Yesterday, June 10, 2017, the Supreme Court announced its judgement on linking Aadhaar with PAN, largely upholding Section 139AA of the Income Tax Act, 1961, which sought to make quoting of Aadhaar compulsory for filing of income tax returns and for making application for allotment of PAN number from July 1 this year. There is a slight twist in the tale, however.
As per sub-section (1) of Section 139AA, income tax assessees are required to quote their Aadhaar/enrolment number while filing income tax return.
As per sub-section (2), all those with Aadhaar must link it to their PAN – not doing so would render the PAN invalid retrospectively.
While the court has upheld sub-section (1) and the first part of sub-section (2), it has ordered a partial stay on the second part of sub-section (2), saying invalidating the PAN would cause people suffering in their day to day dealings and restricting tax payers from filing their return would have severe consequences.
It has read down this proviso to ensure these consequences will be applicable prospectively for those who have an Aadhaar number and do not link it to their PAN by July 1, 2017, and not retrospectively.
Here’s the gist of the judgement:
(i) We hold that the Parliament was fully competent to enact Section 139AA of the Act and its authority to make this law was not diluted by the orders of this Court.
(ii) We do not find any conflict between the provisions of Aadhaar Act and Section 139AA of the Income Tax Act inasmuch as when interpreted harmoniously, they operate in distinct fields.
(iii) Section 139AA of the Act is not discriminatory nor it offends equality clause enshrined in Article 14 of the Constitution.
(iv) Section 139AA is also not violative of Article 19(1)(g) of the Constitution insofar as it mandates giving of Aadhaar enrollment number for applying PAN cards in the income tax returns or notified Aadhaar enrollment number to the designated authorities. Further, proviso to sub-section (2) thereof has to be read down to mean that it would operate only prospective.
(v) The validity of the provision upheld in the aforesaid manner is subject to passing the muster of Article 21 of the Constitution, which is the issue before the Constitution Bench in Writ Petition (Civil) No. 494 of 2012 and other connected matters. Till then, there shall remain a partial stay on the operation of proviso to sub-section (2) of Section 139AA of the Act, as described above.
What this means for you
- If you currently don’t have an Aadhaar number, you are not required to get one and link it to your PAN for now
- If you have enrolled for Aadhar but haven’t got it, you can still file your return without your PAN being invalidated
- If you already have an Aadhaar number, you must link it to your PAN by June 30, 2017 – there are 4 ways to do so
- If you have an Aadhaar number and don’t link it with your PAN by July 1, 2017, the PAN will be invalidated. If you have already filed your return before July 1, this will not apply
- If you have an Aadhaar or enrolment number and file your income tax return after July 1, 2017, you must mention this number on the form
The court cautioned the government to take all proper measures around recent concerns of data leakage so the public is reassured. It has also advised that Parliament should tone down the proviso to Section 139AA (2) and limit it’s potential consequences, and has referred to the Constitution Bench to decide upon Aadhaar and privacy issues w.r.t Article 21 of the Constitution.