The Supreme Court delivered its verdict on Friday in a batch of petitions challenging Section 139AA of the Income-Tax Act that, among other things, made it mandatory for PAN card holders to link their PAN with Aadhaar. This piece attempts to understand and exposit the implications of the operative part of this judgment. Section 139AA, a new provision of the Income Tax Act became effective following the passage and coming into force of the Finance Act, 2017.
Please recall that this challenge came in the backdrop of pending petitions before the Constitution Bench of the Supreme Court, an overall challenge to the Aadhaar project and also the Aadhaar (Targeted Delivery of Subsidies, Benefits and Services) Act, 2016.
Sub-section (1) of Section 139AA of the Income-Tax Act, the section under challenge in the present case, made it mandatory for every I-T assessee, after July 1 2017, to quote either Aadhaar number, or if he does not have one, his Aadhaar enrolment number in his application for a new PAN card. It has also made it mandatory to quote one’s Aadhaar number or Aadhaar enrolment number in one’s income tax return.
Subsection (2) of the Income-Tax Act made it mandatory for existing PAN-card holders, as on July 1 2017, to submit their Aadhaar numbers to the authority on or before the date to be notified by the central government. This provision was challenged on many grounds. This piece is aimed at merely analyzing the implications of the judgment as given below and therefore will not deal with the analysis of the various grounds of challenge and the Court’s reasoning on each of those issues.
At the outset, it needs to be made clear that the Court has not dealt with the ground of Article 21 challenge. It has left it to the constitution bench in the earlier cases to decide on the scope of Article 21 and the rights such as privacy, human dignity, bodily integrity and informational self-determination. The challenge to 139AA on those grounds is still open until a final decision by a constitution bench one way or the other. Until such a time, the Court has thought it fit to issue a partial stay on proviso to subsection 139(2) even as it has upheld the constitutionality of 139AA on all other grounds.
The partial stay on the operation of the proviso to Section 139AA(2), which provided for penal and near-penal consequences of non-compliance of the mandatory linking of Aadhaar with PAN clause, operates thus:
- The stay is only vis-à-vis existing PAN card holders who do not possess an Aadhaar number.
- The stay is to operate only until either a more “toned down” version of the consequences clause is legislated or until the Constitution Bench decides the issue of Article 21 challenge to the Aadhaar project and upholds the project in its entirety, whichever is earlier.
- PAN-holders as on July 1, 2017 who have already gotten themselves an Aadhaar, must link their number, failing which they may face the consequences such as their PAN card being invalidated.
- New PAN card applicants must quote their Aadhaar number or Aadhaar enrolment number in their application for PAN card.
- PAN-holders who do not possess an Aadhaar number have to provide their Aadhaar number or Aadhaar enrolment number in their income tax return (if they are required to file returns under the Act) in compliance with Section 139AA(1). However, there is no consequence for non-compliance with this provision. Some have raised the question, particularly after a recent press statement put out by the CBDT, as to whether the return would be treated as a defective one and rejected if Aadhaar number is not quoted in their respective return. The answer to that question is a ‘no’, to the best of my comprehension. Defective returns are defined under Section 139(9) of the Act. It is a limited definition and does not refer to deficiency such as Aadhaar not being quoted. The I-T department does not have the authority to unilaterally expand that definition. As a result, it must be clarified that although it may be mandatory under 139AA(1) to enroll for Aadhaar and quote it in your return, there are no consequences for non-compliance with that mandate, for the moment.
Prasanna S is a Delhi-based lawyer and has appeared for the petitioners in the Aadhaar cases before the Supreme Court