AADHAAR-PAN Judgment: Facts

Supreme Court of India has recently delivered the AADHAAR-PAN judgment on the validity of S. 139AA of the Income Tax Act.  S. 139AA makes the following mandatory:

• Quoting of AADHAAR for filing income tax returns post July 1, 2017.
• Quoting of AADHAAR in any new application for allocation of PAN post July 1, 2017.
• Linking of AADHAAR with PAN post date to be announced by the central government. Furthermore, failure to do so would invalidate PAN with retrospective effect.

The above provision was challenged on mainly three grounds:

1. The enactment of provision was beyond the legislative competence of the parliament.
2. The enacted provision violates the right to equality u/a 14 of the constitution of India.
3. The enacted provision violates the right to practice any profession, carry out any business, etc,  u/a 19(1)(g) of the constitution of India.

The supreme court has upheld the provision against all the above mentioned challenges while reading down proviso to S. 139AA (2), to the extent it applied retrospectively. The proviso would now apply prospectively only. That is, though the existing pan cards would become invalid if they are not linked to AADHAAR, but the invalidity shall not apply retrospectively. However, in the interest of balance of convenience, the supreme court has granted a stay on the operation of the proviso as a stop-gap arrangement till the bigger challenge on the question of infringement of privacy through AADHAAR has been decided fully and finally by the larger bench. So, the net effect is that if you are earning any income above the taxable limit, you need to have AADHAAR post July 1, 2017, wrt which, it seems, a notification has also been issued by the government.

AADHAAR-PAN Judgment: Arguments and Decision

The legislative competence of the parliament to make AADHAAR mandatory under S. 139 AA of Income Tax Act was challenged on three grounds:

1. When AADHAAR Act makes AADHAAR voluntary, Income Tax Act couldn’t have made it mandatory.
2. S. 139 AA derogates the earlier interim orders passed by the supreme court making AADHAAR non-mandatory.
3. AADHAAR facilitates surveillance state, which is against the limited government as enshrined in the constitution of India.

Legislative Competence

The supreme court rejected the first argument by holding that AADHAAR Act is not a mother act, and any other act like Income Tax Act can make AADHAAR mandatory for a different purpose than that of the AADHAAR Act. I had also assumed AADHAAR Act to be the mother act, for it, for the first time, elaborated upon the authority and the process for issuance of AADHAARs — I think even the government would have thought similarily. However, now when I read s. 56 of AADHAAR Act, I am at agreement with the judgment though I would have much liked the judgment to deliberate more upon this aspect.

But I have a different argument. If Income Tax Act independently makes AADHAAR mandatory, can it be done in a finance bill? This argument was neither raised nor answered by the supreme court. I know AADHAAR Act was also passed as a money bill, but the same has been challenged in the supreme court. Why the supreme court didn’t put up this question before the counsels for deliberation?

(I think the counsels also went with the assumption that the AADHAAR Act is the mother act. However, I am not sure if the senior counsels appearing in the supreme court can afford to be so smug esp when they charge such high fees and enjoy such high reputation.)

The other two arguments were actually not very forceful. However, I need to appreciate the argument wrt surveillance state for its novelty. The courts are generally conservative by nature. If this argument were made in some other forum, it would have succeeded.

Right to Equality

The judgment elaborately explains the concept of equality enshrined in the constitution. Simply speaking, it means people can be classified and discriminated upon on the basis of a classification given the classification is reasonable, not arbitrary, and has nexus with the objective desired to be achieved with such a classification.

S. 139AA creates three classifications:

1. The individual income tax assessees and the other assessees
2. The voluntary PAN holders/applicants and the mandatory PAN holders/applicants.
3. The AADHAAR holders and the non-AADHAAR holders.

I have mentioned the three classifications as such because the judgment nowhere deliberated upon the effect of S. 139AA on the second classification, and nor did anybody argue wrt this classification. More about it later. Let’s first discuss the arguments made in the case.

The counsel argued that though the classification of individual income tax assessees was not unreasonable as they indeed exist as a separate class, but this class was being discriminated upon or targeted without any nexus with the objective of curbing black money. He argued the other assessees generate far greater black money but no curbs have been put on them. The supreme court rightly rejected the argument holding black money is a menance which has to be tackled in multiple ways, and it can’t be a valid argument that another class generating more black money has not been targeted. I agree. It’s like Hindu men saying polygamy be curbed in Muslims first. That way polygamy in Hindus would have never ended.

