BINOY VISWAM v. UNION OF INDIA & ORS.

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A such person; (d) intimate the Assessing Officer any change in his address or in the name and nature of his business on the basis of which the permanent account number was allotted to him. (SA) Every person receiving any sum or income or amount from B which tax has been deducted under the provisions of Chapter XVIIB, shall intimate his permanent account number to the person responsible for deducting such tax under that Chapter: Provided further that a person referred to in this sub-section, shall intimate the General Index Register Number till such time c permanent account number Is allotted to such person. (SB) Where any sum or income or amount has been paid after deducting tax under Chapter XVIIB, every person deducting tax under that Chapter shall quote the permanent account number of the person to whom such sum or income or amount has been paid D by him- ( i) in the statement furnished in accordance with the provisions of sub-section (2C) of section 192; (ii) in all certificates furnished in accordance with the provisions of section 203; E (iii) in all returns prepared and delivered or caused to be delivered in accordance with the provisions of section 206 to any income- tax authority; (iv) in all statements prepared and delivered or caused to be delivered in accordance with the provisions of sub-section (3) cf section 200: Provided that the Central Government may, by notification in the Official Gazette, specify different dates from which the provisions of this sub-section shall apply in respect of any class or classes of persons: Provided further that nothing contained in sub-sections (SA) and (SB) shall apply in case _of a person whose total income is not chargeable to income-tax or who is not required to obtain permanent account numberunder any provision of this Act if such H

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person furnishes to the person responsible for deducting tax a A declaration referred to in section 197 A in the form and manner prescribed thereunder to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil. (SC) Every buyer or licensee or lessee referred to in section B 206C shall intimate his permanent account number to the person responsible for collecting tax referred to in that section. (SD) Every person collecting tax in accordance with the provisions of sectfon 206C shall quote the permanent account number of every buyer or licensee or lessee referred to in that section - c (i) in all certificates furnished in accordance with the provisions of sub-section (S) of section 206C; (ii) in all n:turns prepared and delivered or caused to be delivered in accordance with the provisions of sub-section (SA) or sub- section (SB) of section 206C to an income-tax authority; D (iii) in all statements prepared and delivered or caused to be delivered in accordance with the provisions of sub-section (3) of section 206C. (6) Every person receiving any document relating to a transaction E prescribed under clause (c) of sub-section (S) shall ensure that the Permanent Account Number ~r the General Index Register Number has been duly quoted in the document."

110. Sub-section (8) empowers the Board to make Rules, inter alia, prescribing the categories of transactions in relation to which PAN F is to be quoted. Rule 114B of the Rules lists the nature of transaction in sub-rule (a) to (r) thereof where PAN number is to be given.

111. According to the petitioners, it amounts to violating their fundamental right to carry on.business/profession etc. as enshrined under Article 19( 1)(g) of the Constitution which stands infringed and, therefore, it was for the State to show that the restriction is reasonable and in the G interest of pubic under Article 19(6) of the Constitution. It is in this context, principle of proportionality has been invoked by the petitioners with their submission that restriction is unreasonable as it is utterly disproportionate for committing breach of Section 139AA of the Act. H

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A 112. As noted above, Mr. Datar had relied upon the judgment of this Court in Modern Dental College & Research Ce11tre48 and submitted that while applying the test of proportionality, the respondents were specifically required to demonstrate the that measures undertaken are necessary in that there are no alternative measures that may similarly achieve that same purpose with a lesser degree of limitation (narrow B tailoring) and also that there was proper relation between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right, (balancing two competing interests).

113. In order to consider the aforesaid submissions we may c bifurcate Section l39AA in two parts, as follows: (i) That portion of the provision which requires quoting of AaJhaar number (sub:section(l)) and requirement of intimating Aadhaar number to the prescribed authorities by these who are PAN holders (sub-section (2)). D (ii) Consequences of failure to intimate Aadhaar number to the prescribed authority by specified date.

