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10 Jun 2017

Aadhaar order with breather ...exempted from the mandatory PAN linkage

TT, New Delhi, June 9: The Supreme Court has allowed those who do not possess Aadhaar cards to obtain PAN and file income-tax returns until the larger issue of privacy is resolved.
But the apex court has upheld the constitutional validity of the law that made Aadhaar mandatory for applying for the Permanent Account Number (PAN) and filing tax returns.
The ruling means that those who have an Aadhaar card must link it to their PAN card to be eligible to file tax returns. But those who have enrolled but not yet got their Aadhaar card and those who have not yet sought the document are for the time being exempt from the mandatory linkage and penal invalidation.
The judgment by the bench of Justices A.K. Sikri and Ashok Bhushan ensures that a partial stay has been imposed on an income-tax provision that made Aadhaar linkage mandatory for PAN and tax returns from July 1.
The court said a failure to stay the provision would have led to "very severe consequences" and suggested that Parliament was free to consider whether the penal action should be toned down.
"Those who have already enrolled themselves under the Aadhaar scheme would comply with the requirement of sub-section 2 of Section 139AA of the Act. Those who still want to enrol are free to do so. However, those assessees who are not Aadhaar card holders and do not comply with the provision of Section 139(2), their PAN cards be not treated as invalid for the time being," the bench added.
Section 139AA of the Income Tax Act requires mandatory quoting of Aadhaar or the enrolment ID of an Aadhaar application form for filing income-tax returns and applying for the allotment of PAN from next month.
According to sub-section 2 of 139AA, every person who has been allotted PAN as on July 1 this year and is eligible to obtain Aadhaar will have to inform the income-tax authorities about the Aadhaar number on or before a date to be notified by the Centre.
In case of failure to inform the tax authorities about the Aadhaar number, the PAN allotted to the person would be treated as invalid.
The Centre had also said that no new PAN card would be issued without the production of Aadhaar details and that all existing PAN cards would become invalid after July 1 in the absence of the linkage.
The Supreme Court delivered the judgment while dealing with three petitions filed by CPI leader Binoy Viswam, retired Major General S.G. Vombatkere and social activist Bezwada Wilson, challenging the introduction of Section 139AA into the Income Tax Act, particularly sub-section 2.
Writing the judgment, Justice Sikri said: "A person who is a holder of PAN and if his PAN is invalidated, he is bound to suffer immensely in his day-to-day dealings, which... should be avoided till the constitution bench authoritatively determines the argument of Article 21 of the Constitution."
He added: "Since we are adopting this course of action, in the interregnum, it would be permissible for Parliament to consider as to whether there is a need to tone down the effect of the said proviso by limiting the consequences."
The court said that if failure to inform the tax authorities about the Aadhaar number rendered the PAN invalid, then it "would have the rippling effect of unsettling settled rights of the parties. It has the effect of undoing all the acts done by a person on the basis of such a PAN."
"It may have even the effect of incurring other penal consequences under the act for earlier period on the ground that there was no PAN registration by a particular assessee."
The court noted that a large section of citizens felt concerned about possible data leak even though many of them supported the linkage of PAN with Aadhaar.
"This is a concern which needs to be addressed by the government. It is important that the... apprehensions are assuaged by taking proper measures so that confidence is instilled among the public at large that there is no chance of unauthorised leakage of data," the court said.
It added that it was up to the government to prevent data leak, whether by "tightening the operations" of the private contractors entrusted with the job of Aadhaar enrolment or "prescribing severe penalties" for those found guilty of leaking details.
"Till then, there shall remain a partial stay on the operation of proviso to sub-section 2 of Section 139AA of the Act," the court said.
It rejected the petitioners' argument that the requirement to link the two cards was a violation of Article 14 (right to equality) and Article 19 (free speech, right to profession, etc) of the Constitution.
The court said the measure was intended to curb black money.
"Unearthing black money or checking money-laundering is to be achieved to whatever extent possible. Various measures can be taken in this behalf. If one of the measures is introduction of Aadhaar into the tax regime, it cannot be denounced only because of the reason that the purpose would not be achieved fully," the court said.
"Such kind of menace, which is deep-rooted, needs to be tackled by taking multiple actions and those actions may be initiated at the same time. It is the combined effect of these actions which may yield results, and each individual action considered in isolation may not be sufficient. Therefore, rationality of a particular measure cannot be challenged on the ground that it has no nexus with the objective to be achieved," Justice Sikri said.

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