Madras High Court Upholds Rs 1.5 Crore Tax Penalty Against Actor-Politician Vijay
In a significant legal ruling, the Madras High Court has dismissed a writ petition filed by prominent actor-turned-politician Vijay, founder of the Tamilaga Vettri Kazhagam (TVK), challenging a substantial Rs 1.5 crore penalty imposed by the Income Tax Department. The court's decision brings closure to a protracted legal dispute that originated in 2022 when Vijay contested a demand notice from tax authorities.
Court Rejects Time-Barred Argument, Upholds Department's Action
Justice Senthilkumar Ramamoorthy, presiding over the case, firmly refused to set aside the penalty, concluding that the order had been issued within the statutory limitation period prescribed under the Income Tax Act. The court determined that the department's action was legally valid and procedurally sound, dismissing Vijay's primary contention that the proceedings were time-barred.
The judge's ruling specifically rejected the argument presented by Vijay's counsel that penalty proceedings should have been initiated by June 30, 2019, rather than June 30, 2022. The court concurred with the department's position that the penalty imposition strictly adhered to legal provisions and fell within permissible timeframes.
Origins in 2015 Search Operation and Undisclosed Income
The dispute traces its roots to a comprehensive search and seizure operation conducted by Income Tax officials at Vijay's premises on September 30, 2015. During this extensive raid, officers confiscated documents that, according to department claims, revealed substantial income that had not been voluntarily disclosed by the actor.
Senior standing counsel for the department, A P Srinivas, presented compelling evidence to the court indicating that seized materials demonstrated producers of Vijay's 2015 film Puli had paid him Rs 4.93 crore in cash transactions, in addition to Rs 16 crore through formal cheque payments. Crucially, Tax Deducted at Source (TDS) had been deposited only for the cheque component, leaving the substantial cash transaction unreported for taxation purposes.
Voluntary Disclosure Following Confrontation
When confronted with this evidence, Vijay reportedly admitted to receiving approximately Rs 5 crore in cash and agreed to settle the outstanding taxes. In what was described as cooperation with department authorities to resolve tax matters amicably, the actor consented to disclose an additional income of Rs 15 crore for the financial year, incorporating the previously unreported cash component.
On July 29, 2016, Vijay filed his income tax return for the assessment year 2016-17, declaring a total income of Rs 35.42 crore, which included the additional Rs 15 crore disclosure. The return also claimed depreciation of Rs 17.81 lakh on assets and sought exemption of Rs 64.71 lakh toward fans' club expenses.
Department's Assessment and Penalty Imposition
The Income Tax Department subsequently disallowed these claims and, through an assessment order dated December 30, 2017, revised the taxable income to Rs 38.25 crore. The order explicitly noted that the additional income disclosure would not have occurred "but for the search and seizure operation", indicating the disclosure was not genuinely voluntary.
Based on these findings, the department imposed penalties under Section 271AAB(1) of the Income Tax Act. While Vijay pursued statutory appeals against certain components of the assessment, he specifically challenged the penalty through the present writ petition on limitation grounds.
Legal Proceedings and Interim Relief
The legal battle commenced in 2022 when Vijay approached the High Court against the department's demand notice. A single judge had initially admitted the plea and granted interim relief on August 16, 2022, temporarily suspending the operation of the penalty order pending further judicial review.
During proceedings, the department maintained that the disclosure was prompted exclusively by the search operation rather than voluntary compliance. Justice Ramamoorthy ultimately concurred with this position, upholding the validity of the penalty order while leaving open the possibility for Vijay to challenge the order before appropriate appellate authorities on grounds other than limitation, as those specific issues were not examined in the writ proceedings.
The court's definitive ruling represents a significant development in tax compliance enforcement and establishes important precedent regarding limitation periods in penalty proceedings under the Income Tax Act.
