Implications of the SC Judgment on Aadhaar-PAN Linkage Explained
Fate of Section 139AA rests with the Constitution bench that will examine all issues concerning privacy & Aadhaar.
- - The Supreme Court, on 9 June, upheld the validity of the law making it mandatory to link PAN to the Aadhaar number
- - SC chose to exempt those without an Aadhaar until the larger privacy issue is decided by the Constitution bench
- - The next round of debate over the Aadhaar is scheduled for later this month and the big, final battle before the Constitution Bench still remains to be fought
What are the Implications of the SC Judgement on Linking PAN with Aadhaar?
In offering comment on the Supreme Court’s judgement in Binoy Viswam v Union of India, upholding most of Section 139AA of the Income Tax Act, 1961, given the partisan feelings over the issue, it is necessary to offer a disclaimer: I have been an advocate appearing for the Unique Identification Authority of India in the Supreme Court in the past. I was a Senior Resident Fellow at the Vidhi Centre for Legal Policy which assisted in drafting the Aadhaar law. I am an Aadhaar skeptic and a holdout who refuses to get an Aadhaar card. Nonetheless, my views remain my own.
First things first. There is a bit of confusion over the scope of the judgement, mainly because of a poorly worded para 125. However, the concluding paragraph, para 128 removes any doubt. In short, the implications of the judgement are:
What are the Consequences of Not Linking PAN and Aadhaar?
Keep in mind that Section 139AA imposed two different obligations:
i) to quote the Aadhaar number in Income Tax Returns/PAN applications filed after 1 July 2017
ii) to link the Aadhaar number with the PAN, irrespective of when you file the returns, by 1 July 2017.
Much confusion has resulted in people conflating these two obligations, but the court has dealt with the two separately. Different consequences follow.
The failure to mention your Aadhaar number in your ITR or PAN application will mean your ITR or PAN application is returned as “defective”. This the Court has no problem with.
The failure to link your Aadhaar with your PAN was supposed to result in retroactive invalidation of the PAN – this the Court has found disproportionate and excessive to the stated aim of the law, and therefore, a violation of Article 19(1)(g) read with Article 19(6). Consequently, the proviso has been “read down” to make this consequence prospective for those who presently have an Aadhaar number and do not link it to their PAN by 1 July.
So much for what the Court said. But was it right?
How did the Court Respond to the Petitioner's Arguments?
The petitioners’ challenge to the constitutional validity of Section 139AA was made from multiple angles, most of which were rejected, though the argument that it was an unreasonable restriction of the freedom of trade and commerce has found favour.
Even though the petitioners’ counsel, Shyam Divan, made elaborate arguments on the issues of how Section 139AA violates the right to privacy and dignity, the Court declined to go into these, preferring to leave it to the Constitution Bench to address. Following the Supreme Court’s decision in the right to privacy case in August, these issues can finally be addressed when the main case begins in November.
One can see the wisdom in doing so – if the Aadhaar is the problem (as alleged by the petitioners) it makes sense to have the entire Aadhaar law and scheme up for discussion before the court to judge its constitutional validity, as opposed to one use case.
The Court also points out the valid concern of judicial discipline – a smaller bench hearing and deciding an issue which is still pending consideration before a larger bench.
Should the Court have Constituted a Larger Bench to Make a Decision?
It is a different matter, and one of abiding shame for the Supreme Court, that it had still failed to constitute the larger bench for a matter as important as this, at the time this issue arose. Should the smaller bench of two judges have tried to address this institutional failure by going ahead to decide issues pending before the larger bench? I don’t think so. The solution to an institutional failure is never found in another, different one.
Judicial review of the constitutionality of tax and fiscal laws has always been limited. Courts in India have consistently avoided expanding the scope of judicial review of tax laws simply because unless the unconstitutionality is evident and writ large, they want to avoid the danger of being seen to interfere too much in complex, economic matters which they are not necessarily suited to understand.
In that sense, the Supreme Court’s judgment in Binoy Viswas is in line with past precedent – giving leeway to the legislature and not trying to second guess intentions.
An Anti-Black Money Tool?
Aadhaar’s suitability and effectiveness in fighting black money may be questionable, and indeed the Court suggests as much, but how effective a law or a measure may be, is not the court’s concern when assessing constitutional validity.
In the limited scope of the arguments addressed in the judgement, it is hard to disagree with the Court without requiring it to overturn well-established precedents and chart a bold (and possibly soon to be overturned) path. Even though the judgement in Binoy Viswam is final, it is far from the end for either Section 139AA or Aadhaar.
The big, final battle on Aadhaar before the Constitution Bench still remains to be fought, but will begin at the end of November. As the Court also makes it clear in this judgement, the fate of Section 139AA rests with the Constitution Bench that will go into all issues concerning privacy and the Aadhaar. One hopes the Court will end this “constitutional evasion” and bring closure to the debate once and for all.
(Alok Prasanna Kumar is an advocate based in Bengaluru and can be reached @alokpi. This is an opinion piece and the views expressed above are the author’s own.)
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