Actor Vijay’s tax penalty case: Madras High Court dismisses his plea

The Madras High Court on Friday (February 6, 2025) dismissed a writ petiton filed by actor-turned-politician C. Joseph Vijay of Tamilaga Vettri Kazhagam (TVK) in 2022 against the imposition of a penalty of ₹1.5 crore on him by the Income Tax department for not having voluntarily disclosed an additional income of ₹15 crore during the financial year 2015-16.

Justice Senthilkumar Ramamoorthy refused to set aside the penalty imposed by the I-T department since the actor had disclosed his additional income and paid taxes for it only pursuant to a search and seizure operation carried out by the sleuths on September 30, 2015 and not before that. He concluded the penalty order had been issued within the period of limitation prescribed under the Income Tax Act.

The judge, however, left it open to the writ petitioner to assail the penalty order before the appellate authority on grounds other than limitation since he had not gone into those grounds and dismissed the writ petition by rejecting the ground of limitation alone. Opposing the writ petition, the I-T department had argued the actor would not have disclosed the income but for the searches.

On the other hand, the Mr. Vijay’s counsel had contended the penalty proceedings were hit by the limitation period. Stating the proceedings must have been initiated on or before June 30, 2019 and not on June 30, 2022, he claimed, the limitation period would begin from the date when the Assessing Officer refers a matter to the Additional/Joint Commissioner of Income Tax.

Taking the judge through the facts of the case, I-T department senior standing counsel A.P. Srinivas told the court the I-T sleuths had conducted a search and seizure operation at the premises belonging to Mr. Vijay on September 30, 2015 and seized certain incriminating materials.

The materials indicated P.T. Selvakumar and Shibu of SKT Studios, producers of the actor’s 2015 movie Puli, had paid him ₹4.93 crore in cash apart from the remuneration of ₹16 crore through cheques. They had deposited the Tax Deducted at Source (TDS) only for the cheque amount and not the cash transaction.

When the actor was confronted with the records, he reportedly admitted to have received ₹5 crore in cash and agreed to pay the taxes for it. When asked how much of unaccounted income had the actor earned in the last six years, he replied he hadn’t received any unaccounted cash but for the ₹5 crore for Puli.

Nevertheless, to cooperate with the I-T department and resolve the tax issues in an amicable manner, the actor agreed to disclose an additional income of ₹15 crore (including the cash transaction of ₹5 crore) for the financial year 2015-16 and pay the necessary taxes for it.

Subsequently, on July 29, 2016, he filed his return of income for the assessment year 2016-17 declaring his total income to be ₹35.42 crore including the additional ₹15 crore. While filing the returns, he claimed depreciation of assets worth ₹17.81 lakh and sought exemption for his fans’ club expenses of ₹64.71 lakh.

However, the department disallowed his claims and passed an assessment order on December 30, 2017, determining the taxable income to be ₹38.25 crore. The assessment order also stated the actor would not have disclosed the additional income but for the search and seizure operation.

Therefore, the department imposed penalty under Sections 271(1)(c) and 271AAB(1) of the I-T Act. Though, he chose to go on statutory appeal against the assessment order as well as the penalty imposed under Section 271(1)(c), the penalty under Section 271AAB(1) alone had been challenged by way of a writ petition.