NEW DELHI: The Supreme Court on Friday upheld the validity of the law making Aadhaar mandatory for allotment of PAN and filing of Income Tax(IT) returns but exempted those without it for now until the larger privacy issue is decided.

In effect, those who possess an Aadhaar card must link it to their Permanent Account Number(PAN) card and those who have enrolled and not yet got their Aadhaar card are also exempted from mandatory linkage and the penalising invalidation of their PANs if they don't link it.

The apex court while upholding the validity of a fresh provision in the Income Tax (IT) law making Aadhaar compulsory for allotment of PAN and filing of IT returns imposed a partial stay on it till its constitution bench decides the right to privacy issue connected with it.

Section 139AA of the Income Tax Act provides for mandatory quoting of Aadhaar or enrolment ID of Aadhaar application form for filing of income tax returns and making application for allotment of PAN with effect from July 1 this year.

A bench comprising Justices A K Sikri and Ashok Bhushan, which upheld the legislative competence of the Parliament in enacting the law to this effect, said there was no conflict between the impugned provision of the Income Tax Act and the Aadhaar Act.

It said that PAN card without Aadhaar number would not be treated invalid till the Constitution bench decides the larger issue of Right to Privacy.

The bench said that previous transactions won't be affected or nullified with partial stay on the new law till privacy issue linked to Aadhaar is decided.

Further, the bench also clarified that there would be no retrospective implementation of the provision to invalidate the PAN for non-compliance of unique identification number under the Aadhaar scheme.

While reading the operative portion of the judgement, the bench said, "we are of the opinion that till Article 21 (concerning right to privacy) of the Constitution is decided by the Constitution bench, a partial stay is required (on section 139 AA of IT Act)."

Upholding the validity of Section 139AA of the IT Act subject to the outcome of the batch of petitions before its Constitution bench which is examining if Aadhaar scheme infringes on the Right to Privacy and if there is threat of data leakage, the bench said PAN holders already having Aadhaar have to link both.

The bench clarified that it has not touched upon the issue of Right to Privacy and other aspects that the Aadhaar scheme also affects the human dignity which has to be decided by the Constitution bench.

However, the bench asked the government to take appropriate steps to ensure there was no leakage of data from the Aadhaar scheme as apprehensions have been expressed that there was a possibility of the data being compromised.

"The government to take proper and appropriate steps and the scheme in this regard has to be devised at the earliest till confidence among the citizens that the data would not be leaked," the bench said.

The bench rejected the contention that since the apex court has been passing orders time and again on the issue of Aadhaar, government should not have come out with a provision in the IT law to make UIDAI mandatory for the purpose of allotment of PAN and linking it with the ITR.

"We have rejected this (argument). We have also rejected that it violates Article 19 (1) (g) and Article 14 of the Constitution," the bench said.

The court had on May 4 reserved the verdict on a batch of petitions challenging section 139AA of the I-T Act, which was introduced through the latest budget and the Finance Act, 2017.

The Centre had earlier said that the programme of PAN had become suspect as it could be faked, while Aadhaar was a "secure and robust" system by which the identity of an individual could not be faked.

While opposing the government's move, the petitioners, including CPI leader Binoy Viswam, have contended before the bench that the Centre cannot "belittle" the apex court's 2015 order holding the unique identification number as voluntary.

They had argued that government should not have enacted section 139AA in the Act to make Aadhaar mandatory for PAN as the apex court's five-judge bench order was clear that Aadhaar was voluntary and not mandatory.

However, Attorney General Mukul Rohatgi had contended that Aadhaar was made mandatory for allotment of PAN to weed out fake cards which were used for terror financing and circulation of black money.

Rohatgi had said that with the implementation of Aadhaar, the government had saved over Rs 50,000 crore on various schemes to benefit the poor as well as pension schemes.

The Centre had also told the court that fake PAN cards were being used to "divert funds" to shell companies.

The Supreme Court had observed that it was yet to be "tested" whether Aadhaar violated protection of life and personal liberty granted under Article 21 of the Constitution, which was pending hearing for an authoritative pronouncement by a five-judge Constitution Bench.

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In Video: SC orders partial stay on Aadhaar-PAN linking