9911796707
TMI Blog2017 (3) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions that the exceptional losses, per se, would not turn the same to be a bogus or artificially hiked loss. The tax authorities should have probed the matter further by making enquiries from the concerned seller 33,15,000/- in relation to the transactions entered with M.J. Patel, we are of the view that a partial disallowance out of the above said loss would settle this dispute, since there are deficiencies on both sides. Accordingly, we direct the AO to restrict the disallowance of the above said item to 20% of 33,15,000/- to take care of deficiencies, if any, and in our view the same would meet the ends of justice. Disallowance of net loss incurred in ready forward transactions - Held that:- The assessee has offered general explanations with regard to these transactions. In that case, the tax authorities could have examined the net loss vis-à-vis normal interest expenditure. These kind of examination has not been carried out by the tax authorities in order to find out as to whether the loss vis-à-vis is excessive or unreasonable. We further notice that the assessing officer has not conducted any enquiry with the concerned parties.We also notice that the rate of interest given i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of loss arising in the security transactions entered with Oswal Agro Ltd. - Held that:- Out of the aggregate amount of about 90 crores, the assessee submits that he has received about 72 crores by way of securities, wherein there is no question of diversion. In respect of remaining funds also, the same has been received through the bank account of the assessee and, in the absence of specific finding about diversion, it would get mixed up with the business funds and accordingly it should be presumed that the same has been used for the purposes of business of the assessee. In that view of the matter, the excess payment of 12,56,943/- would partake the character of interest only, which the assessee is entitled to claim. The assessee has also pointed out that he has made a profit of 12,56,943/- in respect of securities transactions entered with M/s Oswal Agro. In view of the above, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance. Disallowance of loss arising in the security transaction entered with Ganesh Book Binding Works - Held that:- Admittedly, the assessee could not prove the genuineness of the transactions entered with Gane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the end of the month. Hence, even though the transactions appear to have been entered on the last day of month, the fact remains that they would have been entered on different days in that month. Further, it was not shown by AO that these transactions are not regular business transactions, i.e., it was extra ordinary one. Accordingly we are of the view that there is no justification in making addition of remaining amount of loss Addition of difference in closing stock - Held that:- The fact that the second stock statement is “not dated” has been accepted by the AO. He has given importance to the same only for the reason that some of the shares mentioned therein tallied with the original stock statement. However, no step was taken by the AO to ascertain as to whether the extra shares noted in the second list were, in fact, purchased by the assessee. The AO could have ascertained the same from the Securities register available with him. Since the second statement was not dated, the AO has presumed the same to be of 31.3.1990 without any basis. Accordingly the impugned addition has also been made on surmises and conjectures. Accordingly, we find no merit in this addition Disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gamut of whole transactions. Hence, we are of the view that there is no reason to suspect these transactions, merely on the reasoning that the assessee has incurred loss in these transactions. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. X X X X Extracts X X X X X X X X Extracts X X X X ..... of this order also. 6. During this year, the assessing officer directed for a Special audit u/s 142(2A) of the Act. Hence this year's assessment is based on certain observations made by the special auditors. The Special auditors reported that they are not able to express any opinion on the accounts as under:- "In view of our observations in the attached schedule-I and Annexures, we are unable to express our opinion whether the said accounts give a true and fair view:- (i) In the case of Balance sheet, of the state of the above named assessee's affairs as at 31st March, 1990. (ii) In the case of Profit and loss accounts, of the profit of the above named assessee for the accounting year ending 31st March 1990." According to the special auditors, the assessee has not maintained certain subsidiary books and further certain types of transactions recorded in the books of accounts are not properly verifiable. The auditors also listed out instances of exceptional losses, exceptional profits, exceptional difference of rate, transactions effected through journal entries etc. Accordingly, the special auditors