ITAT Mumbai Clears Preity Zinta of Rs. 10.84 Crore Unexplained Cash Credit Charge

Tribunal Finds Transactions Genuine, Deletes Addition by Assessing Officer

In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Mumbai Bench "I" has set aside the addition of Rs. 10.84 crore made by the Assessing Officer against Bollywood actress Preity G Zinta. The tribunal, comprising Vice President Shri Saktijit Dey and Accountant Member Shri Girish Agrawal, found that the transactions under scrutiny were genuine and not unaccounted income, as alleged by the Income Tax Department.

The case, registered under ITA No. 4199/MUM of 2025, involved the assessment year 2016-17. The Income Tax Officer had reopened Zinta's case under Section 147 of the Income Tax Act, 1961, after noticing substantial credit and debit transactions in her bank account that did not align with her reported income. This led to an addition of Rs. 10.84 crore as unexplained cash credits under Section 68 of the Act.

Preity Zinta's legal team, represented by Advocates Shri Dharan Gandhi and Ms. Vinita Nara, argued that the transactions were legitimate. Zinta had taken loans from entities associated with a third party, Mr. Danish Merchant, and had repaid these loans through the sale of her residential flat at Quantum Park, Mumbai. The tribunal noted that the transactions resulted in a transfer of liability without any benefit to Zinta.

The ITAT meticulously examined the transactions, which were routed through entities like Ace Links and Ace Light Hospitality Ventures Pvt. Ltd., both linked to Mr. Merchant. The tribunal found that these transactions were adequately documented with the parties' identity, creditworthiness, and transaction genuineness being clearly established. The court also addressed the potential violations under Sections 184 and 185 of the Companies Act, 2013, ruling that the partnership firm structure adhered to statutory requirements.

The tribunal's decision underscored that the reassessment proceedings had become academic following the deletion of the addition on merits. This judgment is a significant relief for Zinta, as it absolves her of the substantial tax liability imposed by the Assessing Officer.

Bottom Line:

Income Tax - Unexplained cash credits under Section 68 of the Income Tax Act, 1961 - Loan transactions routed through entities of a third party scrutinized - Proper documentation and evidence provided by the assessee including identity, creditworthiness of parties, and genuineness of transactions - Addition of Rs. 10,84,27,700/- by Assessing Officer deleted by the Tribunal as transactions were substantiated and merely resulted in liability transfer without any benefit to the assessee.

Statutory provision(s): Section 68 of the Income Tax Act, 1961, Sections 184 and 185 of the Companies Act, 2013, Section 147, 148 of the Income Tax Act, 1961.

Preity G Zinta v. Income Tax Officer, (ITAT)(Mumbai Bench "I") : Law Finder Doc Id # 2817617