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Madras HC dismisses Vijay’s plea against ₹1.5 crore income tax penalty
Madras High Court dismissed actor Vijay’s plea against a ₹1.5 crore income tax penalty, holding that IT department acted within the prescribed limitation period
Chennai: The Madras High Court on Friday dismissed a writ petition filed by actor and Tamilaga Vettri Kazhagam (TVK) president C. Joseph Vijay challenging the Income Tax (IT) department’s imposition of a ₹1.5 crore penalty for allegedly not voluntarily disclosing additional income of ₹15 crore during the 2015–16 financial year.
Justice Senthilkumar Ramamoorthy said the IT department had issued the show cause notice “within the two-year limitation period prescribed under Section 263 of the Income Tax Act,” adding that he did not find any legal infirmity in the issuance of the notice and declined to examine the merits of the penalty proceedings.
Section 263 of the Income Tax Act, 1961, empowers the principal commissioner or commissioner to revise assessment orders passed by an Assessing Officer (AO) if they are deemed “erroneous” and “prejudicial to the interests of the revenue.”
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The court, however, granted liberty to Vijay to challenge the notice and the consequential penalty order before the Income Tax Appellate Tribunal (ITAT) on grounds other than limitation.
Income tax department authorities raided Vijay’s residence in September 2015 and claimed to have unearthed undisclosed income. Vijay subsequently disclosed additional income of ₹15 crore for the assessment year 2016–17 and paid tax on it.
In December 2017, the department passed an assessment order determining Vijay’s taxable income at ₹38.25 crore after disallowing certain claims, including depreciation and expenses linked to his fan association, Rasigar Mandram.
In December 2018, the department initiated penalty proceedings under Section 271AAB(1) of the Income Tax Act, which deals with penalties on undisclosed income unearthed during a search initiated under Section 132. Section 132 empowers tax authorities to conduct search and seizure operations (raids) on premises.
Vijay challenged the assessment before the Commissioner of Income Tax (Appeals), who partly accepted his case. The department then approached the ITAT, which partly ruled in its favour after holding that certain expenses linked to the fan association could not qualify for exemption.
Separately, the department continued penalty proceedings in relation to the ₹15 crore surrendered during the search. In July 2019, it issued a show cause notice seeking to revise the assessment order, asserting that the penalty proceedings had not been properly initiated.
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Vijay challenged the revision proceedings before the ITAT. In May 2022, the tribunal set aside the Section 263 proceedings, holding that they served no purpose since the department had already initiated penalty proceedings under Section 271AAB.
Vijay then moved the High Court, arguing that the penalty proceedings suffered from limitation and perversity. He contended that the authorities failed to appreciate the scope of the ITAT’s order and that the limitation period for imposing the penalty had expired even before the issuance of the Section 263 notice.
The Income Tax department opposed the plea and maintained that it had lawfully imposed the penalty.
Justice Ramamoorthy rejected Vijay’s limitation challenge and held that the department had acted within time. The judge therefore dismissed the writ petition while leaving other remedies open before the appellate tribunal.
