Tax returns

Examining the Link: Aadhaar and PAN

If you are among the 1.12 billion who have Aadhaar cards and PAN cards, chances are that you might have heard of the dispute behind the mandatory linking of the two. In the hullaballoo of the GST, many seemed to have forgotten the July 1st deadline, and many others haven’t even heard of this provision. In today’s article, we will break down the various components of this linking into simple parts and explain what it means for you- the ordinary tax-paying Indian.

What is Aadhaar?

Aadhaar is a 12 digit unique-identity number issued to all Indian residents based on their biometric and demographic data. It is issued by the Indian government to every individual resident of India. The Unique Identification Authority of India (UDAI), which functions under the Planning Commission of India, is responsible for managing Aadhaar numbers and Aadhaar identification cards. Though initially regarded as voluntary by the Supreme Court, the Aadhaar Act 2017 passed by the present government seeks to make the card mandatory for essential services like banking, gas, electricity, poverty and unemployment benefit schemes, mid-day meal scheme and now, even to pay taxes.


What is PAN?

Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department, to any “person” who applies for it or to whom the department allots the number without an application. It is allotted to each taxpayer by the Income Tax Department under the supervision of the Central Board of Direct Taxes. It also serves as an identity proof.


What is the Section 139AA of the Income Tax Act, 1961?

This section of the Act makes it mandatory for linking the Aadhaar and PAN numbers to file tax returns. It states that-

“(1) Every person who is eligible to obtain Aadhaar number shall, on or after the 1st day of July, 2017, quote Aadhaar number–

(i) in the application form for allotment of permanent account number;

(ii) in the return of income:

Provided that where the person does not possess the Aadhaar Number, the Enrolment ID of Aadhaar application form issued to him at the time of enrolment shall be quoted in the application for permanent account number or, as the case may be, in the return of income furnished by him.

(2) Every person who has been allotted permanent account number as on the 1st day of July, 2017, and who is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to such authority in such form and manner as may be prescribed, on or before a date to be notified by the Central Government in the Official Gazette:

Provided that in case of failure to intimate the Aadhaar number, the permanent account number allotted to the person shall be deemed to be invalid and the other provisions of this Act shall apply, as if the person had not applied for allotment of permanent account number.

(3) The provisions of this section shall not apply to such person or class or classes of persons or any State or part of any State, as may be notified by the Central Government in this behalf, in the Official Gazette.

Explanation – For the purposes of this section, the expressions –

(i) “Aadhaar number”, “Enrolment” and “resident” shall have the same meanings respectively assigned to them in clauses (a), (m) and (v) of section 2 of the Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016 (18 of 2016);

(ii) “Enrolment ID” means a 28 digit Enrolment Identification Number issued to a resident at the time of enrolment.”


The deadline for linking was 1st July 2017, beyond which an unlinked PAN would be invalidated. This was done because the PAN card, according to the legislature, could be “faked” and “issued to anyone”, whereas the Aadhaar card has a long safe procedure. Thus, the linking would wipe out false filing under different accounts, weed out black money, prevent PAN duplicates, discover shell companies and ensure the proper transaction of money to the proper section of society which are in need.

 What is the controversy?

While it may sound ideal in theory, it is not so in practice. The Aadhaar card itself is mired in controversy, and this new rule has fed fuel to the fire.

  • According to many leading lawyers, economists and business, Aadhaar violates the Right to Privacy granted under Article 21 of the Constitution of India as the citizens have to mandatorily part with their biometric information (fingerprints and iris scan).
  • Initially assured to be safe, it has been shown in 2016 how the data collected about the citizens have been leaked despite best efforts by the government. A letter written by the Ministry of Electronics and Information Technology confirms that the data, which the Government has been carefully guarding, has been leaked online.
  • Aadhaar was initially deemed to be voluntary by the Supreme Court. But this was made null and void by the Aadhaar Act, 2017 which made it mandatory for essential service, launching the citizens in a panic to get the card done.
  • The privacy issue is pending before a constitutional bench of the Supreme Court. According to the petitioner, until and unless the privacy matter has been resolved, the Aadhaar cannot be made compulsory since the matter is sub-judice.
  • However in the wake of the initial controversy, the government introduced this new law. Immediately, various petitions were filed including Binoy Viswam v. Union of India, [W.P. (C) No. 247/2017] & S G Vombatkere and Anr. v. Union of India, [W.P. (C) No. 277/2017], through which the Supreme Court took up the matter.

What happened during the case?

After the judgement is here, there have been allegations of unfair fights and biased verdict against the Supreme Court. This is because the main issue of the right to privacy which makes the case against Aadhaar so strong was not allowed to be put forward in the Binoy Viswam case. However this is not due to some controversy by the Judges or the Government, it is simply a twist of law. Let us understand it in detail.

