub-section (sic). Accordingly learned Departmental Representative argued that CIT(A) has rightly not admitted appeal as "not maintainable" in view of amended provisions of s. 249(4) of Act. 6 . We have heard both sides and gone through case records including provisions of Act and case laws cited by both sides. admitted and undisputed facts in this case are that relevant assessment year involved in this appeal is 1986-87 and return of income was filed on 31st involved in this appeal is 1986-87 and return of income was filed on 31st March, 1987 and notice under s. 143(2) of Act was issued much before amendment under s. 249(4) i.e. before 1st April, 1989. Even assessment was completed in this case on 30th March, 1989 and appeal before CIT(A) was filed on 8th May, 1989. It is also admitted fact that tax payable on returned income comes to Rs. 733. assessee has paid sum of Rs. 500 along with return of income and sum of Rs. 200 was paid after order of CIT(A) received on 3rd Aug., 1 99 3 and further sum of Rs. 200 was paid on 27th Feb., 2000. In view of these facts it is admitted position that assessee has not paid admitted tax before filing of appeal before CIT(A). CIT(A) has dismissed assessee s appeal in limine without admitting same as admitted tax was not paid by assessee. From above argument of learned counsel of assessee as well as learned Departmental Representative, now question remains whether amended provisions of s. 249(4) of Act will apply to present appeal or unamended provisions as they stood before amendment prior to 1st April, 1989 will apply. CIT(A) has held that assessee is covered by amended provisions and he argued that if provisions prior to 1st April, 1989 r e applicable, appellant has not filed any application requesting for exemption from operation of s. 249(4)(a) of Act. Even in case law cited by learned counsel of assessee of Hon ble Kerala High Court in case of Kerala Transport Company (supra) return of income for asst. yr. 1986-87 has been filed prior to 1st April, 1989 and notice under s. 143(2) of Act was issued prior to 1st April, 1989, it was decided by Hon ble Kerala High Court that appeal against assessment order for that year has to be maintained on basis of law as it stood prior to 1st April, 1989. Although such appeal has been preferred after that date i.e. 1st April, 1989, Hon ble Kerala High Court cited above has held as under : "Whether, on facts and in circumstances of case, (i) CIT(A) is right and within jurisdiction in entertaining appeal and also in deciding same on merits? (ii) and also in view of words at time of filing of appeal occurring in s. 249(4) of IT Act, Tribunal is right in law in holding that if appeal filed after 1st April, 1989, provision prior to 1st April, 1989, will apply? " same is subject-matter of adjudication in IT Ref. No. 174 of 1 99 7. As indicated above, learned counsel for assessee raised point about jurisdiction of Tribunal to pass such order in IT Ref. No. 111 of 1 99 8. But, we do not think it necessary to adjudicate that question. Coming back to reference filed by Revenue, it is to be noted that position under s. 249 before amendment and after amendment w.e.f. 1st April, 1989, is as follows: 249(4) No appeal under this chapter shall be admitted unless at time of filing of appeal, (a) where return has been filed by assessee, assessee has paid tax due on income returned by him; or (b) where no return has been filed by assessee, assessee has paid amount equal to amount of advance tax which was payable by him Prior to 1-4-1989 With effect from 1-4-1989 Provided that on Provided that, in case falling application made by under cl. (b): appellant Dy. CIT(A) or, as case may be, CIT(A) may for any good CIT(A) may, for any good and and sufficient reason to be sufficient reason to be recorded in recorded in writing exempt him writing, exempt him from operation of from operation of provisions of that clause. provisions of this sub-section. relevant question to decide applicability of provision is date on which lis for dispute arose. In case at hand, lis can be stated to have commenced latest by date when notice under s. 143(2) of Act was issued that is date prior to 1st April, 1989. InHoosein Kasam Dada (India) Ltd. vs. State of Madhya Pradesh (1953) 4 STC 114 (SC) : AIR 1953 SC 221, while considering similar position relating to change of law affecting right to appeal and requiring payment of tax admitted to be due as condition precedent for entertaining appeal, apex Court held that right of appeal is not merely matter of procedure. It is matter of substantive right. This right of appeal from decision of inferior Tribunal to superior Tribunal becomes vested in party when proceedings are first initiated in, and before decision is given, by inferior Court. pre-existing right of appeal is not destroyed by amendment if amendment is not made retrospective by