2017 Supreme(SC) 578

SUPREME COURT OF INDIA
A.K. SIKRI, ASHOK BHUSHAN, JJ.
Binoy Viswam - Petitioner
Versus
Union of India & Ors. - Respondents
Writ Petition (Civil) No. 247, 277 & 304 of 2017
Decided On : 09-06-2017

IMPORTANT POINTS
Parliament was fully competent to enact Section 139AA of the Act and its authority to make this law was not diluted by the orders of the Supreme Court.
There is no conflict between the provisions of Aadhaar Act and Section 139AA of the Income Tax Act inasmuch as when interpreted harmoniously, they operate in distinct fields.
Section 139AA of the Act is not discriminatory nor it offends equality clause enshrined in Article 14 of the Constitution.
Section 139AA is also not violative of Article 19(1)(g) of the Constitution insofar as it mandates giving of Aadhaar enrollment number for applying PAN cards in the income tax returns or notified Aadhaar enrollment number to the designated authorities. Further, proviso to sub-section (2) thereof has to be read down to mean that it would operate only prospective.

Headnote:(a) Constitution of India – Article 21 – Right to privacy – Other facets of Article 21 like ‘Right to Human Dignity’ overlap with privacy issues – Similarly, ‘Right to Let Alone’ has the shades of ‘Right to Privacy’ – So is the Right to Informational Self Determination – Right to privacy in context of Aadhar already under consideration of Constitution Bench – Court therefore declining to address these issues – Instantly, validity of section 139AA, Income Tax Act requiring linking of Aadhar with PAN being tested on the touchstone of Articles 14 and 19 only. (Para 71)

       (1994) 6 SCC 632; 489 U.S. 749 (1989) – Relied upon

       AIR 1954 SC 300; AIR 1963 SC 1295; AIR 1978 SC 803; (2003) 5 SCC 298; (1959) SCR 279; (2016) 7 SCC 353

       (b) Constitution of India – Articles 226, 32, 136, 372 and 13(2) – Judicial review of legislative act – Superior Courts arbiter of matters involving interpretation of Constitution – Grounds for invalidating a law – Legislative competence and contravention of any of the fundamental rights stipulated in Part III – No third ground is available to invalidate any piece of legislation – ‘Arbitrariness’ cannot be a ground to declare a legislation invalid as Courts cannot examine the wisdom of legislative choices – Thus the Court would first examine whether legislature had competence and whether the impugned provision in a legislation is compatible with fundamental rights or the Constitutional provisions (substantive judicial review) – If the Legislature lacks competence the legislation would be invalid – However in case there is no lack of legislative competence but the legislation appears to be violative of fundamental rights or other Constitutional rights, second stage of review (procedural judicial review) is undertaken – This includes reading down the legislation so as to bring it in conformity with the Constitutional provisions – Failing that the enquiry enters the third stage – The offending portion of the statute, if severable, is severed and struck down as unconstitutional. (Para 74, 75, 77, 78, 80)

       (2009) 2 SCC 121; (2012) 6 SCC 312; (2008) 6 SCC 1; (1996) 3 SCC 709; (2016) 2 SCC 445; (2011) 4 SCC 414 – Relied upon

       (2014) 5 SCC 438; (1978) 4 SCC 494; (2011) 4 SCC 454; (1973) 1 SCC 500; (2014) 8 SCC 682; (2006) 8 SCC 212; (1975) 2 SCC 148; (2008) 3 SCC 1; (1966) 3 SCR 275; 410 U.S. 113 (1973); (2003) 4 SCC 493 – Relied upon

       (c) Constitution of India – Limited governance – Separation of powers – Principle of federalism – Schedule VII – Articles 245 to 254 – Power to tax is sovereign power of States – Exercise of power by different wings of State within spheres delineated – Unless it is demonstrated that Parliament exceeded its power in enacting impugned provision or this provision violates any Constitutional provision, argument predicated on ‘limited governance’ will not succeed. (Para 82, 85)

       (2016) 11 Scale 1 – Relied upon

       AIR 1967 S C 1170 : (1967) 2 SCR 454 – Referred

       (d) Income Tax Act, 1961 – Section 139AA – Constitution of India – Article 246 and Entries 82 and 97 of List I – Admittedly Parliament having requisite competence to enact the provision – Aadhaar Scheme with the enactment of the Aadhaar (Targeted Delivery of Financial and other subsidies, benefits and services) Act, 2016 – Section 7 – Enrolment for Aadhaar voluntary – But necessary for availing benefits of subsidies etc. – Section 139AA making it mandatory for filing Income tax return and obtaining PAN – Aiming to curb black money, money laundering and tax evasion etc. – The two are different stand alone provisions/laws – Validity of one cannot be examined in the light of provisions of other Acts – Prerogative of Parliament to make a particular provision directory in one statute and mandatory/compulsory in other – Held, both provisions run in parallel lines and there would be no real conflict between the two – The two provisions need to be construed harmoniously – Thus whereas enrollment of Aadhaaar is voluntary when it comes to taking benefits of various welfare schemes (Section 7 of Aadhaar Act), purpose behind enacting Section 139AA is to check a menace of black money as well as money laundering and also to widen the income tax net so as to cover those persons who are evading the payment of tax. (Para 88, 92, 93)

