Chennai, October 6 — The Madras High Court has reserved its verdict on a petition filed by popular actor Vijay, challenging a Rs. 1.5 crore penalty imposed by the Income Tax Department for allegedly unaccounted income of Rs. 15 crore during the 2015-16 financial year.
Justice Senthilkumar Ramamoorthy reserved the court’s order on Friday after hearing arguments. Previously, another bench of the same court had stayed the proceedings related to the case in 2022.
The case stems from income tax searches conducted at Vijay’s residence in September 2015, which the department claims uncovered undisclosed income. An assessment order was passed in December 2017, and 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 partially accepted his case. Dissatisfied, the Income Tax Department escalated the matter to the Income Tax Appellate Tribunal (ITAT). The tribunal partly ruled in favor of the department, citing expenses linked to Vijay’s fan association, Rasigar Mandram, in calculating his taxable income.
Additionally, penalty proceedings related to the Rs. 15 crore surrendered by Vijay during the search were pursued. In July 2019, the department issued a show cause notice under Section 263 of the Income Tax Act, seeking to revise the assessment order, asserting that penalty proceedings for the surrendered amount had not been properly initiated.
Vijay challenged this move before the ITAT, which in May 2022 set aside the revision proceedings, stating they were unnecessary since penalty proceedings under Section 271AAB had already been initiated.
When the matter reached the High Court, then-Judge Anita Sumanth clarified that the issue was not about initiating penalty proceedings but whether the final penalty order was issued within the statutory time limit under Section 275 of the Income Tax Act. The court initially observed that the penalty order appeared to be issued beyond the prescribed deadline and stayed its recovery.
Vijay’s legal team argued that the penalty order was flawed due to the respondent’s failure to consider the scope of Vijay’s appeal before the ITAT and that the time limit for imposing the penalty had expired before the issuance of the show cause notice under Section 263.
The Income Tax Department opposed Vijay’s plea, asserting that the penalty was lawfully imposed. The court has now reserved its judgment on the matter.
