Government Vs Aadhaar Holdouts: Who Won?
Government says you need an Aadhaar to file returns, others disagree.
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Do you have an Aadhaar identification number? If no, then can you still file your income-tax returns?
Depends on who you ask.
For starters, the Supreme Court’s June 9 verdict is quite clear on two aspects. First, those who have an Aadhaar ID will have to mandatorily link it with their permanent account number to file taxes. Second, taxpayers are also free to voluntarily enroll for the biometric ID.
It’s the fate of the Aadhaar holdouts that’s in question. The apex court has ordered a “partial stay” till the larger question of right to privacy is decided by a Constitution bench. This is what the verdict says:
…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.Supreme Court’s June 9 Verdict
One interpretation of this is that the taxpayers who don’t have an Aadhaar ID and have also not applied for one will not have their PAN invalidated, for now, and can file their returns. There may not be many of them though given that the government has said multiple times that 99 percent of adults have enrolled for the unique identification number.
‘99-1 In Favour Of Government’
The government’s statement a day after the apex court’s verdict, however, doesn’t suggest any relief, at least for filing returns. “Everyone who has been allotted permanent account number as on the 1st day of July, 2017, and who has Aadhaar number or is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to income tax authorities for the purpose of linking PAN with Aadhaar,” said a statement by the Central Board for Direct Taxes.
When contacted for a clarification, a CBDT spokesperson said the statement issued by the department makes its stand clear that the department will not invalidate the PAN as of now after the Supreme Court judgement. “But to file returns, everyone needs to have an Aadhaar or an enrollment number. The website will not allow tax returns to be filed without that,” the spokesperson said.
The government’s argument stems from the fact that the apex court upheld the Section 39AA of the Income Tax Act that made Aadhaar-PAN linkage a must for taxpayers.
The top court has not added any qualifications to linking PAN with Aadhaar, Advocate Zoheb Hossain, who argued for the government, said. “The court has not read down the mandatory aspect of the PAN linkage. In my view, it is not a 50-50 but a 99-1 in favour of the government,” he said.
Petitioners Claim Relief
The Supreme Court’s verdict came on a batch of petitions that had challenged the Section 39AA, citing privacy fears. Counsel representing the petitioners disagree with the government’s view.
There is no confusion, said Senior Advocate Arvind Datar, who argued for one of the petitioners.
Those who have got a PAN card and do not have Aadhaar, they need not obtain Aadhaar and they can continue to file their returns. That’s the relief we’ve got.Arvind Datar, Senior Advocate
Right after the verdict, Senior Advocate Salman Khurshid, also representing one of the petitioners, had told BloombergQuint that returns filed by those who don’t have Aadhaar will be valid, calling it a partial relief.
If you don’t have an Aadhaar card, you are not going to get every transaction of yours based on a PAN card invalidated. If you want to get an Aadhaar card, you are free to do so. If you don’t get an Aadhaar card, your transactions and returns on the basis of your PAN card will still remain valid.Salman Khurshid, Senior Advocate
However, the CBDT statement had reiterated that the apex court had “upheld Section 139AA of the Income Tax Act as constitutionally valid which required quoting of the Aadhaar number in applying for PAN as well as for filing of ITRs”.
How Will The Verdict Be Implemented?
So, which of the two opinions stand in conformity with the judgement.
Former Solicitor General for India and Senior Advocate Mohan Parasaran leaned on the side of the petitioners. If the tax department’s view is correct, it will imply that there is absolutely no stay or relief granted in the judgement, he said. “Only those who already have Aadhaar will need to apply for linkage. Those who don’t have Aadhaar can’t be compelled. That will go against the spirit of the judgement.”
The judgement in my view is quite unambiguous. If the tax department misinterprets, they will have to face consequences from the tax payer.Mohan Parasaran, Senior Advocate
The last date to file income-tax returns is a month and a half away, so the implementation of the verdict becomes crucial.
Based on the partial relief granted, it could be interpreted that one may be technically eligible to file tax return in absence of Aadhaar, Vikas Vasal, head of the tax practice at consulting firm Grant Thornton, told BloombergQuint. However, for all practical purposes, Aadhaar will be required, unless the revenue authorities modify the online systems and return filing requirements for filing the tax return without Aadhaar, he said.
The privacy concerns cited by petitioners have also not been addressed and the Supreme Court has referred it to a larger bench. Till then, petitioners have the option of filing an application in the top court seeking a clarification on its judgement. No such request has been made so far.
On Friday, the government also made quoting Aadhaar mandatory for opening bank accounts as well as for financial transactions of Rs 50,000 and above, the revenue department of the finance ministry said in a notification.