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Supreme Court upheld linking of Aadhaar with PAN card mandatory for filing ITR - (09 Jun 2017)

Direct Taxation

Supreme Court has upheld linking of Aadhaar card with PAN card mandatory for filing income tax returns in a judgment titled as Binoy Viswam v. Union of India & others. The Constitutional validity of Section 139AA of Income Tax Act, 1961 inserted vide Finance Act of 2017 was challenged before Hon’ble Supreme Court. However, Supreme Court makes it clear that, it is not mandatory for those people who do not possess an Aadhaar card or those who haven’t applied yet. Supreme Court also stayed retrospective invalidation of PAN for non-compliance till Constitutional Bench decides issue relating to privacy of data which is still pending before it. Order further stated that, a person who do not possess Aadhaar card will not face any criminal consequences for not linking Aadhaar card with PAN card. Supreme Court also held that, Parliament was fully competent to enact Section 139AA of Income Tax Act and its authority to make this law was not diluted by orders of this Court.

It is further held that, there is no conflict between provisions of Aadhaar Act and Section 139AA of Income Tax Act as when interpreted harmoniously, they operate in distinct fields. Section 139AA of Act is not discriminatory nor does it offend equality clause enshrined in Article 14 of Constitution. Section 139AA is also not violative of Article 19(1)(g) of Constitution insofar as it mandates giving of Aadhaar enrolment number for applying PAN cards in income tax returns or notified Aadhaar enrolment number to designated authorities. Further, proviso to sub-section (2) thereof has to be read down to mean that, it would operate only prospective.

In order to weed out fraudulent financial accounts, Government decided to introduce Section 139AA of Income Tax Act, 1961 inserted vide Finance Act of 2017. As per Aadhaar (Targeted Delivery of Financial Subsidies, Benefits and Services) Act, 2016, Aadhaar number is mandatory only for receiving social welfare benefits. According to provisions of Finance Act 2017, Aadhaar number/Aadhaar enrolment number is mandatory to file income tax returns and to apply for a new PAN. Government proposes to declare existing PAN to be void, if taxpayer did not links it with Aadhaar by July 31, 2017. In 2015, issue pertaining to Right to Privacy and other aspects was brought before Supreme court and a three judge bench referred it to a larger constitution bench which is yet to be decided. Validity of provision upheld in aforesaid manner is subject to passing muster of Article 21 of Constitution, which is the issue before Constitution Bench in Writ Petition (Civil) No. 494 of 2012 and other connected matters. Till then, there shall remain a partial stay on operation of proviso to sub-section (2) of Section 139AA of Act.


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