have declined to express any opinion on the financial statements of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special auditors had given a list of transactions in Annexure-1 of audit report, wherein the assessee had incurred substantial losses. For example, in a transaction of ₹ 10.00 crores, the assessee had incurred loss of ₹ 16,38,849/-. Further it was noticed that in all these transactions, the broker involved therein was also involved in security scam. Since the supporting vouchers were inadequate, the special auditors had reported that the authenticity of these transactions were not verifiable. The aggregate amount of exceptional losses was reported to be ₹ 1,20,36,929/-. Since the assessee did not furnish replies to each of the exceptional transactions, the AO disallowed the above said amount in the original proceedings. 9. In the set aside proceedings, the assessee submitted that this addition was made by the AO on the ground that the genuineness of losses was unverifiable. In order to arrive at this decision, the AO had placed reliance on the report given by Special Auditors. The assessee submitted that the auditors have not doubted the genuineness of the transactions, but have only reported exceptional transactions. The assessee further submitted that those exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions and in their opinion, these losses were exceptional. The parameters followed by the auditors to identify exceptional nature of transactions were:- (a) The prevailing rates on the date of transactions are not available. (b) Apparently the losses/profits are either too low or above moderate or too high. (c) Generally one side of transaction (i.e. seller or buyer) is always a broker with whom the assessee has traded heavily during the course of the year. With regard to the above said observations, the Ld A.R made following submissions:- (a) Though the Government securities were quoted on stock exchanges, but hardly there were any transaction on the floor of exchange. Hence there was no system for ascertaining prevailing rates and the rates were decided between the parties on the basis of yield of securities and the maturity period at the time of entering the transactions. (b) All the transactions have been entered at arm length and through banking channels, wherein the ultimate parties were banks and financial institutions. Hence the losses/profits arose during the course of normal business transactions. (c) The banks and financial institutions have employed brokers for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was corresponding receipt and issue of securities. In the absence of contract vouchers/details of securities, the loss shown by the assessee cannot be accepted by the tax authorities. 16. We notice that the AO has placed reliance fully on the observations made by the auditors for making this disallowance. The Ld CIT(A) has expressed the view that the third party confirmations were not available to prove the losses and hence he has confirmed the addition. It is a fact that the assessee could not produce third party confirmations as well as contract notes to substantiate the claim of exceptional losses in the securities transactions. However, the assessee has also pointed that he has made profits in such type of transactions and the said fact has not been denied by the tax authorities. In fact, they have accepted the profits so declared by him. The assessee has also expressed his handicap in explaining these transactions, viz., seizure of records by CBI as well as Income tax department, resignation of main staff etc. Even though the assessee could not furnish supporting vouchers, the fact remained that the transactions have been carried through banking channels only. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of securities, the assessee quotes different rate to seller and purchaser and the difference is being taken as income/expenditure. For example, if Central Bank of India wants to sell a security having a par value of ₹ 100/-. The assessee may quote ₹ 100.05 to the seller and he may quote ₹ 100.10 to the buyer. If both the deals are struck, then the assessee would earn DOR of Re.0.05. This amount is initially credited to the Securities Account and at the year end; the same is transferred to the Profit and Loss account as DOR from the Securities Account. The Special auditors reported certain transactions, wherein the assessee had incurred exceptional losses. In the first round of proceedings, the AO disallowed entire loss of ₹ 34,80,607/- reported by Special auditors as exceptional cases. Even though the assessee had cited instances, wherein he had made exceptional profits also, yet the AO disallowed the losses for the reason that the assessee has failed to offer any convincing explanation. In the set aside proceedings, the assessee gave some more instances, where exceptional profits had been made. He also pleaded that the special auditors report should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny material on record to show that the prices at which the securities were purchased and sold were not market rates. We have noticed that the assessee