The petitions challenging the constitutionality of Section 139AA of the Income Tax Act (‘IT Act’) came up for hearing before the Supreme Court today. Section 139AA makes it mandatory for individuals to quote their Aadhaar number when applying for a Permanent Account Number (PAN) as well as to file income tax returns. Section 139AA(2) stipulates that failure to intimate the Aadhaar number would automatically invalidate one’s existing PAN. Further, not linking the two also creates a legal fiction by which the provisions of the Act would apply ‘as if the person had not applied for the allotment of the PAN’.
Passed in March 2017, this IT Act amendment comes in the backdrop of several pending petitions challenging the constitutional validity of the Aadhaar project. Since 2013, the Supreme Court has passed multiple interim orders directing that Aadhaar remain purely voluntary till the pendency of these petitions. In August 2015, the Supreme Court had referred these matters to a larger bench, citing ambiguity in the Court’s jurisprudence on the fundamental right to privacy. Almost two years later, this bench remains to be constituted.
This background is pertinent given that the petitioners were forced to limit their submissions to the issue of linking Aadhaar numbers with PAN. The pending reference effectively ended up acting as a bar to assail the IT Act provision on the basis of privacy issues associated with Aadhaar.
The challenge constitutes of two separate writ petitions, filed by different sets of petitioners. The first petition has been filed by Mr. Binoy Viswam and the second by (Retd). Maj. Gen. Vombatkere and Mr. Bezwada Wilson, who are also petitioners in the main challenge to the Aadhaar project.
Arguments Advanced on behalf of Mr. Viswam:
The counsel for Mr. Viswam primarily advanced two arguments – that Section 139AA is unconstitutional as it violates and overrules several orders of the Supreme Court, and that it infringes Article 14 of the Constitution.
- Section 139AA violates orders of the Supreme Court that were based on the Central Government’s undertakings – It was argued that by way of successive interim orders, such as on 23 September 2013, 11 August 2015, 15 October 2015 and 14 September 2016, the Court had directed that Aadhaar remain purely voluntary. The 15 October 2015 order specifically states that the Aadhaar scheme must remain voluntary ‘till the matter is finally decided by this Court one way or another’. Reference was also made to the Supreme Court’s recent order in Lokniti Foundation v. Union of India (6 February 2017), where it recorded the government’s submission that Aadhaar was voluntary for obtaining a telephone connection.
Based on these facts, it was argued that no one could be deprived of a service or benefit for want of an Aadhaar number. The bench observed that such undertakings could not preclude the Parliament from passing a law (such as that in issue). To this, the counsel responded stating that the state could not indirectly make Aadhaar mandatory under the IT Act while it remained voluntary under the parent Act, that is – the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (‘Aadhaar Act’). Section 7 of the Act, which stipulates that no benefit or service can be denied on the ground of not having an Aadhaar number, was read to support this contention.
Additionally, it was argued that these interim orders granted individuals a right – the right to not enroll for Aadhaar. This could not be taken away till the decided the matter conclusively. The counsel buttressed this contention citing precedent – Madan Mohan Pathak v. Union of India (1978) 2 SCC 50 and Indian Aluminium Co. v. State of Kerala (1996) 7 SCC 637, amongst others.
- Section 139AA is violative of Article 14 because it unreasonably targets individuals out of all categories of assessees and for bring arbitrary – Besides individuals, entities such as companies, partnership firms, co-operative societies and trusts are also required to file returns on their income. As a result, it was argued that Article 139AA discriminated between assessees as it only adversely impacted individuals.
The argument advanced was that the twin test of permissible classification – that the classification is not based on an intelligible differentia, and that the differentia has no rational relation to the object sought to be achieved by the provision, were not satisfied in the present case. Given that the object of linking the Aadhaar and PAN is to address black money and weed out fakes, the provision fails to address nefarious activities carried through companies or trusts. This argument was later also advanced on the ground of proportionality.
This was met with some resistance by the bench, which observed that there was a natural distinction between natural and juristic persons and a distinction on that ground was not, discriminatory per se. It went on to observe that the law could be treated as a mere replacement of one system by another. The larger challenge to Aadhaar aside, it was difficult to assail the validity of a new or reformed system on this ground alone.
Counsel for Mr. Viswam then attempted to show that the provision is unconstitutional for being arbitrary. He submitted that such an unreasonable classification virtually resulted in ‘civil death’ for an individual. As per Section 114B of the IT Act, a PAN is necessary for eighteen essential transactions including opening a bank account and purchasing shares. If invalidated under Section 139AA(2), it would unreasonably restrict the right of individuals to carry on their business, as opposed to entities such as companies. Further, the individual would also be subject to additional penalties due to the legal fiction by which an individual is assumed never to have applied for a PAN. It was argued that this retrospective effect was highly prejudicial to individual assessees.
This was immediately objected to by the Attorney General, who argued that the legal fiction was not intended to be retrospective and would only apply from 1 July 2017, which is the deadline for linking Aadhaar with PAN.
To conclude, it was submitted that as per the data published by the Unique Identification Authority of India, enrolment rates for several states such were above 100%. This data was used to show that the problem of fakes or bogus cards existed even under the Aadhaar regime.
Post lunch, the counsel for (Retd.) Maj. Gen. Vombatkere and Mr. Wilson began arguments. He outlined his prayers before the Court – that Section 139AA be struck down, or alternatively, be read down to make Aadhaar a voluntary requirement.
As a preliminary point, he argued that neither of the petitioners had enrolled for Aadhaar. Being parties to the petitions challenging the Aadhaar project, they were conscientious objectors to the entire scheme. He proceeded to outline the broader issues in the challenge, with a view to provide the judges with some context. His submission rested on the idea of autonomy and bodily integrity associated with biometrics such as fingerprints and iris scans. Arguing that the Indian Constitution guaranteed a free, democratic society, he stated that the state had no dominion over core elements on one’s body and identity. As a result, the state could not coerce citizens to part with this information as a condition or as a bargain for enjoying rights guaranteed to them.
The arguments on behalf of (Retd.) Maj. Gen. Vombatkere and Mr. Wilson will continue on April 27 and will build on the specific issue of Article 139AA. The Attorney General is also likely to make his submissions on behalf of the Union Government.