hrough the Finance Act, 2017, Section 139AA was inserted in the Income-tax Act, 1961. Section 139AA has two parts.

The flagship project of the government to provide a unique identity number —Aadhaar—to every individual and linking it with various schemes is a topic of much discussion. The recent Supreme Court ruling on ‘right to privacy’ as a fundamental right has made the debate even more interesting.

Section 139AA – Requirement to quote Aadhaar & link it with PAN. Through the Finance Act, 2017, Section 139AA was inserted in the Income-tax Act, 1961. Section 139AA has two parts:

First, it requires every person, who is eligible to obtain Aadhaar on or after July 1, 2017, to quote the Aadhaar number in the PAN application and income-tax (I-T) return. Where the person has not been allotted an Aadhaar number, the enrolment id of the Aadhaar application form is required to be quoted in the PAN application and I-T return. Thus, every individual filing I-T return on or after July 1, 2017 is required to quote Aadhaar number in the I-T return.

Second, the Section requires every person who has a PAN as on July 1, 2017, and is eligible to obtain Aadhaar number, to link their Aadhaar with their PAN. The Section also provides that, effective a date to be notified, in case of failure to link the Aadhaar with PAN, the PAN shall be deemed to be invalid. This date is expected to be notified by the Central Board of Direct Taxes (CBDT).

There were many challenges faced by individuals in linking Aadhaar and PAN such as different name, date of birth etc., in the PAN and Aadhaar database. Given these challenges, through a circular dated July 31, 2017, the CBDT said that for the purpose of e-filing of tax returns, it would be sufficient to quote Aadhaar or its enrolment id in the I-T return. The actual linking of PAN with Aadhaar can be done subsequently by August 31, 2017. However, CBDT in its circular has categorically stated that tax returns will not be processed until the linkage of Aadhaar with PAN is done. Given the recent Supreme Court ruling on ‘right to privacy’ and the ongoing debate on Aadhaar, this deadline has been further extended to December 31, 2017.

SC ruling in June 2017 – Upheld Section 139AA with partial relief

Amidst the debate with respect to constitutional validity of Section 139AA, in June 2017, the Supreme Court in its ruling in the case of Binoy Viswam, upheld the validity of Section 139AA while clarifying that it is subject to the outcome of writ petition pending before the Supreme Court on the validity of Aadhaar under the Aadhaar Act.

SC ruling in August 2017 – ‘Right to privacy’ is a fundamental right

The issue whether collection of biometric data under the Aadhaar Act violates the ‘right to privacy’ was raised by way of a writ petition before the three-judge bench of the Supreme Court. The bench took note of various conflicting Supreme Court rulings earlier on the ‘right to privacy’ and the matter was finally passed on to a nine-judge bench. On August 24, 2017, the nine-judge bench passed a landmark judgement which acknowledged the ‘right to privacy’ as a fundamental right. In its ruling, the Supreme Court said: ‘Privacy has both positive and negative content. The negative content restrains the state from committing an intrusion upon the life and personal liberty of a citizen. Its positive content imposes an obligation on the state to take all necessary measures to protect the privacy of the individual.

The right of privacy is a fundamental right. It is a right which protects the inner sphere of the individual from interference from both State, and non-State actors and allows the individuals to make autonomous life choices’. However, this ruling deals with the issue of ‘right to privacy’ being a fundamental right only. Whether Aadhaar scheme violates this fundamental right to privacy is still pending and is to be decided by the three-judge bench, the outcome of which, in turn, may have an impact on the validity of Section 139AA.

Date extended till Dec 31, 2017

In the meantime, considering the uncertainty on Aadhaar and Section 139AA, the CBDT has extended the deadline to link Aadhaar with PAN to December 31, 2017. However, tax returns filed for FY2016-17 may not be processed by the tax department until the said linkage is done. In the absence of processing of I-T returns, refunds, if any, due to the taxpayers may not be processed.

The writer is tax director, People Advisory Services, EY India