The Madras High Court has dismissed a writ petition filed by actor-turned-politician Vijay, the founder of Tamilaga Vettri Kazhagam (TVK), which challenged a ₹1.5 crore penalty imposed by the Income Tax Department. The penalty was levied following the non-disclosure of an additional income of ₹15 crore during the 2015-16 financial year. Justice Senthilkumar Ramamoorthy delivered the ruling, confirming that the department’s actions were legally valid and issued within the prescribed period of limitation.
Origins of the Tax Dispute
The legal conflict dates back to September 30, 2015, when Income Tax officials conducted a search and seizure operation at the premises of the actor. During this raid, officials discovered documents suggesting that Vijay had received significant payments that were not voluntarily disclosed in his initial tax filings.
The investigation focused on the remuneration for his 2015 film, Puli. According to Senior Standing Counsel A. P. Srinivas, the seized materials indicated that the film’s producers, P.T. Selvakumar and Shibu of SKT Studios, had paid the actor ₹16 crore via cheques and an additional ₹4.93 crore in cash. While Tax Deducted at Source (TDS) was properly deposited for the cheque component, it was not accounted for in the cash transaction. When confronted with these findings, the actor admitted to receiving the cash and agreed to settle the outstanding taxes.
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Disclosure and Assessment Findings
In an effort to resolve the matter amicably and cooperate with the department, Vijay agreed to disclose an additional income of ₹15 crore for the year, which included the cash component from the movie remuneration. On July 29, 2016, he filed his income tax return for the assessment year 2016-17, declaring a total income of ₹35.42 crore. This figure incorporated the additional ₹15 crore unearthed during the search.
However, the assessment process encountered further friction when Vijay claimed certain deductions. Specifically, he sought a depreciation of ₹17.81 lakh on assets and an exemption of ₹64.71 lakh related to expenses for his fans’ clubs, known as Rasigar Mandram. The Income Tax Department disallowed these specific claims. In an assessment order dated December 30, 2017, the department revised his taxable income to ₹38.25 crore. Crucially, the order highlighted that the additional ₹15 crore would likely never have been disclosed if not for the search and seizure operation, leading to the imposition of penalties under Section 271AAB(1) of the Income Tax Act.
The Legal Challenge and Limitation Argument
Vijay moved the Madras High Court in 2022 to challenge the demand notice, securing an interim stay on August 16, 2022. The primary argument presented by his counsel was based on the statute of limitations. They contended that the penalty proceedings were time-barred and should have been initiated on or before June 30, 2019, instead of June 30, 2022. The defense argued that the limitation period should have commenced from the date the Assessing Officer referred the matter to higher authorities.
The Income Tax Department countered this by stating that the proceedings were conducted strictly within the permissible timeframe allowed by the Act. They maintained that the disclosure was a direct result of the raid rather than a voluntary act of transparency. Justice Ramamoorthy ultimately concurred with the department, rejecting the plea that the order was hit by limitation.
Future Legal Recourse
While the High Court rejected the challenge regarding the timing of the penalty, the ruling does not mark the absolute end of the road for the actor. The court clarified that its decision focused primarily on the limitation period and did not examine other merits of the case. Consequently, the judge left it open for Vijay to approach the appropriate appellate authority or the Income Tax Appellate Tribunal (ITAT) to contest the penalty on grounds other than the statute of limitations. This provides a window for the actor to continue his legal battle through statutory appeal channels if he chooses to dispute the disallowed exemptions or the specific nature of the penalty.
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