Mr. Thiagarajan Kumararaja Vs Union of India (Madras High Court)
It was observed that though the PAN is issued under the provisions of Section 139A of the Act, its function is not limited to giving this number in the income tax returns or for other acts to be performed under the Act as mentioned in Sub-Sections (5), (5A), (5B), 5(C), 5(D) and (6) of Section 139A. It was further observed that Rule 114B of the Rules mandates quoting of this PAN in various other documents pertaining to different kinds of transactions listed therein. It was also observed that for doing many activities of day to day nature, including in the course of business, the PAN is to be given and in the absence of a PAN, it will be impossible to undertake any of the activities, though its requirement is aimed at curbing the tax evasion. It was further observed that if the PAN of a person is withdrawn or is nullified, it definitely amounts to placing restrictions on the right to do business.
Then, the Hon’ble Supreme Court proceeded to frame the question as to whether these restrictions are reasonable and meet the requirement of Clause (6) of Article 19. After referring to the decision in the case of Modern Dental College and Research Centre Vs. State of Madhya Pradesh [reported in 2016 (7) SCC 353], proceeded to discuss as to whether the restrictions, which would result in terms of the Proviso to Sub-Section (2) of Section 139AA of the Act, are reasonable or not. On this question, it would be beneficial to refer to certain paragraphs viz. paragraphs 122, 124 and 125 of the decision in the case of Binoy Viswam, as under :
“122. While considering the aforesaid submission of the petitioners, one has to keep in mind the aforesaid purpose of the impugned provision and what it seeks to achieve. The provision is aimed at seeding Aadhaar with PAN. We have already held, while considering the submission based on Article 14 of the Constitution, that the provision is based on reasonable classification and that has nexus with the objective sought to be achieved. One of the main objectives is to de-duplicate PAN cards and to bring a situation where one person is not having more than one PAN card or a person is not able to get PAN cards in assumed/fictitious names. In such a scenario, if those persons who violate Section 139AA of the Act without any consequence, the provision shall be rendered toothless. It is the prerogative of the Legislature to make penal provisions for violation of any law made by it. In the instant case, requirement of giving Aadhaar enrolment number to the designated authority or stating this number in the income tax returns is directly connected with the issue of duplicate/fake PANs.
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“124. Therefore, it cannot be denied that there has to be some provision stating the consequences for not complying with the requirements of Section 139AA of the Act, more particularly when these requirements are found as not violative of Articles 14 and 19 (of course, eschewing the discussion on Article 21 herein for the reasons already given). If Aadhar number is not given, the aforesaid exercise may not be possible.
125. Having said so, it becomes clear from the aforesaid discussion that those who are not PAN holders, while applying for PAN, they are required to give Aadhaar number. This is the stipulation of sub-section (1) of Section 139AA, which we have already upheld. At the same time, as far as existing PAN holders are concerned, since the impugned provisions are yet to be considered on the touchstone of Article 21 of the Constitution, including on the debate around Right to Privacy and human dignity, etc. as limbs of Article 21, we are of the opinion that till the aforesaid aspect of Article 21 is decided by the Constitution Bench a partial stay of the aforesaid proviso is necessary. 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. We are adopting this course of action for more than one reason. We are saying so because of very severe consequences that entail in not adhering to the requirement of sub-section (2) of Section 139AA of the Act. 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. Since we are adopting this course of action, 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.”
Hon’ble Supreme Court has not granted stay of Section 139AA(2) of the Act, but its validity has been upheld and the limited stay, which was granted by the Hon’ble Supreme Court, was only to facilitate other transactions, which are mentioned in Rule 114B of the Income Tax Rules, 1962 (hereinafter called the Rules). Therefore, the Hon’ble Supreme Court having upheld the provisions of Section 139AA of the Act, the partial stay granted was only restricted to transactions mentioned in Rule 114B of the Rules and hence, the question of permitting the petitioner to file manual returns without furnishing the aadhaar number is not sustainable and that was not the judgment of the Hon’ble Supreme Court.
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