114. Insofar as first limb of Section I 39AA of the Act is concerned, we have already held that it was within the competence of the Parliament E to make a provision of this nature and further that it is not offensive of Article 14 of the Constitution. This requirement; per se, does not find foul with Article 19( I )(g) of the Constitution either, inasmuch as, quoting the Aadhaar number for purposes mentioned in sub-section (I) or intimating the Aadhaar number to the prescribed authority as per the requirement of sub-section (2) does not, by itself, impinge upon the right to carry. on profession or trade, e\c. Therefore, it is not violati~e of Article 19(1 )(g) of the Constitution either. In fact, that is not even the argument of the petitioners. Entire emphasis of the petitioners submissions, while addressing "the arguments predicated on Article 19(1 )(g) of the Constitution, is on the consequences that ensue in terms of proviso to sub-section (2) inasmuch as.it is argued, as recorded above, that the consequences provided will have the effect of paralysing the right to carry on J?l\siness/profession. Therefore, thrust is on the second part of Section . l 39AA . . of the Act, which we proceed to deal with, now.

115. At the outset, it may be mentioned that though PAN is issued 48 Footnote 7 above H

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under the provisions of the Act (Section 139A), its function is not limited to giving this number in the income-tax returns or for other acts to be performed under the Act, as mentioned in sub-sections (S), (SA), (SB), S(C), S(D) and 6 of Section 139A. Rule l 14B of the Rules mandates quoting of this PAN in val'ious other documents pertaining to different kinds of transactions listed therein. It is for sale and purchase of immovable property valued at Rs.S lakhs or more; sale or purchase of motor vehicle etc., while opening deposit account with a sum exceeding Rs.S0,000/- with a banking company;. while making deposit of more than Rs.S0,000/- in any account with Post Office, savings bank; a contract of a value exceeding Rs. I lakh for sale or purchase of securities as defined under the Securities Contract (Regulation) Act, l 9S6; while opening an account with a banking company; making an application for installation of a telephone connection; making payment to hotels and restaurants when such payment exceeds Rs.2S,OOO/- at any one time; while purchasing bank drafts or pay orders for an amount aggregating Rs.S0,000/- or more during any one day, when payment in cash; payment in cash in connection with travel to any foreign country of an amount exceeding Rs.2S,OOO/- at any one time; while making payment of an amount ofRs.S0,000/- or more to a mutual fund for purchase of its units or for acquiring shares or debentures/bonds in a company or bonds issued by the Reserve Bank of India; or when the transaction of purchase of bullion or jewellery is made by making payment in cash to a dealer above E a specified amount, etc. This shows that for doing many activities of day to day nature, including in the course of business, PAN is to be given. Pithily put, in the absence of PAN, it will not be possible to un.dertake any of the aforesaid activities though this requirement is aimed at curbing the tax evasion. Thus, ifthe PAN ofa person is withdrawn or F is nullified, it definitely amounts to placing restrictions on the right to do business as a business under Article 19(l)(g) of the.Act. The question would be as to whether these restrictions are reasonable and, therefore, meet the requirement of clause (6) of Article 19. In this context, when 'balancing' is to be done, doctrine of proportionality can be applied, which was explained in the case of Modern Dental College & Resea;ch G Centre'9, in th~ following manner: "Doctrine of proportionality explained and applied S9. Undoubtedly, the right to establish and manage the educational 49 Footnote 7 above H

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A institutions is a-fundamental right recognised under Article 19(1 )(g) of the Act. It also cannot be denied that this right is not "absolute" and is subject to limitations i.e. "reasonable restrictions" that can be imposed by law on the exercise of the rights that are conferred under clause ( 1) of Article 19. Those restrictions, however, have to be reasonable. Further, such restrictions should be "in the interest B of general public", which conditions are stipulated in clause (6) of Article 19, as under: "19. (6) Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law insofar as it imposes, or prevent the State from making any law imposing, in the interests of the c general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law insofar as it relates to, or prevent the State from making any law relating to--- D. (i) the professional or technical qualifications necessa&y for practising any profession or carrying on any occupation, trade or business, or (ii) the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise."

