ITAT Mumbai Deletes ₹10.84 Cr Addition Against Preity Zinta; Holds Loans Were Genuine, Not Unexplained Cash Credits
Preity G Zinta vs ITO (Int. Tax) (ITA No. 4199/MUM/2025)
Facts:
1.Assessing Officer (AO) treated the net credits of Rs 10.84 crore as unexplained cash credits under section 68, alleging that the amounts were routed through a circuit of companies connected with Mr. Merchant and lacked genuine source.
2.The assessee (Preity G Zinta) explained that between 2012–2014, she had borrowed substantial funds from Mr. Merchant and his group entities due to financial difficulties, offering her flat at Quantum Park, Mumbai as security.
3.To repay these loans, she later sold the flat, and the sale proceeds, along with inter-entity fund movements within the Merchant Group, were routed through her bank account to repay old loans.
4.The assessee (Preity G Zinta) produced:
Complete loan history (borrowings and repayments),
Sale deed and capital gains computation,
Bank statements,
Transaction-wise explanations and source-of-source evidence, and
Tax audit disclosures.
5.The AO alleged “circular transactions” and held that the flow of funds between the group entities lacked commercial purpose. Despite issuing notices under Section 133(6) to all the Merchant Group entities who fully responded, filed confirmations, bank statements, ITRs and proved their creditworthiness, the AO concluded that the credits remained unexplained and made the addition under Section 68.
ITAT Mumbai held as below:
1.The genuineness of the loans taken and repaid have been duly established by the assessee (Preity G Zinta) by proving the identity and creditworthiness of the parties as well as the genuineness of transactions for which all the necessary documentary evidences are placed on record.
2.it is seen that the assessee (Preity G Zinta) had borrowed money from Ace Link, i.e., a partnership firm and repaid loan of Ace Light Hospitality Ventures Pvt. Ltd. The Assessee (Preity G Zinta) has not derived any benefit from these transactions and these transactions have resulted in merely transferring liability of assessee from the entity Ace Light Hospitality Ventures Pvt. Ltd. to another entity Ace Links which is a partnership firm.
3.Considering the above detailed discussion and taking into account the factual matrix of the case, we delete the addition made by the ld. Assessing Officer in the hands of the assessee.
The copy of the order is as under:
