BREAKING| Madras High Court Dismisses Plea By Actor Vijay Challenging 1.5 Crore Income Tax Penalty

The Madras High Court has dismissed a plea filed by Actor Vijay challenging the Rs. 1.5 crore penalty imposed on him by the Income Tax Department for undisclosed income of Rs 15 crore in the financial year 2015-16.

Justice Senthilkumar Ramamoorthy noted that the show cause notice had been issued within the two-year limitation period prescribed under Section 263 of the Income Tax Act.

As the court found no infirmity in the issuance of the notice, it refrained from examining the other aspects of the matter.

At the same time, the court granted liberty to Vijay to assail the notice and the consequential order before the appellate tribunal on grounds other than limitation.

It all goes back to income tax searches carried out at Vijay's residence in September 2015. Following the search, the department alleged that undisclosed income had come to light.

An assessment order was passed in December 2017. Nearly a year later, in December 2018, the department issued a notice initiating penalty proceedings under Section 271AAB(1) of the Income Tax Act.

Vijay challenged the assessment before the Commissioner of Income Tax (Appeals), who partly accepted his case. Aggrived, the Income Tax Department then took the matter to the Income Tax Appellate Tribunal (ITAT).

The ITAT partly ruled in favour of the department after finding that certain expenses were linked to Vijay's fan association, Rasigar Mandram, while computing his taxable income.

Separately, penalty proceedings were also pursued in relation to the Rs 15 crore that Vijay had surrendered during the search.

In July 2019, the Income Tax Department issued a show cause notice under Section 263 of the Income Tax Act, seeking to revise the assessment order. The department took the position that penalty proceedings relating to the Rs 15 crore surrendered during the search had not been properly initiated.

Vijay challenged the move before the Income Tax Appellate Tribunal. In May 2022, the ITAT set aside the revision proceedings, saying they were unnecessary as penalty proceedings under Section 271AAB had already been initiated.

At a preliminary stage, the court found that the order appeared to have been issued after the prescribed limitation and stayed recovery of the penalty.

Challenging the notice, Vijay contended that there was perversity in passing the order as the respondent had failed to appreciate the scope of appeal before the ITAT while challenging the order of revision under Section 263.

Further, it was argued that the authorities had failed to appreciate that the time limit for imposition of penalty expired even before the issuance of the show cause notice under Section 263 of the Act.

The Income Tax Department has opposed Vijay's plea and maintained that the penalty was lawfully imposed.

Case Title: C Joseph Vijay v. The Deputy Commissioner of Income Tax and others

Citation: 2026 LiveLaw (Mad) 53

Case No: WP No. 21006 of 2022