was in the habit of entering into the buying and selling the securities by taking risks. In such kind of business transactions, the possibility of making exceptional losses/profits could not be ruled out. Hence we find merit in the submissions that the exceptional losses, per se, would not turn the same to be a bogus or artificially hiked loss. The tax authorities should have probed the matter further by making enquiries from the concerned seller & buyer, about prevailing market rates etc., and then they should have come to a conclusion. It is pertinent to note that the Special auditors have only reported the same as Exceptional cases, but they have not branded the same as bogus. Hence, in our view, this claim has been disallowed by the tax authorities only on surmises and not based upon any credible evidence. Accordingly we do not find any justification in disallowing this claim. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. 24. The next addition contested by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account and security register/vouchers and submitted that the tax authorities have disallowed the claim without properly appreciating the factual matrix. He submitted that the tax authorities have not appreciated the fact that most of the transactions were not carried out on the same date as pointed out by the Auditors. He submitted that, as per the accounting procedure followed, the transactions might have been entered upon different dates but all the transactions are entered in the securities ledger at the end of the month. With regard to the loss incurred in respect of M.J. Patel's transactions, the Ld A.R submitted that he has confirmed the transactions and hence the tax authorities are not justified in rejecting the same. He submitted that these transactions have been entered into by the assessee in the normal course of business operations. 27. On the contrary, the Ld D.R submitted that the assessee could not substantiate the claim of loss with proper supporting evidences. He submitted that the security vouchers prepared by the assessee are self serving documents and hence the assessee should have obtained confirmations from ultimate buyers/sellers. 28. We have heard the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n May, 1989. Even though the assessee cannot have control over the transactions carried on by Shri M.J. Patel, the fact that the customers of Shri M.J. Patel are not traceable and the belated payments, in our view, casts shadow of doubt on the transactions entered between the assessee and Shri M.J. Patel. At the same, the undisputed fact remains that the payments have been made through banking channels and further they have been backed by the security vouchers issued by the assessee. In our view, these evidences could not be altogether brushed aside. In these set of facts, we are of the view that the entire loss claimed by the assessee also should not have been disallowed. 30. Accordingly, we are of the view that the transactions claimed to have been made on different dates have to be accepted, since the said claim has not been disproved by the tax authorities. Accordingly, out of the addition of ₹ 43,82,480/-, the losses pertaining to transactions noted down in Sr. no.5, 12 and 13 are directed to be deleted. In the first round of proceedings, the assessee had also claimed that the transactions noted in Sl.No.11 have also been entered on different dates, but the said claim w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) confirmed the same by following his decision rendered in the original round of proceedings. 33. We heard the parties on this issue. We notice that the main contention of the assessee is that these transactions of purchase and sale were aimed in getting/giving loans. The difference in purchase and sale rate actually represented interest element. We notice both the tax authorities have failed to examine this claim with the relevant transactions before rejecting this explanation of the assessee. 34. The assessee has furnished the details of these transactions at page 483 of the paper book. The said statement is the Annexure 4 referred to in the original assessment order and the same has been prepared by the Special auditors. However, the Annexure 4 appears to be incomplete one. A perusal of the same shows that the assessee has transacted with Bank of America, Excel Co., Oswal Agro, State Bank of Hyderabad, BMC Bank etc. According to the assessee, these transactions are one leg of transactions and other leg of transactions were not considered by the tax authorities. According to the assessee, he could not also explain about the other side of transactions in the absence of secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined that the above said amount of ₹ 15.30 crores has been received from Andhra Bank from a Current account belonging to Hiten Dalal. The amount of ₹ 15.47 crores have been paid from the bank account of the assessee with the instruction to remit the same to the account of M/s Maruti Udyog Ltd. 38. The assessee submitted that he had carried the transaction with M/s Jayantilal Khandwala (Broker of Maruti Udyog Ltd) and also with M/s Hiten Dalal. Originally the security was purchased from Hiten Dalal and sold to Maruti Udyog Ltd through Jayantilal Khandwala. It was a funding transaction and the deal was for 60 days. However, Hiten Dalal foreclosed it within in 30 days and paid the money to the assessee. After 60 days, the assessee returned the money to Jayantilal Khandwala, i.e., by direct remittance to Maruti Udyog Ltd. In the accounts of the assessee, the ledger account was opened in the name of Maruti Udyog Ltd instead of Jayantilal Khandwala. The above said explanation was not acceptable to the AO and hence he disallowed the loss of ₹ 16,95,247/- in the original assessment proceedings. 