  • The present matter is simply a part of the larger matter of the Right to Privacy pending under the constitutional bench of the Supreme Court.
  • The Supreme Court made it clear, multiple times, that it will not be considering any arguments around the right to privacy or Article 21. The reason for this is judicial propriety, where a judicial bench will not adjudicate on matters that are already pending before a larger bench, in this case the Aadhaar-privacy case before the larger Constitution bench.
  • The petitioners here were given two options- either to merge the issue with the pending issue or to treat it as a new issue but without the privacy concerns.
  • A constitutional bench takes longer to be constituted and decide since the matters discussed are crucial and involve a substantial question of law. This would have been detrimental to the interest of the petitioners as the 1st July deadline would have been crossed.
  • The petitioners decided to go along with the latter option. The apex court thus only considered arguments based on a violation of other fundamental rights, namely the right to equality (Article 14), and the right to freedom of profession (Article 19(1) (g)). Considering that the main concern with Aadhaar is the violation of privacy (Article 21), the case was considerably weakened as privacy concerns was the main matter here.
  • Even though the petitioners’ counsel made elaborate arguments on the issues of how Section 139AA violates the right to privacy and dignity, the Court declined to go into these, preferring to leave it to the Constitution Bench to address. This is because if the Aadhaar is the problem (as alleged by the petitioners) it makes sense to have the entire Aadhaar law and scheme up for discussion before the court to judge its constitutional validity, as opposed to one use case.
  • Along with naming its limitations with hearing privacy based arguments, the Supreme Court also brought to notice another restriction it faced. Courts have limited powers of reviewing a law. A contention was that the Act violates the Constitution, such as a violation of the fundamental rights. However, Section 139AA passed the tests of the right to equality and the right to freedom of profession, though the test based on the right to life and liberty remains.
  • As the grounds for judicial review are limited, arguments on other grounds, like unreasonableness or arbitrariness of the act (unless this results in unconstitutionality) will not be considered.
  • The Court, also, cannot question the Parliament’s motives behind passing a law. For instance, it cannot be argued that the Aadhaar Act was enacted with a dishonest or underlying motive, such as to enable surveillance. It can, however, be argued that the all-pervasiveness of Aadhaar in effect enables surveillance, thus resulting in a violation of people’s right to life and liberty. This, it is to be remembered, is an argument which can only be brought up before the Constitution Bench in the Aadhaar-privacy case.


What was the judgement?

The Court on 9th June 2017 upheld Section 139AA of the Income Tax Act, 1961 while providing limited relief to those without Aadhaar cards. There were minor alterations to the penalties made to suit those without Aadhaar cards and the limited time left to link it.

Though it might seem that the judgment is entirely a victory for the government, with little hope for those against Aadhaar, it is on the other hand, both a victory and a setback, equally for the government and the anti-Aadhaar advocates. The judgment makes it clear that Section 139AA is yet to survive the more stringent test – of the right to life and liberty under Article 21. This point is reiterated as many as four times in the judgment.

The implications of this are clear, Section 139AA is legal and binding, but only for now. The decision of the Constitution Bench in the Aadhaar-privacy case will decide the final fate, of both Aadhaar as well as Section 139AA.

What does it mean for you?

Now that the basic facets of the issue have been examined, let us see the implication of the judgement for the ordinary taxpayer.

  • If you are filing income tax returns after 1st July 2017, you must mention your Aadhaar or enrolment number on the form. This requirement stems from sub-section (1) of Section 139AA, which has been upheld fully by the court.
  • If you have an Aadhaar number, you must link it to your PAN before 1st July 2017. This requirement under sub-section (2) of Section 139AA has been upheld by the court.
  • If you do not have an Aadhaar number, you do not need to link it to your PAN in the foreseeable future. This proviso to sub-section (2) of Section 139AA has been “read down” due to the main Aadhaar case pending before the Constitution Bench, but only for those who do not have an Aadhaar card yet.
  • If you have an Aadhaar number and do not link it to your PAN before 1st July 2017, your PAN will be invalidated. The Supreme Court has “read down” this proviso to sub-section (2) to Section 139AA to make the consequence of invalidation apply prospectively, and not retrospectively.
  • Keep in mind that Section 139AA imposed two different obligations:
    1. To quote the Aadhaar number in Income Tax Returns/PAN applications filed after 1 July 2017
    2. To link the Aadhaar number with the PAN, irrespective of when you file the returns, by 1 July 2017.
  • Much confusion has resulted in people conflating these two obligations, but the court has dealt with the two separately. Different consequences follow.
  • The failure to mention your Aadhaar number in your ITR or PAN application will mean your ITR or PAN application is returned as “defective”. This, the Court has no problem with.
  • The failure to link your Aadhaar with your PAN was supposed to result in retroactive invalidation of the PAN – this the Court has found disproportionate and excessive to the stated aim of the law, and therefore, a violation of Article 19(1) (g) read with Article 19(6). Consequently, the proviso has been “read down” to make this consequence prospective for those who presently have an Aadhaar number and do not link it to their PAN by 1 July.



The implication of this judgement is clear- if you have an Aadhaar card, link it with your PAN. If you don’t, you still have the right to wait for the privacy issue to be decided. While many feel that this judgement is a huge setback to anti-Aadhar advocates and the right to privacy of citizens, Section 139AA and the Aadhaar Act are yet to stand a lot more stringent test – that of Article 21. While a lot banks on the effectiveness of the right to privacy arguments, the final word on Aadhaar is yet to come.


~Sayanti Chatterjee~