60. Another significant feature which can be noticed from the reading of the aforesaid clause is that the State is empowered to make any law relating to the professional or technical qualifications necessary for practising any profession or carrying on any occupation or trade or business. Thus, while examining as to whether the impugned provisions of the statute and rules amount to reasonable restrictions and are brought out in the interest of the general public, the exercise that is required to be undertaken is the balancing of fundamental right to carry on occupation on the one hand and the restrictions imposed on the other hand. This is what is known as "doctrine ofproportionality". Jurisprudentially, "proportionality" can be defined as the set of rules determining the necessary and sufficient conditions for !,imitation of a constitutionally protected right by a, law to be constitutionally H

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permissible. According to Aharon Barak (former Chief Justice, A Supreme Court of Israel), there are four sub-components of proportionality which need to be satisfied [ Aharon Barak, Proportionality: Constitutional Rights and Their Limitation(Cambridge University Press 2012).], a limitation ofa constitutional right will be constitutionally permissible if: B (i) it is designated for a proper purpose; (ii) the measures undertaken to effectuate such a limitation are rationally connected to the fulfilment of that purpose;. (iii) the measures undertaken are necessary in that there are no alternative measures that may similarly achieve that same purpose c with a lesser degree of limitation; and finally (iv) there needs to be a proper relation ("proportionality stricto sensu" or "balancing") between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right. D

61. Modern theory of constitutional rights draws a fundamental distinction between the scope of the constitutional rights, and the extent of its protection. Insofar as the scope of constitutional rights is concerned, it marks the outer boundaries of the said rights and defines its contents. The extent of its protection prescribes the E limitations on the exercises of the rights within its scope. In that sense, it defines the justification for limitations that can be imposed on such a right.

62. It is now almost accepted that there are no absolute constitutional rights and all such rights are related. As per the F · analysis of Aharon Barak, two key elements in developing the modern constitutional theory of recognising positive constitutional rights along with its limitations are the notions of democracy and the rule oflaw. Thus, the requirement of proportional limitations of constitutional rights by a sub-constitutional law i.e. the statute, . G is derived from an interpretation of the notion of democracy itself. Insofar as the Indian Constitution is concerned, democracy is treated as the basic feature of the Constitution and is specifically accorded a constitutional status that is recognised in the Preamble of the Constitution itself. It is also unerringly accepted that this H

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A notion of democracy includes human rights which is the cornerstone of Indian democracy~ Once we accept the aforesaid theory (and there cannot be any denial thereof), as a fortiori, it has also to be accepted that democracy is based on a balance between constitutional rights and the public interests. In fact, such a provision in Article 19 itself on the one hand guarantees some B certain freedoms in clause (I) of Article 19 and at the same time empowers the State to impose reasonable restrictions on those freedoms in public interest. This notion accepts the modern constitutional theory that the constitutional rights are related. This relativity means that a constitutional licence to limit those rights is c granted where such a limitation wil 1be justified to protect public interest or the rights of others. This phenomenon-{Jf both the right and its limitation in the Constitution-exemplifies the inherent tension between democracy's two fundamental elements. On the one hand is the right's element, which constitutes a fundamental component of substantive democracy; on the other hand is the D people element, limiting those very rights through their representatives. These two constitute a fundamental component of the notion of democracy, though this time in its formal aspect. f!ow can this tension be resolved? The answer is that this tension is not resolved by eliminating the "losing" facet from the E Constitution. Rather, the tension is resolved by way of a proper balancing of the competing principles. This is one of the expressions of the multi-faceted nature of democracy, Indeed, the inherent tension between democracy's different facets is a "constrnctive tension". It enables each facet to develop while harmoniously coexisting with the others. The best way to achieve this peaceful coexistence is through balancing between the competing interests. Such balancing enables each facet to develop alongside the other facets,.not in their place. This tension between the two fundamental aspects-rights on the one hand and its limitation oti the other hand~is to be resolved by balancing the two so that they harmoniously coexist with.each other. This balancing is to be . done keeping in mind the relative social values of each competitive asp~cts when considered in proper context.

