In a major relief, Bollywood actress Preity Zinta has emerged victorious in a nine-year-long income-tax battle involving the sale of her Bandra flat and alleged “circular transactions” worth over ₹13 crore. The order was delivered in her favour on November 17.
The Controversy That Started in 2016
In February 2016, Preity Zinta sold her luxury apartment at Quantum Park, Union Park, Bandra (West), which was registered in three parts (in her name, her mother’s name, and her company’s name) for a total consideration of ₹7.13 crore. Around the same time, ₹13.10 crore was credited and debited from a newly opened Corporation Bank account within days, triggering alarm bells in the Income Tax department’s investigation wing.
The Assessing Officer alleged that the transactions were “sham and circular” – money routed through entities linked to businessman Danish Merchant to introduce unaccounted income – and added ₹10.84 crore as unexplained cash credits under Section 68.
What Really Happened: Loan Restructuring, Not Money Laundering
The Income Tax Appellate Tribunal (ITAT) “I” Bench, Mumbai, in its detailed 17 November 2025 order, accepted Preity Zinta’s explanation:
- She had borrowed large sums from Danish Merchant and his group companies (Ace Light Hospitality, Ace Links, Ace Housing) during 2012–2015 due to financial distress.
- The Quantum Park flat was mortgaged as security for these loans.
- In 2016, to avoid violation of Sections 184 & 185 of the Companies Act (which restrict companies from giving loans to individuals), Merchant insisted the loan be shifted from his private limited company to his partnership firm (Ace Links).
- The flat sale proceeds and fresh loans from Ace Links were used to square off the old loan – a pure restructuring, not infusion of black money.
The Tribunal noted that identity, creditworthiness, and genuineness of all transactions were fully proved with bank statements, registered sale deeds, confirmations, and audited accounts.
ITAT’s Final Verdict: Complete Clean Chit
The bench comprising Vice President Saktijit Dey and Accountant Member Girish Agrawal held:
“The transactions are genuine… Assessee has not derived any benefit… It merely resulted in transferring liability from one entity to another. No addition is called for.”
The entire ₹10.84 crore addition was deleted. All legal grounds (reopening validity, limitation, jurisdiction) became academic.
Preity Zinta’s Long Legal Battle Ends
This was the second round of litigation at ITAT. The actress had already declared capital gains on the flat sale and paid tax on it in her original 2016 return. The department’s reopening in 2021 and subsequent additions through the DRP route have now been quashed.
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