39. In the set aside proceedings, the assessee submitted the letter of confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of entries made by Jayantilal Khandwala, since he has shown receipt of ₹ 15.23 crores only on 10.7.1989. 43. When the assessee is returning a sum of ₹ 15.47 crores, why M/s Jayantilal Khandwala should credit the account of the assessee with ₹ 15.23 crores. This confusion stands un-clarified till date. 44. Be that as it may, the assessing officer's enquiry made with Bank of Karad shows (clause (d) in page 48 of the assessment order) that the amount of ₹ 15.47 crores was paid to Bank of America with instructions to remit the same to the account of Maruti Udyog Ltd. This fact, which was ascertained by the assessing officer himself, shows that there may be merit in the submissions made by the assessee. According to the assessee, he was facing much difficulty in offering proper explanations during the course of original assessment proceedings, since all the books were seized by CBI and Income tax department. The set aside proceedings were completed after expiry of 16 years from the end of the accounting year and it would be difficult to obtain relevant details from anybody. Accordingly, it appears that the assessee has offered explanations with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special auditors have listed some instances, where the assessee appears to have paid interest at high rates. Since the assessee did not offer proper explanations, the AO disallowed the claim of ₹ 1,48,92,400/- as excessive interest payment in the original assessment proceedings. In the set aside proceedings, the AO repeated the same addition. The Ld CIT(A) gave a relief of ₹ 38,46,750/- (relating double entry of same item) and accordingly restricted the addition to ₹ 1,10,45,650/-. 48. We have heard the parties on this issue. This addition has been made by the AO mainly on the reasoning that the rate of interest works out to a higher figure and the assessee has not shown as to how he received corresponding interest from securities. The AO has relied upon the special auditor's report in this regard. A perusal of Annexure 6 attached to the original assessment order would show that the Special Auditor has listed out the payments, where he did not receive proper explanation, i.e., the special auditor has not stated that the assessee has paid interest at high rate of interest. 49. The payment of interest at excessive rate is relevant under the Income tax Act only if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue relates to the addition of Negative balance of securities. As in earlier years, the assessing officer prepared quantity details of purchase and sale of securities on the basis of entries made in the Securities Ledger. His working revealed that the assessee has sold the shares without having stock of the same. Hence the AO interpretated that the negative stock represents income of the assessee. The assessee explained the modalities of the trade and the accounting practice followed by him, i.e., the entries for purchase and sale of securities are made on cash basis, Conversion of physical shares into SGL, SGL shares into physical shares, splitting up of shares, consolidation of shares etc., and submitted that all these activities might have resulted in a confusion. The assessee also pointed out that there were punching errors in the statement prepared by the AO. However, the AO took the view that the explanations given by the assessee are not satisfactory in respect of negative balance of various securities listed in page 57 to 60 of the assessment order, which aggregated to ₹ 75,69,07,150/-, The AO, in the original proceedings, added the same as income of the assessee. 53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same was repurchased on 31.7.1989 and hence there is no negative balance in this item also. In respect of other items also, the assessee has reconciled and offered proper explanations, which are placed in page 552 to 705 of the paper book. Accordingly the Ld A.R contended that the AO has made this addition without examining the explanations of the assessee. On the contrary, the Ld D.R placed strong reliance on the orders passed by the tax authorities. 