63. In this direction, the next question that arises is as to what criteria is to be adopted for a proper balance between the two H

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facets viz. the rights and limitations imposed upon it by a statute. A Here comes the concept of "proportionality", which is a proper criterion. To put it pithily, when a law limits a constitutional right, such a limitation is constitutional if it is proportional. The law imposing restrictions will be treated as proportional if it is meant to achieve a proper purpose, and ifthe measures taken to achieve B such a purpose are rationally connected to the purpose, and such measures are necessary. Thi~ essence of doctrine of proportionality is beautifully captured by Dickson, C.J. of Canada in R. v. Oakes, in the following words (at p. 138): "To establish that a limit is reasonable and demonstrably justified in a free and democratic society, two central criteria must be c satisfied. First, the objective, which the measures, responsible for a limit on a Charter right or freedom are designed to serve, must be "of' sufficient importance to warrant overriding a constitutional protected right or freedom ... Second ... the party invoking Section 1 must show that the means chosen are D reasonable and demonstrably justified. This involves "a form of proportionality test. .. " Although the nature of the proportionality test will vary depending on the circumstances, in each case courts will be required to balance the interests of society with those of individuals and groups. There are, in my view, three important components ofa proportionality test. First, E the measures adopted must be ... rationally connected to the objective. Second, the means ... should impair "as little as possible" the right or freedom in question ... Third, there must be a proportionality between the effects of the measures which are responsible for limiting the Charter right or freedom, and F the objective which has been identified as of "sufficient importance". The more severe the deleterious effects of a · measure, the more important the objective must be if the measure is to be reasonable and demonstrably justified in a free and democratic society." G

64. The exercise which, therefore, is to be taken is to find out as to whether the limitation of constitutional rights is for a purpose that is reasonable and necessary in a democratic society and such an exercise involves the weighing up of competitive values, and ultimately an assessment based on proportionality i.e. balancing H

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A of different interests.

F (2) Restrictions must not be arbitrary or of an excessive nature so as to go beyond the requirement of the interest of the general public. (3) In order to judge the reasonableness of the restrictions, no abstract or general pattern or a fixed principle can be laid down G so as to be of universal application and the same will vary from case to case as also with regard to changing conditions, values of human life, social philosophy of the Constitution, prevailing conditions and the surrounding circumstances. (4) A just balance has to be struck between the restrictions imposed and the social control envisaged by Article 19(6). H

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( 5) Prevailing social values as also social needs which are intended to be satisfied by the restrictions. (6) There must be a direct and proximate nexus or reasonable connection between the resfyictions imposed and the object sought to be achieved. If there is a direct nexus between the restrictions, and the object of the Act, then a strong presumption in favour of the constitutionality of the Act will naturally arise."

116. Keeping in view the aforesaid parameters and principles in mind, we proceed to discuss as to whether the 'restrictions' which would result in terms of proviso to sub-section (2) of Section 139AA of the Act are reasonable or not. C

117. Let us revisit the objectives of Aadhaar, and in the process, that of Section 139AA in particular.

118. By making use of the technology, a method is sought to be devised, in the form of Aadhaar, whereby identity of a person is ascertained in a flawless manner without giving any leeway to any individual to resort to dubious practices of showing multiple identities or fictitious identities .. That is why it is given the nomenclature 'unique identity'. It is aimed at securing advantages on different levels some of which are described, in brief, below: (i) In the first instance, as a welfare and democratic State, it becomes the duty cf any responsible Government to come out with welfare schemes for the upliftment of poverty stricken and marginalised sections of the society. This is even the ethos of Indian Constitution which casts a duty on the State, in the form of · 'Directive Principles of State Policy', to take adequate and effective steps for betterment of such underprivileged classes. State is bound to take adequate measures to provide education, health care, employment and even cultUral opportunities and social standing to these deprived and underprivileged classes. It is not that Government has not taken steps in this direction from time to time. At the same time, however, harsh reality is that benefits of these schemes have not reached those persons for whom that are actually meant. India has achieved· significant economic growth since independence. In particular, rapid economic gro.wth has been achieved H