There was another argument with respect to classification into non-AADHAAR and AADHAAR holders, which was rejected by the court outright as a fallacious argument. Elsewhere, I have argued non-AADHAAR holders form a class unto themselves. In fact, this class is in minority, but it does exist, and S. 139 AA has accentuated this class. The court said this class is a class of convenience, whose only significance is with respect to the impugned S. 139 AA and has been artificially created to impugn the provision, albeit the impugned provision per se doesn’t create any such class.

I think this is a seriously wrong approach. This way the government can always enact a provision discriminating upon one class of people, and when they would go to the court, the court would say their significance is limited only to the impugned legislation. In other words, their identity is linked to the impugned legislation, else they don’t have any identity at all. If the court had to make any such observation, it should have deliberated more comprehensively upon this than reecting it by just calling it a fallacious argument. The argument was pretty well made out and deserved the attention of the court.

Coming to the classification of mandatory and voluntary PAN holders. Voluntary PAN holders/applicants, as the name suggest, are not required to obtain PAN; however, they do obtain it as good citizens. S. 139AA discriminates upon them by imposing an extra condition of obtaining AADHAAR to obtain or keep a PAN. This discrimination has no nexus with the objective of curbing black money as the voluntary PAN holders/applicants just don’t generate enough money to generate black money. This is in fact reverse discrimination even against the objective of curbing black money.

Right to Practice any Profession and Business

I found this judgment the most wanting in this area. Admittedly, the argument was only made with respect to infringement of right to practice profession , carry out business, etc, in case of invalidation of existing PANs with retrospective effect in case they were not linked to AADHAAR. The court rightly held that invalidation of existing PANs is a violation of A 19(1)(g) as the purpose of PAN is not only filing of returns. PANs are used for facilitating so many other activities like opening bank accounts, making cash transactions, taking telephone connections, etc, which are necessary to run a profession or a business. The penal provision under S. 139 AA invalidating PAN cards on not linking them with AADHAAR would shut down the business or profession.

However, then the court checked whether the penal provision is a reasonable restriction under article 19(6) of the constitution. The argument was made that once a case has been made out for infringement, the onus was on the government to prove it was a reasonable restriction. Further, it was argued that the restriction has to be checked on the fulcrum of proportionality. It should be seen if any alternative with lesser harm is possible.

The court found the issue of fake PANs important. It also accepted the argument of the government that AADHAAR has nill duplication, and linking AADHAAR with PAN would eliminate the fake generation of PANs as well. It didn’t deliberate upon the question of proportionality at all. In the end, it only left it to the wisdom of the legislature to provide for penalties.

The court completely failed to take cognizance of the fact that AADHAAR requires a person to divulge his biometric details. Is the court suggesting it is essential to divulge biometric details to the government to practice any profession or business in India? The mere thought of such a possibility is repulsive. All I know, only prisoners are forced to divulge their biometric details. However, in India, you need to give your iris scans to exercise your most basic fundamental right to practice a profession! Elsewhere, I have argued, albeit extravagantly, that India is being converted into a brothel, where prostitutes operate sans privacy. It seems the brothel has received the stamp of approval from no less than Supreme Court of India.

AADHAAR-PAN Judgment: Parting Note

The judgment started with a caveat that deliberation with respect to the effect of section 139 AA, Income Tax Act, on article 21 has been left open. I have a serious problem with such an approach. It has been held in Maneka Gandhi that fundamental rights don’t operate in isolation but in a continuum. Though I have argued elsewhere that article 21 can indeed operate in isolation, but this is not one of those cases. Here, the right to privacy u/a 21 of the constitution is definitely linked to the right to practice profession or business as well as to the right to equality.

Secrecy or privacy is the cornerstone of any profession or business, and mandatory AADHAAR under section 139 AA on the basis of procedure set up under AADHAAR Act, which is being challenged separately in a wholesome proceeding, does bring the right to privacy in direct connection with right to equality as well. However, I will have to admit the court didn’t discuss the procedure at all. But I wonder whether the deliberation u/a 14 can be termed complete unless the procedure for obtaining AADHAAR has been challenged and deliberated upon. So, to my mind, the judgment is not only short on the discussion on privacy but also on article 14 itself.

I think the court should have never heard this matter finally. It should have just decided the interim application, if any, without suggesting tagging of the petition with other matters concerning privacy. Further, once the arguing counsels had made a concession that they shall not argue on privacy, the court should not have heard them on privacy at all. It is a serious waste of time, for which poor man suffers at the cost of a few senior counsels. I would go to the extent of saying such waste of court’s time tantamount to contempt of court.