Chennai: The Madras High Court on Friday acquitted actor and Tamilga Vetri Kazhagam (TVK) president C. Joseph Vijay dismissed a writ petition challenging the imposition by the Income Tax (IT) department. ₹1.5 crore fine for not voluntarily disclosing its additional income ₹15 crores in the financial year 2015-16.
The Madras High Court on Friday dismissed a writ petition filed by actor and Tamilaga Vetri Kazhagam (TVK) president C Joseph Vijay.Justice Senthilkumar Ramamurthy said the IT department issued the show-cause notice “within the two-year limitation prescribed under Section 263 of the Income Tax Act”, adding that he did not find any legal infirmity in issuing the notice and declined to examine the merits of the disciplinary proceedings.
Section 263 of the Income Tax Act, 1961, empowers the Chief Commissioner or the Commissioner to revise assessment orders passed by an Assessing Officer (AO) if they are considered “erroneous” and “prejudicial to the interest of the revenue”.
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The court, however, granted Vijay liberty to challenge the notice and consequent penalty order before the Income Tax Appellate Tribunal (ITAT) on grounds other than limitation.
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Income Tax authorities raided Vijay’s residence in September 2015 and demanded undisclosed income. Vijay later reported the additional income ₹15 crore for assessment year 2016-17 and tax paid thereon.
In December 2017, the department passed an assessment order determining Vijay’s taxable income ₹38.25 crore after disallowing certain claims including depreciation and expenses related to his fan association, Rasiga Mandram.
In December 2018, the department initiated penalty proceedings under section 271AAB(1) of the Income Tax Act, which deals with penalty on undisclosed income during an inquiry initiated under section 132. Section 132 empowers the tax authorities to conduct search and seizure operations (raids).
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Vijay challenged the assessment before the Commissioner of Income Tax (Appeals), who accepted his case in part. The department then approached the ITAT, which partially ruled in its favor that certain expenses incurred by fan associations could not qualify for exemption.
Separately, department related penalty proceedings continued ₹15 crore surrendered during the search. In July 2019, it issued a show-cause notice to modify the assessment order, holding that the penalty proceedings had not been properly initiated.
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Vijay challenged the revision proceedings before the ITAT. In May 2022, the tribunal set aside the section 263 proceedings, saying they served no purpose as the department had already initiated disciplinary proceedings under section 271AAB.
Vijay then approached the High Court, arguing that the penal process suffered from limitations and distortions. He alleged that the authorities had failed to appreciate the scope of the ITAT’s order and that the period of limitation for imposition of penalty had lapsed before issuing the Section 263 notice.
The Income Tax Department opposed the plea and maintained that it imposed the penalty legally.
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Justice Ramamurthy rejected Vijay’s limitation challenge and said the department had acted within time. The judge therefore dismissed the writ petition leaving open other remedies before the Appellate Tribunal.