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A in the last 25 years, after the country adopted the policy of liberalisation and entered the era of, what is known as, globalisation. Economic growth in the last decade has been phenomenal and for many years, the Indian economy grew at highest rate in the world. At the same time, it is also a fact that in spite of significant political and economic success which has proved to be sound and sustainable, the benefits thereof have not B percolated down to the poor and the poorest. In fact, such benefits are reaped primarily by rich and upper middle classes, resulting into widening the gap between the rich and the poor. Jean Dreze & Amartya Sen eithly narrate the position as under50 : "Since India's recent record of fast economic growth is often c celebrated, with good reason, it is extremely important to point to the fact that the societal reach of economic progress in India has been remarkably limited. It is not only that the income distribution has been getting more unequal in recent years (a characteristic that India shares with China), but also that the rapid rise in real wages in China from which the working classes have benefited greatly is not matched at all by India's relatively stagnant real wages. No less importantly, the public revenue generated by rapid economic growth has not been used to expand the social and physical infrastructure in a determined and well-planned way (in this India is left far behind by China). There is also a continued lack of essential social services (from schooling and health care to the provision of safe water and drainage) for a huge part of the population. As we will presently discuss, while India has been overtaking other countries in the progress of its real income, it has been overtaken in terms of social indicators by many of these countries, even within the region of South Asia itself(we go into this question more fully in Chapter 3, 'India in Comparative Perspective'). To point to just one contrast, even though India has significantly caught up with China in terms of GDP growth, its progress has been very much slower than China's in indicators such as longevity, literacy, child undernourishment and maternal mortality. In South Asia itself, the much poorer economy of Bangladesh has caught up with and overtaken India in terms of many social indicators (including life expectancy, immunization of children, infant mortality, '°An Uncertain Glory : India and its Contradictions H

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child undernourishment and girls' schooling). Even Nepal has A been catching up, to the extent that it now has many social indicators similar to India's, in spite of its per capita GDP being just about one third. Whereas twenty years ago India generally had the second-best social indicators among the six South Asia countries (India, Pakistan, Bangladesh, Sri Lanka, Nepal and B Bhutan), it now looks second worst (ahead only of problem-ridden Pakistan). India has been climbing up the ladder of per capita income while slipping down the slope of social indicators." It is in this context that not only sustainable development is needed which takes care ofintegrating growth and development, thereby ensuring that the benefit of economic growth is reaped by every citizen of this c country, it also becomes the duty of the Government in a welfare State to come out with various welfare schemes which not only take care of immediate needs of the deprived class but also ensure that adequate opportunities are provided to such persons to enable them to make their lives better, economically as well as socially. As mentioned above, various welfare schemes are, in fact, devised and floated from time to time by the Government, keeping aside substantial amount of money earmarked for spending on socially and economically backward classes. However, for various reasons including corruption, actual benefit does not reach those who are supposed to receive such benefits. One of the main reasons is failure to identify these persons for lack of means by which identity could be established of such genuine needy class. Resultantly, lots of ghosts and ·duplicate beneficiaries are able to take undue and impermissible benefits. A former Prime Minister of this country 51 has gone to record fo say that out of one rupee spent by the Government for welfare of the downtrodden, only 15 paisa thereof actually reaches those persons for whom it is meant. It cannot be doubted that with UID/ Aadhaar much of the malaise in this field can be taken care of. (ii) Menace of com1ption and black money has reached alarming proportion in this country. It is eating into the economic progress which the country is otherwise achieving. It is not necessary to go into the various reasons for this menace. However, it would be pertinent to comment that even as per the observations of the Special Investigation Team (SIT) on black money headed by Justice M.B. Shah, one of the reasons is that persons have the 1 ' Late Shri Raj iv Gandhi H

