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The Supreme Court today partially read down Section 139AA of the Income Tax Act which makes Aadhaar mandatory for filing Income Tax Returns.
A Bench of Justices AK Sikri and Ashok Bhushan read down the proviso to Section 139AA(2) and ruled that those who do not have Aadhaar will not be required to obtain the same for linking it with PAN. However, those who have obtained Aadhaar will have to link it with PAN for filing Income Tax Returns.
“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. It is only to facilitate other transactions which are mentioned in Rule 114B of the Rules. 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.”
Further, the Court also held that the said proviso would operate only prospectively. Thus, a failure to intimate the Aadhaar will not render PAN void ab initio.
“..we find that proviso to Section 139AA(2) cannot be read retrospectively. If failure to intimate the Aadhaar number renders PAN void ab initio with the deeming provision that the PAN allotted would be invalid as if the person had not applied for allotment of PAN would have 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 rights which are already accrued to a person in law cannot be taken away. Therefore, this provision needs to be read down by making it clear that it would operate prospectively.”
Importantly, the Court upheld the Constitutional validity of Section 139AA with respect to Articles 14 and 19. But it refused to go into the question of Article 21 and Right to Privacy since the same is already pending before a Constitution Bench of the Court.
The following are the conclusions arrived at the Court in its 157-page judgment.
(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.
The two petitions challenging Section 139AA were heard in May.
The lead petition was filed by CPI leader Binoy Viswam. The petition was drawn and filed by advocate Sriram P. Senior Advocates Arvind Datar and Salman Khurshid appeared for Viswam.
The second petition was filed by SG Vombatkere, a retired Indian Army Officer and Bezwada Wilson, founder and convenor of Safai Karmachari Andolan. The petition was drawn by advocate Udayaditya Banerjee and filed by M/s. KJ John & Co. Senior Advocate Shyam Divan appeared for Vombatakre and Wilson.
The Central government was represented by Attorney General (AG) Mukul Rohatgi with Vidhi’s Arghya Sengupta assisting him. Advocate Zoheb Hossain served as the Advocate-on-Record.
Read a complete report of the hearing in the case here.