Preity G. Zinta Vs ITO (ITAT Mumbai)
ITAT Mumbai Deletes Entire ₹10.84 Cr Addition u/s 68; Loans & Sale-Proceeds Fully Explained, Circular-Transaction Theory Rejected
Assessee, Ms. Preity G. Zinta, a non-resident actress, faced reassessment after Department noticed large credits/debits of ₹13.10 crore in a newly opened Corporation Bank account. AO treated these as unexplained cash credits u/s 68, alleging “circular transactions” with entities of Mr. Danish Merchant Group, ultimately adding ₹10.84 crore.
ITAT noted that AO had issued notices u/s 133(6) to all three Danish Merchant entities—Ace Links (partnership), Ace Light Hospitality Ventures Pvt Ltd, & Ace Housing & Construction Pvt Ltd—& each entity fully responded, filing bank statements, confirmations, & ITRs. These evidences confirmed the identity, creditworthiness & genuineness of loans & repayments.
Assessee demonstrated that she had borrowed funds in earlier years from Danish Merchant group concerns & later repaid them through the sale of her Quantum Park flat, duly disclosing long-term capital gains. The transactions routed through Ace Links were explained as restructuring necessitated due to Companies Act Sections 184–185 restrictions on loans by a company; hence the movement through a partnership firm.
Tribunal found that:
- The entire loan movement was genuine, well-documented, & corroborated by lender entities.
- AO had incorrectly considered only ₹2.25 crore as sale proceeds, whereas ₹4.12 crore was actually received & taxed as part of capital gains.
- The allegation of circular movement lacked substance since the pattern of borrowing & repayment matched audited books, bank statements, & confirmations.
- The balance-sheet reflected proper loan balances, nothing was hidden, & the source as well as source of source stood established.
Holding that AO’s inference was based on suspicion rather than evidence, ITAT deleted the entire ₹10.84 crore addition. All jurisdictional grounds became academic.