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A option to quote their PAN or UID or passport number or driving licence or any other proof of identity while entering into financial/ business transactions. Because of this multiple methods of giving . proofs of identity, there is no mechanism/system at present to collect the data available with each of the independent proofs of ID. For this reason, even SIT suggested that these databases be B interconnected. To the same effect is the recommendation of the Committee headed by Chairman, CBDT on measures to tackle black money in India and abroad which also discusses the problem of money-laundering being done to evade taxes under the garb of shell companies by the persons who hold multiple bogus PAN c numbers under different names or variations of their names. That can be possible if one uniform proof of identity, namely, UID is adopted. It may go a long way to check and minimise the said malaise. (iii) Thirdly, Aadhaar or UID, which has come to be known as D most advanced and sophisticated infrastructure, may facilitate law enforcement agencies to take care of problem -of terrorism to • some extent and may also be helpful in checking the crime and also help investigating agencies in cracking the crimes. No doubt, going by aforesaid, and may be some other similarly valid considerations, it is the intention of the Government to give phillip E- to Aadhaar movement and encourage the people of this country to enroll themselves under the Aadhaar scheme. I 19. Wether such a scheme should remain voluntary or it can be made mandatory imposing compulsiveness on the people to be covered by Aadhaar is _a different question which shall be addressed at the appropriate stage. At this juncture, it is only emphasised that malafides cannot be attributed to this scheme. In any case, we are concerned with the vires of Section 139 AA of the Income Tax Act. 1961 which is a statutory provision. This Court is, thus, dealing with the aspect of judicial review of legislation. Insofar as this provision is concerned, the explanation of the respondents in the counter affidavit, which has already been reproduced above, is that the primary pm'pose of introducing this provision was to take care of the problem of multiple PAN cards obtained in fictitious names. Such multiple cards in fictitious names are obtained with the motive of indulging into money H

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laundering, tax evasion, creation and channelising of black money. A It is mentioned that in a de-duplication exercises, 11.35 lakhs cases of duplicate PANs/fr'audulent PANs have been detected. Out of these, around 10.52 lakhs pertain to individual assessees. Parliament in its wisdom thought that one PAN to one person can be ensured by adopting Aadhaar for allottment of PAN to B individuals. As of today, that is the only method available i.e. by seeding of existing PAN with Aadhaar. It is perceived as the best method, and the only robust method of de-duplication of PAN database. It is claimed by the respondents that the instance of duplicate Aadhaar is almost non-existent. It is also claimed that seeding of PAN with Aadhaar may contribute to widening of the c tax case as well, by checking the tax evasions and bringing in to tax hold those persons who are liable to pay tax but deliberately avoid doing so. It would be apposite to quote the following discussion by the Comptroller and Auditor General in its report for the year 2011 : D "Widening of Tax Base The assessee base grew over the last five years from 297.9 lakh taxpayers in 2005-06 to 340.9 lakh taxpayers in 2009-10 at the rate .of 14.4 per cent. The Department has different mechanisms available to enhance the assessee base which include inspection and survey, information sharing with other tax departments and third party information available in annual information returns. Automation also facilitates greater cross linking .. Most of these mechanisms are available at the level of assessing officers. The Department needs to holistically harness these mechanisms at macro level to analyse the gaps in the assessee base. Permanent Account Numbers (PANs) issued upto March 2009 and March 2010 were 807.9 · lakh and 958 lakh respectively. The returns filled in 2008-09 and 2009-10 were 326.5 lakh and 340.9 lakh respectively. The gap between PANs and the number ofreturns filed was 617. l lakh in G 2009-10. The Board needs to identify the reasons for the gap and use this information for appropriately enhancing the assessee base. The gap may be due to issuance of duplicate PAN cards and death of some PAN card holders. The Department needs to put in place appropriate controls to weed out the H

