Aadhaar and Income-Tax Returns: Legal Notes by Arvind Datar
Arvind P. Datar
On March 13, 2018, the deadline for linking Aadhaar with bank accounts, mobile numbers, etc. was
extended by the Supreme Court till the pronouncement of the judgment. However, there was no specific mention of income tax returns or PAN.
The question that is repeatedly being asked is How do persons who have chosen not to apply for Aadhaar file their income-tax returns?
In Binoy Viswam v. Union of India [(2017) 7 SCC 59 at para 133], the Supreme Court has made it clear that persons who have chosen not to enroll for Aadhaar will not face the consequences of their PAN number being deemed to be invalid as this would make it impossible for such persons to carry out banking transactions, sale and purchase of motor vehicles, shares, mutual funds etc as prescribed in Rule 114B of the Income-tax Rules, 1962. The net result is that, pending the decision in the main Aadhaar case, assessees who did not have the Aadhaar number could file returns and ensure that their PAN numbers did not become invalid.
However, the income-tax returns have now to be filed electronically and require the quoting of the Aadhaar number. Thus, persons who have chosen not to apply for Aadhaar will not be able to upload the return electronically despite the fact that application for Aadhaar is voluntary.
Manual return to be filed:
As per the interim orders of the Gujarat and Kerala High Courts, assessees can file their return manually without insisting on Aadhaar number/enrollment number. The cases are:
- Bandish Saurabh Soparkar v. Union of India, [2017] 87 taxmann.com 48 (Gujarat); and
- Prasanth Sugathan v. Union of India, [2017] 84 taxmann.com 73 (Kerala).
It must be pointed out that the Madras High Court, in Thiagarajan Kumararaja v. Union of India 398 ITR 740 (Mad), has dismissed a writ petition on the ground that the partial stay by the Supreme Court was only to facilitate the transactions mentioned in Rule 114B of the Income-tax Rules, 1962. The decision of the Madras High Court is, it is humbly submitted, erroneous, as the partial stay was intended not to prejudice persons who did not have Aadhaar cards or had not enrolled for the Aadhar number. This stay was also necessary in view of the main Aadhaar matter pending before the Constitution bench, and the judgment specifically mentions that the issues of privacy were being left open to be dealt with by the Constitution Bench (this was later referred to a nine judge Bench).
The views of the 9 judge Bench in Puttaswamy have now been relied upon in support of the view that compulsory linking of Aadhaar to PAN is unconstitutional, and arguments to this effect have been made in the pending matter before the Constitution Bench. The Madras High Court failed to note that if all eligible persons had to get Aadhaar number, the grant of the partial stay would be totally meaningless. The decision of the Madras High Court is thus contrary to the Supreme Court decision. Further, the decision of the Madras High court is being appealed against. The views taken by the Gujarat and Kerala High Courts are in harmony with the views and the partial stay granted by the Supreme Court.
It is, therefore, suggested that persons who do not have Aadhaar should adopt the following steps:
- The income-tax returns should be filled up manually;
- The return should be filed before the Jurisdictional Assessing Officer with a covering letter stating that they have chosen not to enroll for Aadhaar and that the return cannot be uploaded electronically without Aadhaar number. Consequently, they have no option but to file it manually; and
- Such manual filing has been permitted by the Gujarat and Kerala High Courts.
It is also hoped that the CBDT issues a circular that enables the filing of manual returns till the Aadhaar judgment is pronounced.
[In view of the urgency, this short note is being published simultaneously in Taxsutra and Bar & Bench]
The author is a Senior Advocate, and acknowledges the assistance of Sandeep Bagmar and Rahul Unnikrishnan, Advocates.