       (1971) 1 SCC 442 – Relied upon

       (e) Constitutional law – Separation of power – Legislative act – Enactment overruling a judgment without removing basis of the judgment – Court observing Aadhaar to be voluntary – First, observations in interim orders – Secondly, Court not examining the Aadhaar Scheme with the enactment of the Aadhaar (Targeted Delivery of Financial and other subsidies, benefits and services) Act, 2016 which was not even passed, but only the Aadhaar scheme – Contention of legislative incompetence rejected. (Para 94)

       (f) Constitution of India – Article 14 – ‘Equality before law’ and ‘equal protection of law’ – Distinction – Mechanical equality before law may result in injustice – Guarantee against denial of equal protection of the law does not mean that identically the same rules of law should be made applicable to all persons in spite of difference in circumstances or conditions – Article 14 forbids class legislation – It does not forbid reasonable classification. (Para 94A, 96)

       (1992) 2 SCC 643; 1950 SCR 869 – Relied upon

       (g) Constitution of India – Article 14 – Reasonable classification – Nexus with objectives – Section 139AA, Income Tax Act, 1961 – Linking Aadhaar with PAN – Aiming to curb black money, money laundering, tax evasion etc. – Cannot be challenged on the ground that it will not eradicate the menace 100% – Such kind of menace requires taking multiple actions and at the same time – Held, it cannot be said that there is no nexus with the objective sought to be achieved. (Para 99, 100)

       (h) Income Tax Act, 1961 – Section 139AA r/w Article 14, Constitution of India – Classification – any law or scheme is meant to be followed by all – Two classes cannot be created on the basis of those who want to be covered by the scheme, and others who do not want to be covered thereby – Impugned provision makes two classification – One who are assessees and the other who are not assessees – All assessees are treated alike – Provision not hit by Article 14 – Doctrine of proportionality cannot be read into Article 14. (Para 102, 103, 104)

       (1974) 4 SCC 3 – Relied upon

       (1996) 1 SCC 345; (1995) 5 SCC 96; AIR 1958 SC 731; (1990) 1 SCC 109; (2016) 6 SCC 602; (2011) 14 SCC 331; (2013) 2 SCC 705; (2013) 14 SCC 368; Writ Petition (C) No. 607 of 2016 – Referred

       (i) Income Tax Act, 1961 – Section 139AA(2), Proviso r/w Rule 114B, Income Tax Rules, 1962 – Requirement of intimating Aadhaar number to prescribed authorities not violative of Article 19(1)(g) of the Constitution. (Para 114)

       (j) Income Tax Act, 1961 – Section 139AA and Rule 114B – Requirement of PAN not confined to income tax return – It extends to various other transactions – Withdrawal of PAN amounts to placing restrictions on the right to do business as a business under Article 19(1)(g) – Doctrine of proportionality. (Para 115)

       Modern Dental College – Relied upon

       (k) Income Tax Act, 1961 – Section 139AA – seeding of PAN with Aadhaar – Necessary for de-duplication of PAN and eliminating issue of fake PAN – Requirement of giving Aadhaar number to the designated authority or stating this number in the income tax returns directly connected with the issue of duplicate/fake PAN – Violation of section 139AA without any consequences would render it toothless. (Para 122, 124)

       (2016) 11 Scale 1; 17 US 316 (1819) – Relied upon

       (l) Income Tax Act, 1961 – Section 193AA(2), Proviso – Cannot be read retrospectively – Doing so would have rippling effect of unsettling settled rights of the parties – Held, it would operate prospectively. (Para 126)

       Facts of the case:

       In these three writ petitions challenge is laid to the constitutional validity of Section 139AA of the Income Tax Act, 1961 inserted by the amendment to the said Act vide Finance Act, 2017 making linking of Aadhaar no. to PAN and ITR compulsory.

       Finding of the Court:

       Section 139AA of the Income Tax Act, 1961 is not violative of Articles 14 and 19(1)(g) of the Constitution and also that there was no impediment in the way of Parliament to insert such a statutory provision.

       Those who are not PAN holders, while applying for PAN, they are required to give Aadhaar number.

       Measures should be taken to leave no chance of unauthorised leakage of data.

       Result: Petitions disposed of.