express words or necessary intendment. fact that pre-existing right of appeal continues to exist must, in its turn, necessarily imply that old law which created that right of appeal must also exist to support continuation of that right. As old law continues to exist for purpose of supporting pre-existing right of appeal that old law must govern exercise and enforcement of that right of appeal and there can then be no question of amended provision preventing exercise of that right. provision which is calculated to deprive assessee of unfettered right of appeal cannot be regarded as mere alteration in procedure. For purposes of accrual of right of appeal critical and relevant date is date of initiation of proceedings and not decision itself. At this juncture, it is also necessary to take note of another decision of apex Court in Ramesh Singh vs. Cinta Devi AIR 1 99 6 SC 1560 : (1 99 6) 3 SCC 142 relating to maintainability of appeal vis-a-vis prescription mandating deposit of requisite amount as condition precedent for entertaining appeal. Following decision in Hoosein Kasam Dada (India) Ltd. vs. State of Madhya Pradesh (1953) 4 STC 114 (SC) : AIR 1953 SC 221, State of Bombay vs. Supreme General Films Exchange Ltd. AIR 1960 SC 980 and Vithalbhai Naranbhai Patel vs. CST (1961) 12 STC 219 : AIR 1967 SC 344, it was observed that unless new provision expressly or by necessary implication makes provision retrospective in character, right to appeal which is already crystallized will not be affected. This position was illuminatingly stated in Kirpa Singh vs. Rasalldar Ajaipal Singh AIR 1928 Lah 627 (FB). vested right of appeal can be taken away by subsequent enactment, if it so provides expressly or by necessary implication, as was observed by apex Court in Garikapati Veeraya vs. N. Subbiah Chowdhry AIR 1957 SC 540. appeal is continuation of assessment proceedings. right of appeal is substantive right which gets crystallised when assessment proceedings are initiated. right of appeal is substantive right conferred on party by statute. conferring of right of appeal is not circumscribed by right being available at time of institution of cause in Court of first instance. right of appeal in given case may already be available at institution of cause in Court of first instance or may even be subsequently conferred. In either situation, without any distinction such right is conferred by statute (see Special Military Estates Officer vs. Munivenkataramiah AIR 1 99SC 449 : (1 99 ) 2 SCC 168." 7 . As facts before us are exactly identical to case law of Hon ble Kerala High Court referred and cited above, we can draw strength from Hon ble Kerala High Court s decision. Further Hon ble apex Court in case of Hoosein Kasam Dada (India) Ltd. vs. State of Madhya Pradesh (supra) held that imposition of restriction by amendment of section could not affect assessee s right of appeal from decision in proceedings which commenced prior to such amendment and right of appeal was free from such restriction under s. 249(4) of Act as it stood at time of commencement of proceedings. Consequently assessee s appeal should not have been rejected on ground that it was not accompanied by satisfactory proof of payment of assessed tax. As assessee did not admit that any amount was due by it, it was entitled to file its appeal when deposition (sic) any sum of money. new requirement in proviso to s. 22(1) of Sales-tax Act could not be said merely to regulate exercise of assessee s pre-existing right but no truth whittles down. right itself could not be regarded as mere rule of procedure. Hon ble apex Court has finally held as under: "In our view above observation is apposite and applies to case before us. true implication of above observation as of decisions in other cases referred to above is that pre-existing right of appeal is not destroyed by amendment if amendment is not made retrospective by express words or necessary intendment. fact that pre-existing right of appeal continues to exist must, in its turn, necessarily imply that old law which created that right of appeal must also exist to support continuation of which created that right of appeal must also exist to support continuation of that right. As old law continues to exist for purpose of supporting pre- existing right of appeal that old law must govern exercise and enforcement of that right of appeal and there can then be no question of amended provision preventing exercise of that right. argument that authority has no option or jurisdiction to admit appeal unless it be is accompanied by deposit of assessed tax as required by amended proviso to s. 22(1) of Act overlooks fact of existence of old law for purpose of supporting pre-existing right and really amounts to begging question. new proviso is wholly inapplicable in such situation and jurisdiction of authority has to be exercised under old law