Preity Good News!’ ITAT Quashes ₹10.84 Cr Income Tax Addition against Bollywood Actress Preity Zinta [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently granted substantial relief to Bollywood actress Preity Zinta by deleting an income tax addition of ₹10.84 crore made under Section 68 of the Income Tax Act, 1961 for the Assessment Year (A.Y.) 2016-17.

Film actress Preity Zinta, known for her spirited, strong and emotionally grounded roles on-screen, helped define late-1990s and early-2000s Bollywood cinema and accumulated a net worth estimated to be over ₹150 crore, earned from her acting career, advertisements, and business ventures including co-ownership of The Punjab Kings cricket team that competes in the Indian Premier League (IPL).

Preity, a non-resident individual, filed her returns on 26 June 2016 declaring an income of ₹46.20 lakh. Based on information available on the Department’s internal portal regarding high-value credit and debit entries in her newly opened Corporation Bank account, the Assessing Officer (AO) proceeded to reopen the case by issuing notice under Section 148 on 30 March 2021. During reassessment, the AO added ₹10,84,27,700 as unexplained cash credits under Section 68.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

Zinta explained that the transactions represented borrowings from entities associated with one Danish Merchant, including M/s Ace Housing and Constructions Ltd., and furnished extensive documentation such as confirmations, PAN details, bank statements, audited financials and registered sale deeds relating to the sale of her Quantum Park flat. The Dispute Resolution Panel (DRP) nevertheless upheld the addition and the AO passed the final assessment order accordingly.

Aggrieved, the assessee approached the ITAT for the second time through this appeal. In the earlier round, the Coordinate Bench had remanded the matter to examine the validity of reopening as well as the merits. Upon remand, the AO reiterated the earlier conclusions and sustained the addition again.

Dharan Gandhi and Vinita Nara appeared for the assessee, while Krishna Kumar represented the Revenue.

The two-member Bench comprising Vice President Saktijit Dey and Accountant Member Girish Agrawal recorded that Zinta had placed on record complete documentary evidence including confirmations from all three entities of the Danish Merchant Group, their tax returns, bank statements, audited financials and details of loan movements which adequately established the identity, creditworthiness and genuineness of the lenders. The Tribunal also noted that the AO had not brought any material on record to contradict these documents.

Accordingly, the Bench formulated the opinion that the movement of funds merely reflected a restructuring of liabilities, as the assessee had originally borrowed from Ace Light Hospitality Ventures Pvt. Ltd. and later repaid that loan through Ace Links - a partnership firm, using funds that included sale consideration of the Quantum Park flat.

The Tribunal held that the assessee had not derived any benefit from these transactions, and that she had simply transferred her liability from one entity to another to avert compliance missteps under sections 184 and 185 of the Companies Act, 2013.

Based on these findings, the Tribunal noted that the addition under Section 68 was unsustainable and accordingly deleted the income tax addition of ₹10.84 crore. Since the primary income addition was deleted, the Tribunal held that the remaining grounds became academic in nature.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates