The Centre’s amendment to the Income Tax (IT) Act making it compulsory for assessees to link their PAN and Aadhaar numbers passed judicial scrutiny on Friday with the Supreme Court upholding it. The apex court rejected the contention that the changes had the effect of making Aadhaar which was “voluntary” under the Aadhaar Act into a “mandatory” requirement. The order came from a bench of Justices A K Sikri and Ashok Bhushan which heard a clutch of petitions challenging the constitutional validity of Section 139AA of the IT Act, introduced by way of the Finance Act of 2017 in March this year.
Sub-section 1 of Section 139AA required assessees to furnish their Aadhaar number while applying for PAN card and while filing their income tax return. Sub-section 2 said that the PAN cards of all those who already had their Aadhaar cards made or were eligible for it will be deemed invalid if they did not submit their Aadhaar numbers to the designated authority (for linking PAN and Aadhaar).
The apex court upheld the validity of sub-section 1 but ordered a partial stay on the operation of sub-section 2. This was done to avoid difficulty to genuine assessees until the time a separate batch of pending petitions which has questioned the privacy issues raised by the Aadhaar scheme is decided by a Constitution Bench of the Court.
The order also made it clear that today’s decision will be subject to the outcome of the decision of the Constitution Bench.
“Having said so, it becomes clear from the aforesaid discussion that those who are not PAN holders, while applying for PAN, they are required to give Aadhaar number. This is the stipulation of sub-section (1) of Section 139AA, which we have already upheld. At the same time, as far as existing PAN holders are concerned, since the impugned provisions are yet to be considered on the touchstone of Article 21 of the Constitution, including on the debate around Right to Privacy and human dignity, etc. as limbs of Article 21, we are of the opinion that till the aforesaid aspect of Article 21 is decided by the Constitution Bench, a partial stay of the aforesaid proviso is necessary,” the order said.
“Those who have already enrolled themselves under 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…We are adopting this course of action for more than one reason. We are saying so because of very severe consequences that entail in not adhering to the requirement of sub-section (2) of Section 139AA of the Act. A person who is holder of PAN and if his PAN is invalidated, he is bound to suffer immensely in his day to day dealings, which situation should be avoided till the Constitution Bench authoritatively determines the argument of Article 21 of the Constitution,” the Bench added.
The court rejected the contention that since enrollment under Aadhaar Act is voluntary, it cannot be compulsory under the Income Tax Act saying the objectives of the two acts were entirely different and the Parliament was within its powers to make a provision directory in one statute and mandatory in another.
The purpose for enrollment under Aadhaar Act is to avail benefits of various welfare schemes while the purpose behind Income Tax Act is entirely different, the bench said. “For achieving the said purpose, viz., to curb black money, money laundering and tax evasion etc., if Parliament chooses to make the provision mandatory under the Income Tax Act, the competence of the Parliament cannot be questioned on the ground that it is impermissible only because under Aadhaar Act, the provision is directory in nature.
It is the prerogative of the Parliament to make a particular provision directory in one statute and mandatory/compulsory in other.”
The petitioners had contended that the IT Act amendment went against earlier orders of the SC which had the effect of saying that Aadhaar was voluntary.
But the court rejected this saying that such orders were “passed in the petitions where Aadhaar scheme floated as an executive/administrative measure has been challenged” whereas in the present case, it was a statute passed by Parliament that was in question.
Further, those were interim orders pending adjudication of the main question whether Aadhaar scheme violated Article 21 which had to be decided by the Constitution bench, it said and added that “in a situation like this, it cannot be said that Parliament is precluded from or it is rendered incompetent to pass such a law.”
The court acknowledged citizens’ concerns about leak of Aadhaar data and said: “This is a concern which needs to be addressed by the Government. It is important that the aforesaid 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 whether it is done by tightening the operations of the contractors who are given the job of enrollment…or by prescribing severe penalties to those who are found guilty of leaking the details, is the outlook of the Government.”