which so continues to exist. argument of Sri Ganapathy Aiyar on this point, therefore, cannot be accepted. learned advocate urges that requirement as to deposit of amount of assessed tax does not affect right of appeal itself which still remains intact, but only introduces new matter of procedure. He contends that this case is quite different from case of Sardar Ali vs. Dalimuddin (1929) ILR 56 Cal 512 for in this case it is entirely in power of appellant to deposit tax if he chooses to do so whereas it was not within power of appellant in that case to secure certificate from learned Single Judge who disposed of second appeal. In first place onerous condition may in given case prevent exercise of right of appeal, for assessee may not be in position to find necessary money in time. Further this argument cannot prevail in view of decision of Calcutta High Court in Nagendra Nath Bose vs. Mon Mohan Singha (1930) 34 CWN 1009. No cogent argument has been adduced before us to show that that decision is not correct. There can be no doubt that new requirement "touches" substantive right of appeal vested in appellant. Nor can it be overlooked that such requirement is calculated to interfere with or fetter, if not to impair or imperil, substantive right. right that amended section gives is certainly less than right which was available before. provision which is calculated to deprive appellant of unfettered right of appeal cannot be regarded as mere alteration in procedure. Indeed new requirement cannot be said merely to regulate exercise of appellant s pre-existing right but in truth whittles down right itself and cannot be regarded as mere rule of procedure. Finally, Sri Ganapathy Aiyar faintly urges that until actual assessment there can be no "lis" and therefore, no right of appeal can accrue before that event. There are two answers to this plea. Whenever there is proposition by one party and opposition to that proposition by another "lis" arises. It may be conceded, though not deciding it, that when assessee files his return "lis" may not immediately arise, for under s. 11(1) authority may accept return as correct and complete. But if authority is not satisfied as to correctness of return and calls for evidence, surely controversy arises involving proposition by assessee and opposition by State. circumstance that authority who raises dispute is himself Judge can make no difference, for authority raises dispute in interest of State and in so acting only represents State. It will appear from dates given above that in this case "lis" in sense explained above arose before date of amendment of section. Further, even if "lis" is to be taken as arising only on date of assessment, there was possibility of such "lis" arising as soon as proceedings started with filing of return or, at any rate, when authority called for evidence and started hearing and right of appeal must be taken to have been in existence even at those dates. For purposes of accrual of right of appeal critical and relevant date is date of initiation of proceedings and not decision itself. For all reasons given above we are of opinion that appellant s appeal should not have been rejected on ground that it was not accompanied by satisfactory proof of payment of assessed tax. As appellant did not admit that any amount was due by it, it was under section as it stood previously entitled to file its appeal without depositing any sum of money. We, therefore, allow this appeal and direct that appeal be admitted by CIT and be decided in accordance with law. appellant is entitled to costs of this appeal and we order accordingly." 8. From above case laws of Hon ble apex Court and of Hon ble Kerala High Court, it may be concluded that though not deciding it, but when assessee files his return, "lis" may not immediately arise but it can be presumed that under s. 143(1) of Act, assessing authority may accept return as correct and complete. If authority is not satisfied as to correctness of return and selects case by issuing notice under s. 143(2) of Act and make assessment under s. 143(3) then there is every possibility of controversy arising involving proposition by assessee and opposition by Department. For purpose of accrual of right of appeal critical and relevant date, is date of assessment proceedings, i.e., date of issue of notice under s. 143(2) of Act. In present case notice under s. 143(2) of Act was issued much before amended section came into force on 1st April, 1989. When "lis" commenced, all rights came into action and no bar on likely appeal can be put, unless change in law is made retrospectively by express or clear implication. In present case in hand amended provisions under s. 249(4) of Act were amended w.e.f. 1st April, 1989 and these are not retrospective at all. To sum up, it can be easily said, that right of appeal being substantive right, institution of suit carries with it implication with all successive operations available under law then force would be preserved to parties (to) suit throughout rest of career of suit. To this proposition only two exceptions will apply i.e. (i) by virtue of this statute such right of appeal is taken away retrospectively by expressly or impliedly, and, (ii) to appropriate remedy is abolished. 