Recently the Supreme Court upheld the verdict of making Aadhaar mandatory for filing Income tax returns but it also imposed a partial stay until the right to privacy issue is addressed. There was a partial relief for people who haven’t got Aadhaar as those who have a PAN card but do not have an Aadhaar Card can still file their income tax returns this year.
NOT YET MANDATORY FOR ALL
As per Section 139AA of the Income Tax Act, it is mandatory to have an Aadhaar card for filing of income tax returns and making an application for allotment of PAN with effect from July 1 2017. The Aadhaar was made mandatory so as to weed out the fake PAN cards which were used for circulation of black money and financing of terrorism.
Also with the implementation of Aadhaar, the government had saved over Rs 50,000 Crore on various schemes to benefit the poor as well as pension schemes. The Centre had also told the court that fake PAN cards were being used to divert funds to shell companies.
Various other benefits of Aadhaar were there such as an Aadhaar enabled payment system could benefit a lot of farmers as they could have their payments made directly to them. This would boost credit worthiness as well as financial inclusion. It would also help banks to offer loans and crop insurance.
However, The Supreme Court had ordered that Section 139AA would be applied prospectively and it also mentioned that the government needed to address the issue of the leakage of data concerning Aadhaar and PAN linkage. The Supreme Court also said those who are not Aadhaar card holders and are not compliant with the provision of Section 139(2) will not be treated as invalid. People who have enrolled for the Aadhaar card and have not yet got it are also exempted from the linkage and the penalizing invalidation of their PANs if they choose not to link the PAN Card with the Aadhaar.
CONCERNS WITH AADHAAR LINKAGE WITH PAN
According to a judge the person who holds a PAN and if the PAN is invalidated due to Aadhaar linkage as he did not have Aadhaar number, that person would suffer immensely in his daily dealings. Hence, the situation should be avoided till the Supreme Court can authoritatively determine the validity of Aadhaar.
Another concern which the Supreme Court mentioned was that If there was a failure to intimate the Aadhaar number. Then it would render the PAN void ab initio with the provision that the allotted PAN would be invalid similar to the person having not applied for allotment of a PAN. This could have rippling effect of unsettling the rights of the parties. It would have the effect of undoing all the earlier acts done by that person on the basis of the invalidated PAN. Also, It may have even bring penal consequences under the Act for an earlier period on the basis that there was no PAN registration done by a particular assesse. Hence, the Supreme Court made law would apply prospectively.
Also there are still some other concerns with Aadhaar, as a biometric authentication may fail due to lack of connectivity. Issues with iris for senior citizens and fingerprint authentication for manual workers have also been raised. These issues still need to be addressed.
THE AADHAAR REACH
According to the union, 95.10% of the people have an Aadhaar account i.e. approximately 115.15 Crore people. If we compare this to people who have a ration card the count is approximately 15.17 Crore. In fact the number of people who have a PAN Card is approximately 29 Crore. So Aadhaar has successfully reached a large number of people and this is one of the primary decisions why the government is pushing for Aadhaar to be used for Filing IT Returns.
Nearly 6.2 Crore people have their PAN linked with Aadhaar account after the government told the people to link Aadhaar with PAN Cards to file returns this year.
Of the total 29 Crore People who have PAN Cards, only 5.2 Crore people filed Income Tax returns last year. The government officials have insisted that the PAN must be linked with the Aadhaar with one of the officials stating that a lot of the people use multiple PANs to file their returns to evade paying out the actual amount. He further stated that this issue has been faced by the income tax department for a long time and it needs to be resolved.
IMPACT OF THE RULING
Currently the people who do not have an Aadhaar need not link it with their PAN Card. Since the decision is taken prospectively with the main concern being the privacy issue of Aadhaar which needs to be addressed especially if it needs to be linked with the PAN Card.
Also with over 1.15 billion Aadhaar numbers in existence, the data needs clear auditing and measures for accountability so as to ensure security among the public. An independent body which monitors Aadhaar transaction failures and the user experiences must be there. It could publishing this data periodically and become an accountability mechanism for improving Aadhaar. Also stronger data protection laws for Aadhaar are required. Aadhaar with a 12-digit unique identification number has already been made mandatory for more than 100 services and welfare schemes. Therefore Aadhaar must have all basis covered before we make it compulsory for filing income tax returns especially if it is the future of India.
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