Saturday, 10 June 2017

What the Supreme Court has decided in its 9 June 2017 Aadhaar judgment

What the Supreme Court has decided in its 9 June 2017 Aadhaar judgment

1 Parliament was fully competent to enact Section 139AA of the Income Tax Act and its authority to make this law was not diluted by the orders of the Supreme Court.

2 There is no conflict between the provisions of the Aadhaar Act and Section 139AA of the Income Tax Act in as much as when interpreted harmoniously, they operate in distinct fields.

3 Section 139AA of the Income Tax Act does not violate Article 14 of the Constitution of India and is not discriminatory. 

4 Section 139AA of the Income Tax Act (as read down by the Court, see point 7 below) does not violate Article 19(1)(g) of the Constitution of India. 

5 This Division Bench of the Supreme Court refused to decide the question whether Section 139AA of the Income Tax Act violates Article 21of the Constitution of India as that issue is pending hearing before a Constitution Bench. 

6 (i) The Court has stayed the operation of the following portion of Section 139AA of the Income Tax Act (i.e., the proviso to sub-section (2) of Section 139AA), and this stay operates till the decision of the Constitution Bench in the cases involving the right to privacy arguments under Article 21 of the Constitution of India. 

“Provided that in case of failure to intimate the Aadhaar number, the permanent account number allotted to the person shall be deemed to be invalid and the other provisions of this Act shall apply, as if the person had not applied for allotment of permanent account number.”

(ii) The Court has clarified that this stay applies only in the context of the obligation to comply with sub-section (2) of Section 139AA. This following statement in the judgment explains how the stay granted against the proviso to sub-section (2) of Section 139AA of the Act would operate.

“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.”

(iii) The Court also stated: 
“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.”

7 The Court has also clarified that the proviso to sub-section (2) of Section 139AA of the Act cannot apply retrospectively and must be read down to make it clear that “it would operate prospectively”.

8 The judgment upholds the constitutional validity of Section 139AA of the Income Tax Act “subject to the outcome of batch of petitions referred to the Constitution Bench where the said issue is to be examined.” 

9 This Division Bench of the Supreme Court has made a general, non-specific recommendation to the Government that it take steps to address citizens’ concerns about unauthorized Aadhaar data leaks, leaving it to the Government to decide what steps it would take to address such concerns. 

10 There is no stay on the operation of sub-section (1) of Section 139AA of the Act and therefore with effect from 1 July 2017, it remains mandatory to quote the Aadhaar number (or Enrolment ID of Aadhaar application form) on all applications for allotment of new PAN cards, and in all income-tax returns. 

11 There is no stay on the operation of sub-section (2) of Section 139AA of the Act and the judgment states that:
(a) those who already have Aadhaar cards and those who have already enrolled under the Aadhaar scheme will need to comply with this sub-section. 
(b) Those who wish to enroll under the Aadhaar scheme are also free to do so and must comply with this sub-section. 
(c) However, those who do not have Aadhaar cards, and have not enrolled under the Aadhaar scheme and who do not wish to enroll and who do not comply with this sub-section, will not be subject to the proviso to this sub-section (which has been stayed till the Constitution Bench decision) and their PAN cards will not become invalid in the interim.

12 Note that the Government is required to notify the form, manner and date of compliance with sub-section (2) of Section 139AA including listing the Government authority/ authorities to which Aadhaar numbers are to be intimated. 

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