9. In view of above discussion and going through facts of case and authorities of Hon ble apex Court as well as of Hon ble Kerala High Court cited above, we are of view that pre-amended provisions of s. 249(4) of Act prior to 1st April, 1989 will apply to appeal before CIT(A). Further, from facts of above case it seems that assessee has paid sum of Rs. 500 along with return of income as admitted tax whereas admitted tax as per computation by CIT(A) is Rs. 733 and this difference is by reason of inclusion of surcharge, which is not there in table enclosed. sum of Rs. 200 was paid on 3rd Aug., 1 99 3 thereby total payment made was Rs. 700 and assessee further paid sum of Rs. 200 on 27th Feb., 2000 by abundant caution. Accordingly we fairly feel that there seems no mala fide intention on part of assessee not to pay up this undisputed tax of Rs. 233 before appeal filed by assessee to CIT(A). Accordingly CIT(A) is directed to go into relevant material and find out whether there exists good and sufficient reason for non-payment and accordingly decide issue after taking material from assessee and giving reasonable opportunity of being heard. Further, if CIT(A) admits appeal then he will decide issue on merits. Accordingly this appeal is set aside to file of CIT(A). In result, assessee s appeal is allowed for statistical purposes. 10. Now we will take up ITA No. 303/Mad/2000. This appeal pertains to penalty levied by AO and confirmed by CIT(A) vide its order dt. 15th Oct., 1 99 9. At outset it is seen that quantum appeal has been set aside to file of CIT(A) to decide whether appeal is maintainable or not, in view of facts and circumstances narrated in that case. This being penalty appeal, under s. 271(1)(c) of Act for concealment of income, we fairly feel that this should also be set aside to file of AO and he will decide this penalty after quantum appeal is decided by CIT(A). AO will give reasonable opportunity of being heard to assessee before deciding this penalty. In result this appeal of assessee is allowed for statistical purposes. 11. Now coming to ITA No. 246/Mad/1 99 3, it is seen that first issue raised by assessee in ground No. 3 is that CIT(A) erred in passing order ex parte, and ought to have given further opportunity to appellant. At outset it is seen from order of CIT(A) vide para 2 which reads as under : "The appeal was posted for hearing on 20th Oct., 1 99 2 when Shri B. Rajadurai, CA appeared and requested for adjournment. It is seen from records that during year 1 99 2 this appeal was posted for hearing on six occasions. Prior to that it was posted for hearing on four occasions. Invariably on every occasion appellant was asking for adjournment. It should also be noted that when appeal was posted for hearing on 6th Oct., 1 99 2, Shri Rajadurai asked for adjournment on ground that appellant-firm had handed over papers to him in connection with appeal and requested for adjournment. Accordingly, it was adjourned to 20th Oct., 1 99 2. Even now Shri Rajadurai requests for further adjournment. I have informed him that since sufficient opportunities have already been granted, no further adjournment can be granted. Accordingly I proceed to dispose of appeal on merits." 12. From above it is clear that appeal was posted in month of October, 1 99 2 i.e. on 6th Oct., 1 99 2 and last opportunity was provided on 20th Oct., 1 99 2 and on 20th Oct., 1 99 2 assessee s counsel Shri Rajadurai, CA requested for further adjournment. CIT(A) rejected adjournment request by giving reason that sufficient opportunities have already been granted. Hence no further adjournments can be granted and he proposed to decide appeal on merits. We have seen that number of opportunities have been provided by CIT(A) to assessee which are dt. 6th Oct., 1 99 2 and 20th Oct., 1 99 2 and order was passed on 19th Nov., 1 99 2 by CIT(A). We are of considered view that assessee has not been provided proper opportunity of being heard by CIT(A) as it is clear from abovementioned facts. We fairly feel that assessee should be heard reasonably before deciding appeal ex parte. Accordingly this appeal is set aside to file of CIT(A) to give reasonable opportunity of being heard to assessee and decide issue on merits. Accordingly this appeal is allowed for statistical purposes. 1 3 . In result, these three appeals of assessee are allowed for statistical purposes. *** MAGUDAPATHY PICTURES v. ASSISTANT COMMISSIONER OF INCOME TAX
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