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SC Says S.139AA Of IT ACT Constitutionally Valid, But Partially Stays Its Operation [Read Judgment]

LiveLaw News Network
9 Jun 2017 9:56 AM GMT
SC Says S.139AA Of IT ACT Constitutionally Valid, But Partially Stays Its Operation [Read Judgment]
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Supreme Court of India on Friday upheld the constitutional validity of Section 139AA of Income Tax Act which made mandatory linkage of  IT returns with Aadhaar. However the Court has partially stayed the operation of the Section subject to the outcome of the Constitution Bench Judgment in the main Aadhaar Case in which the very validity of Aadhaar is challenged. The Bench has made it clear that those who don't have Aadhaar need not apply for it for the purpose of filing IT returns. The Court also said that S.139AA has no retrospective effect.

The Bench of Justices AK Sikri and Ashok Bhushan held as follows:

........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. 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. Since we are adopting this course of action, in the interregnum, it would be permissible for the Parliament to consider as to whether there is a need to tone down the effect of the said proviso by limiting the consequences.

However, at the same time, 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

Summary of Judgment

(i) Validity of Aadhaar, whether it is under the Aadhaar scheme or the Aadhaar Act, is already under challenge on the touchstone of Article 21 of the Constitution. Various facets of Article 21 are pressed into service. First and foremost is that it violates Right to Privacy and Right to Privacy is part of Article 21 of the Constitution. Secondly, it is also argued that it violates human dignity which is another aspect of Article 21 of the Constitution. Since the said matter has already been referred to the Constitution Bench, we have consciously avoided discussion, though submissions in this behalf have been taken note of. We feel that all the aspect of Article 21 needs to be dealt with by the Constitution Bench. That is a reason we have deliberately refrained from entering into the said arena.

(ii) It was submitted by the counsel for the petitioners themselves that they would be confining their challenge to the impugned provision on Articles 14 and 19 of the Constitution as well as competence of the Legislature, while addressing the arguments, other facets of Article 21 of the Constitution were also touched upon. Since we are holding that Section 139AA of the Income Tax Act is not violative of Articles 14 and 19(1)(g) of the Constitution and also that there was no impediment in the way of Parliament to insert such a statutory provision (subject to reading down the proviso to sub-section (2) of Section 139AA of the Act as given above), we make it clear that the impugned provision has passed the muster of Articles 14 and 19(1)(g) of the Constitution. However, more stringent test as to whether this statutory provision violates Article 21 or not is yet to be qualified. Therefore, we make it clear that Constitutional validity of this provision is upheld subject to the outcome of batch of petitions referred to the Constitution Bench where the said issue is to be examined.

(iii) It is also necessary to highlight that a large section of citizens feel concerned about possible data leak, even when many of those support linkage of PAN with Aadhaar. 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, they being private persons or by prescribing severe penalties to those who are found guilty of leaking the details, is the outlook of the Government. However, we emphasise that measures in this behalf are absolutely essential and it would be in the fitness of things that proper scheme in this behalf is devised at the earliest.


  • 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.

  • 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.

  • 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 Bench comprising Justice A.K. Sikri and Justice Ashok Bhushan had reserved its judgment last month, on a batch of Petitions alleging that Section 139AA of the Income Tax Act, 1961 was “illegal and arbitrary” and “violative of Articles 14 and 21 of the Constitution”. Section 139AA stipulates that every person, who is eligible to obtain Aadhaar number shall, on or after the 1st day of July, 2017, quote Aadhaar number in the application form for allotment of permanent account number and in the return of income.

One Petition had been filed by Major General (Retd.) Sudhir Vombatkere and Bezwada Wilson, leader of Safai Karamachari Andolan, and another by former Kerala Minister and CPI leader Binoy Viswam.

The Petitioners had relied on various orders of the Supreme Court dated September 23, 2013, March 24, 2014, August 11, 2015, and October 15, 2015, contending that the Apex Court has time and again opined that the scheme is purely voluntary and is to be obtained only after obtaining the consent of an individual.

During the hearings, Attorney General Mukul Rohatgi had led a strong defence, banking on the efficiency of biometric details in preventing duplication. Mr. Rohatgi had further cited a number of instances to submit that there exists no absolute right to bodily integrity. Relying on political philosopher Rousseau, the AG had further argued that the State is like a corporation, and the individuals are its members. There is no harm in using the collective might of the state to provide orderly life, peace, and tranquility, he had suggested.

On the other hand, representing one of the Petitioners, Senior Advocate Shyam Divan had made one of the most compelling arguments on civil liberties in Aadhaar case, by touching upon the constitutionality of the amendment to the Income Tax Act without delving into the privacy aspects of the case.

Mr. Divan had argued on the concept of ‘informational self determination’, citing various rulings of the German Constitutional Court to explain that an individual must have the right to determine what sort of information belonging to him can be used. Mr. Divan had then linked this argument to the right to dignity as guaranteed under Article 21 of the Indian Constitution.

“I know of only one authority which might justify the suggested method of construction: “‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean, neither more nor less.’ ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’ ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all.’” (Through the Looking Glass, c. vi.) After all in this long discussion, the question is whether the words “If a man has” can mean “If a man thinks he has”. I am of opinion that they cannot, and that the case should be decided accordingly,” Mr. Divan had submitted.

It is interesting to note that after the Apex Court had reserved its judgment in the matter, the Centre had issued a notification exempting certain individuals from the requirement of quoting Aadhaar/ Enrolment ID. The exemption had been applied to the following individuals:

  1. An individual who is residing in the state of Assam, Jammu and Kashmir and Meghalaya;

  2. An individual who is a non-resident as per the Income-tax Act, 1961;

  3. An individual of the age of eighty years or more at any time during the previous year; and

  4. An individual who is not a citizen of India.

You may read: Aadhaar and the Supreme Court’s Sense of Urgency by Gopal Krishna

You may also read: Aadhaar/PAN: SC Judgment Tomorrow, Issues and Options before the Court by Gautam Bhatia

You may also read: Surveys on Aadhaar-PAN Linkage Show People Concerned about Possible Data Leak by LiveLaw News Network

Read the Judgment here.

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