Supreme Court upholds Aadhaar-PAN linkage

But court partly stays ‘harsh’ proviso.

June 09, 2017 02:44 pm | Updated December 04, 2021 10:45 pm IST - New Delhi

In this file photo, a man records his identity with an iris scanner for obtaining the Aadhaar card, at the Head Post Office in Madurai. File

In this file photo, a man records his identity with an iris scanner for obtaining the Aadhaar card, at the Head Post Office in Madurai. File

The Supreme Court on Friday upheld the validity an Income Tax law amendment linking PAN with Aadhaar for filing tax returns and making Aadhaar or Aadhaar enrollment slip compulsory to apply for a Permanent Account Number (PAN) card.

A Bench of Justices A.K. Sikri and Ashok Bhushan held that the proviso to Section 139AA (1) of the Income Tax Act requiring citizens to mention their Aadhaar number or atleast their Aadhaar enrollment id to the designated authorty was  “ directly connected with the issue of duplicate/fake PANs”.

“Parliament in its wisdom thought that one PAN to one person can be ensured by adopting Aadhaar for allotment of PAN to individuals. As of today, that is the only method available i.e. by seeding of existing PAN with Aadhaar. It is perceived as the best method, and the only robust method of de-duplication of PAN database,” the court held.

It held that Section 139AA (1) was not violative of the right to trade and profession under 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.

Neither did the court find Section 139AA discriminatory.

It said the Parliament was fully competent to enact Section 139AA and its authority to make this law was not diluted by the orders of the Supreme Court that Aadhaar was voluntary. “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,” the court held. 

The court however upheld Section 139AA (2), which makes it mandatory for citizens who hold a PAN as on July 1, 2017 and are eligible to obtain Aadhaar number to intimate his Aadhaar number to the authorities for filing income tax returns. Those who have enrolled for Aadhaar are also free to do the same.

However, the court issued a “partial stay” on the proviso to Section 139AA (2), which mandates that those who do not link Aadhaar with PAN by July 1 would face the consequences of invalidation of their PAN  ab inito -  that is, the effect of non-compliance would be the automatic invalidation of their PAN as it it had never existed. 

Finding this proviso too harsh and a trigger for inviting “very severe consequences”, the Supreme Court read it down to the extent that the proviso would not have any retrospective effect or affect past income tax transactions of citizens in case of non-compliance.


“If failure to intimate the Aadhaar number renders PAN void ab initio, 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. Therefore, this provision needs to be read down by making it clear that it would operate prospectively,” the Supreme Court held.

The court exempted assessees who are not Aadhaar card holders from the ambit of the proviso to Section 139 (2). Their PAN cards would not be treated as invalid for the time being till a Constitution Bench decides on the question whether Aadhaar scheme is a violation of right to privacy and a limb of Article 21 (right to life and dignity) of the Constitution.

“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,” Justice Sikri, who authored the judgment, observed. The court further suggested to the Parliament to consider whether there is a need to “tone down the effect” of the proviso to Section 139AA (2) by limiting the consequences.

The court cautioned the government to take all proper measures to prevent assuage public apprehensions about data leakage by taking proper measures so that confidence is instilled among the public at large. “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,” the court held.

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