Aadhaar – Whether mandatory for making PAN application or filing return of income?

A new section, Section 139AA, was inserted in the Finance Act, 2017, as per which it is mandatory for persons eligible to obtain Aadhaar no. ( a 12-digit unique identity number based on biometric and demographic data of an individual) to quote Aadhaar no. in the PAN application form and in the income tax return, with effect from July 01, 2017.

Where PAN has already been allotted to any person who is eligible to obtain Aadhaar as on July 01, 2017, such person is required to link his Aadhaar with PAN.

The Central Board of Direct Taxes (CBDT) on April 04, 2017 also issued a press release in this regard clarifying that such mandatory quoting of Aadhaar shall apply only to a person who is eligible to obtain Aadhaar number.

As per Section 3(1) of the Aadhaar (Targeted Delivery Of Financial And Other Subsidies, Benefits And Services) Act, 2016, every resident shall be entitled to obtain Aadhaar no. by submitting requisite information and undergoing enrolment process.

Further, as per Section 2(v) of the said Act, “resident“ means an individual who has resided in India for a period or periods amounting in all to 182 days or more in the 12 months immediately preceding the date of application for enrolment.

CBDT has been continuously extending the deadline for linking Aadhaar number with PAN due to various problems faced by the taxpayers such as mismatch in Aadhaar details or shortage of Aadhaar facilitation centers etc. As of now, the last date for linking Aadhaar number with PAN has been extended to 30th June, 2018 by CBDT.

Section 139AA also provides that the Central Govt. may, by notification, exempt any person or any State from the above requirement.

The Central Govt. vide Notification No. 37/2017 dated May 11, 2017 (which came into force from 1st July, 2017), exempted following individualsfrom the provisions of Section 139AA:

  1. An individual residing in the States of Assam, Jammu and Kashmir and Meghalaya,
  2. 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,
  4. An individual not a citizen of India.

 

The constitutional validity of Section 139AA has been a matter of dispute and several petitions were filed before various High Courts and the Supreme Court in this regard.

In June 2017, the Supreme Court in the case of Binoy Viswam v. Union of India[2017] 82 taxmann.com 211 (SC), held that Section 139AA is not violative of Articles 14 and 19(1)(g) of the Constitution of India. Accordingly, those who have to apply PAN are required to give Aadhaar.

Regarding the requirement of linking PAN with Aadhaar, the Supreme Court held that since the matter of validity of Aadhaar was yet to be considered on the touchstone of Article 21 of the Constitution (including the debate around Right to Privacy and Violation of Human Dignity) by the Constitution Bench, partial stay on the said requirement was necessary. Accordingly, those individuals who have Aadhaar are required to link the same with PAN. However, those individuals who do not have Aadhaar are not required to do so and their PAN would not be treated as invalid for the time being.

The Supreme Court also held that Section 139AA cannot be read retrospectively due to the fact that if failure to intimate Aadhaar number invalidates the PAN, then it has the effect of undoing all the acts which were done on the basis of such PAN in the past which may also attract penal consequences. Therefore, it was concluded that the said section is to read prospectively.

For the individuals who are not falling within the exemption notification discussed above, Aadhaar is required to be obtained before making PAN application or for the purposes of filing income tax return.