Quoting of Aadhaar Number in Return of Income – Whether mandatory ?

Background

The Finance Act 2017 has inserted a new Section 139AA which has come into force with
effect from 1st April 2017. Under this Section, it is mandatory for quoting of Aadhaar
Number for obtaining PAN and in filing Return of Income (ROI). The main purpose
behind enacting this new Section 139AA is to check menace of black money as well as to
cover those persons who are evading tax payments. The purpose is also to weed out fake
PAN cards which were used for terror financing and circulation of black money.

Relevant Provisions

(i) Every person who is eligible to obtain Aadhaar Number has to quote the same on
or after 1st July 2017 in
- Application for allotment of PAN; and
- ROI
(ii) If a person has not received Aadhaar Number, he will have to quote the Enrolment
ID of Aadhaar application issued to him.

(iii) Every person who is allotted PAN as on 1st July 2017 and who is eligible to obtain
Aadhaar Number, will have to intimate his Aadhaar Number to such authority on
or before the date to be notified by the Government in prescribed form.

(iv) If the above intimation as stated in (iii) above is not given, the PAN given to the
person shall become invalid.

(v) The provisions of this section shall not apply to such persons as may be notified
by the Central Government.
To Whom it is applicable

The new Section is applicable only to those persons who are eligible to obtain Aadhaar
Number. All residents individuals in India are eligible to obtain Aadhaar Number.

Non-residents. HUF, Firms, LLPs, APO, Companies, etc who are not eligible to obtain
Aadhaar Number, therefore, this new Section will not apply to them.

Documents where quoting of Aadhaar Number is mandatory

(a) In the application for allotment of PAN i.e. in form 49A

(b) In ROI which is to be filed on or after 1st July 2017

Thus, even if ROI of earlier years, either filed belated or revised after 1st July 2017, it will
be mandatory to quote Aadhaar Number in such Returns.

Consequences of non-compliance

In view of Proviso to Section 139AA(2), if there is a non-compliance, then PAN allotted

to such person shall become invalid and other Provisions of the Income Tax Act shall
also apply as if such person had not applied for allotment of PAN.

Supreme Court findings

Certain social activist have filed petition before the Supreme Court challenging the new
law. The Supreme Court heard the petition and held in the case of Binoy Viswam Vs
Union of India (82 taxmann.com 211) that Section 139AA of the Income Tax Act
constitutionally valid and is not discriminatory nor it offence equality clause enshrined in
Article 14 of the Constitution. However, the Supreme Court has given partial relief to
those who do not have Aadhaar and who do not wish to obtain Aadhaar for the time
being that their PAN will not be cancelled.

Conclusion

Subsequent to Supreme Court judgement a Press Release was issued by CBDT dated 10th
June 2017 where effect of the Supreme Court decision has been summarized as under:

(i) From July 1, 2017 onwards every person eligible to obtain Aadhaar must quote
their Aadhaar number or their Aadhaar Enrolment ID number for filing of
income tax returns as well as for applications for PAN

(ii) 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;

(iii) However, those who do not have Aadhaar and who do not wish to obtain
Aadhaar for the time being, that their PAN will not be cancelled.