55. From the paper book furnished by the assessee, we notice that the assessee has offered explanations with regard to the 35 items listed out by the AO in the original assessment proceedings. The explanations are available at pages 552 to 705 of the paper book. As submitted by the ld A.R, these explanations have not been examined at all by the AO. A perusal of the explanations would show that the assessee has given the details of transactions in respect of each of the security and also attached the relevant security vouchers. The details show that the sale is covered by the subsequent purchases. The assessee has also pointed out mistakes committed in his books of account and also furnished the details of rectification carried ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the funds received were used by him. Accordingly he took the view that the interest claim of ₹ 12,56,943/- was not allowable and accordingly disallowed the same in the original assessment proceedings. 58. In the set aside proceedings, the assessee explained that all the transactions were routed through the banks and the funds given by Oswal Agro was used by the assessee for his business purposes only. The AO considered the same as vague reply and accordingly disallowed the above said interest claim in the set aside proceedings also. The Ld CIT(A) also confirmed the addition. 59. We heard the parties on this issue and perused the record. The main contention of the assessee is that out of funds of 90 crores received, about ₹ 72 crores were received in the form of securities, in which the question of diversion of funds does not arise. He further submitted that the assessee has received remaining amounts through banking channels and it was used for the purposes of business only. The Ld A.R further submitted that the assessing officer has not pointed out as to how the funds were diverted by the assessee. Accordingly he submitted that the Ld CIT(A) was not justified in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus. Accordingly he disallowed the claim of ₹ 7,85,500/- in the set aside proceedings also. The Ld CIT(A) also confirmed the addition. 64. We heard the parties on this issue. Admittedly, the assessee could not prove the genuineness of the transactions entered with Ganesh Book Binding Works. Since the assessee has asked for cross examination of the witness after expiry of 14 years, it may not be feasible for the assessing officer to provide the same after expiry of such a long period. However, the fact remains that the assessee could not substantiate the transactions entered with Ganesh Book binding works. On the contrary, the AO has proved that the said transactions are not genuine. Hence we are of the view that the Ld CIT(A) was justified in confirming this addition. 65. The next issue relates to the claim of loss in trading in shares, which was debited to the Brokerage Account. The auditors had reported certain transactions entered by the assessee with his clients, which resulted in a loss of ₹ 3,75,000/- in the account of B.C. Dalal share trading account. The auditors also reported that the assessee has accounted debit and credit entries with the same party on 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout even examining the same. The contention of the assessee is that both profit and loss arising in share trading were also accounted in brokerage account only. Since there is no material to contradict explanations given by the assessee, we are of the view that there is no justification in rejecting the same. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance. 69. The next addition relates to the disallowance of loss booked in BCD Share trading Account. The AO collected ledger account copies from some of the brokers with whom the assessee had made share trading. Comparison of the same with the books of account revealed that the opening and closing balances did not tally. The assessee submitted that he has maintained books of account on Cash basis, while other brokers might have maintained under mercantile system as per Settlement basis. Further, the AO noticed that the assessee has booked losses in eight transactions aggregating to ₹ 42,42,350/-. The assessee submitted that a sum of ₹ 34,54,000/- out of the above transactions are in the nature of reimbursement of dividend income to the following partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quires verification, we restore this issue to the file of the AO with the direction to examine this issue in the light of discussions made supra. The order of Ld CIT(A) stands modified accordingly. 72. In respect of remaining items, the assessee has submitted that they are not same day transactions as presumed by the tax authorities. It has been further submitted that the remaining items include a sum of ₹ 2,00,450/- pertaining to Hosein Investment, which has already been disallowed while making addition of ₹ 3,75,000/-. The assessee has also contended that these losses were incurred in the normal course of carrying on the business. 73. The Ld D.R, on the contrary, placed reliance on the orders of tax authorities. Having heard rival submissions, we are of the view that there is merit in the submissions made by the assessee. We have noticed earlier while disposing the appeals of the assessee for earlier years that the Patawat Sheets is only summary of transactions entered during the month and the same were prepared at the end of the month. Hence, even though the transactions appear to have been entered on the last day of month, the fact remains that they would have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Ld CIT(A) on this issue and direct the AO to delete this addition. 76. The next item of addition relates to the disallowance of loss on sale of shares to CIFCO Ltd. The AO noticed that the assessee has purchased shares of HCL Ltd from CIFCO Limited and also sold them at a price lower than the purchase price to CIFCO. These kind of purchase and sale of shares have been undertaken on three occasions. The aggregate amount of loss incurred in these transactions was ₹ 1,61,950/-. Since CIFCO Ltd was a sister concern and since the assessee did not maintain adequate records to support these transactions, the AO disallowed the claim in the original as well as in the set aside assessment. The Ld CIT(A) also confirmed the same. 77. We heard the parties on this issue. The Ld A.R submitted that the profit of ₹ 1,61,950/- earned by the sister concern CIFCO Ltd has been accepted in its hands. He further submitted that the assessee could not produce evidences, since the records were in disarray due to raids by CBI and Income tax department. He submitted that these transactions were entered into in the normal course of business and hence the disallowance of loss should be deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89. Accordingly he gave relief of ₹ 2,50,000/- and confirmed the addition to the extent of ₹ 5,00,000/-. 81. The Ld A.R reiterated the contentions made before the AO and the Ld D.R submitted that the Ld CIT(A) has analysed the issue in a proper perspective. 82. We have heard the parties on this issue and perused the record. We notice the assessee has made withdrawals in the month of November & December, 1989 and made the deposits in February & March, 1990. Thus there is a gap of about three months between the date of withdrawals and deposits. Hence the tax authorities have refused to accept the withdrawals as the source of deposits. However, it is not clear as to whether the assessee has spent away all the withdrawals. In respect of deposit of ₹ 50,000/- made on 11.07.1989, there was no prior withdrawals and hence the same should be considered as unexplained deposit. With regard to the withdrawals aggregating to ₹ 5,00,000/- made between 15.11.1989 to 14.12.1989, we are of the view that the assessee may be given credit of 50% of the same, since the claims of both the parties are not supported by the any evidence. Accordingly, we are of the view that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties had purchased shares of M/s Baroda Rayon Ltd from the assessee:- (a) Random House Investment and Trading Co. Pvt Ltd (b) Navdha Investments and Trading Co. P Ltd The assessee, however, did not deliver the shares and it was carried forward from one Settlement period to another Settlement period. Finally, when the transaction was closed, the assessee booked loss of ₹ 4,19,200/- in respect of transaction with M/s Random House and loss of ₹ 3,86,450/- in respect of transaction with M/s Navdha Investment. The AO doubted the genuineness of these transactions and accordingly disallowed the same in the original assessment proceedings. 87. In the set aside proceedings, the assessee explained the same to be in the nature of funding transactions and the loss incurred actually represents interest payments. He further submitted that the assessee has carried out all these transactions through banking channels and there are cases, where he has made profits also in the funding transactions. The assessee further submitted that these transactions have been entered in the normal course of carrying the business and accordingly contended that there is no reason to disallow the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. The assessee had made profit of ₹ 88,98,250/- in respect of transactions of trading in shares with M/s Champaklal Devidas, the proprietary concern of Shri J.P.Gandhi. However, the assessee had declared overall profit of ₹ 11,99,386/- only in respect of trading in share transactions. Hence the AO took the view that the assessee might not have declared the above said profit and accordingly made the addition in the first round of proceedings. Before the Ld CIT(A), in the first round of proceedings, the assessee submitted that the transactions entered with Shri J.P.Gandhi has already been included in his books of account and no separate addition is called for. The Ld CIT(A) noticed that the AO did not intend to make any addition, even though he has discussed about these transactions and those discussions were intended to substantiate the disallowances of losses only. The Ld CIT(A) also observed that the above said position was also accepted by the AO during the course of hearing of the appeal. Accordingly the Ld CIT(A) deleted the above said addition in the first round of proceedings. 91. In the set aside proceedings, the AO again made the addition and the Ld CIT(A) del ..... X X X X Extracts X X X X X X X X Extracts X X X X
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