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A duplicate PANs and also update the position in respect of deceased assessee. It is significant to note that the number of PAN card holders has increased by 117.7 per cent between 2005-06 to 2009-10 whereas the number of returns filed in the same period has increased by 14.4 per cent only. B (emphasis supplied) The total direct tax collection has increased by 128.8 per cent during the period 2005-06 to 2009-10. The increase in the tax collection was around nine times.as compared to increase in the assessee base. It should be the constant endeavour of the c Department to ensure that the entire assessee base, once correctly identified is duly meeting the entire tax iiability. However, ho assurance could be obtained that the tax liability on the assessee is being assessed and collected properly. This comment is corroborated in para 2.4.1 of Chapter 2 of this report where we have mentioned about our detection of under charge of tax D amouting to Rs. 12,842.7 crore in 19,230 cases audited during 2008-09. However, given the fact that ours is a test audit, Department needs to take firm steps towards strengthening the controls available on the existing statutes towards deriving an assurance on the tax collections."

E 120. Likewise, the Finance Minister in his Budget speech in February, 2013 described the extent of.tax evasion and offering lesser income tax than what is actually due thereby labelling India as tax known compliance, with the following figures: "India's tax to GDP ratio is very law, and the proportion of direct tax to indirect tax is not optional from the view point of social justice. I place before you certain data to indicate that our direct tax collection is not commensurate with the .income and consumption pattern of Indian economy. As against estimated 4.2 crore persons engaged in organized sector employment, the number of individuals filing return for salary income are only 1. 74 crore. As against 5. 6 crore informal sector individual enterprises and firms doing small business in India, the number of returns filed by this category are only 1.81 crore. Out of the 13.94 lakh companies registered in India up to 31th March, 2014, 5.97 lakh companies have filed their returns for Assessment Year 2016-17. Of the 5.97 H

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lakh companies which have filed their returns for Assessment A Year 2016-17 so far, as many as 2.76 lakh companies have shown losses or zero income. 2.85 lakh companies have shown profit . before tax of less than Rs. I crore. 28,667 companies have shown profit between Rs. 1 crore to Rs. 10 crore, and only 7781 companies have profit before tax of more than Rs. I 0 crores. B Among the 3 .7 crore individuals who filed the tax returns in 2015- 16, 99 lakh show income below the exemption limit of Rs. 2.5 Lakh p.a. 1.95 crore show income between Rs. 2.5 to Rs. 5 lakh, 52 lakh show income between Rs. 5 to Rs. 10 lakhs and only 24 Jakh people show income above Rs. I 0 lakhs. Of the 76 lakhs individual assesses who declare income above Rs. 5 lakhs, 56 c lakhs are in the salaried class. The number of people showing income more than 50 lakhs in the entire country is only 1.72 lakh. We can contrast this with the fact that in the last five years, more than 1.25 crore cars have been sold, and number oflndian citizens who flew abroad, either for business or tourism, is 2 crore in the D year 2015. From all these figures we can conclude that we are largely a tax non-compliant society. The predominance of the cash in the economy makes it possible for the people to evade their taxes. When too many people evade the taxes, the burden of their share falls on those who are honest and complaint."

121. The respondents have also claimed that linking of Aadhaar E · with PAN is consistent with India's international obligations and goals. In this behalf, it is pointed out that India has signed the Inter-Governmental Agreement (IGA) with the USA on July 9, 2015, for Improving International Tax Compliance and implementing the Foreign Account Tax Compliance Act (FATCA). India has also signed a multilateral agreement on June 3, 2015, to automatically exchange information based on Article 6 of the Convention on Mutual Administrative Assistance in Tax Matters under the Common Reporting Scheme (CRS), formally referred to as the Standard for Automatic Exchange of Financial Account Information (AEoI). As part oflndia's commitment under FATCA and CRS, financial sector entities capture the. details about the customers using the PAN. In case the PAN or submitted details are found to be incorrect or fictitious, it will create major embarrassment for the country. Under Non-filers Monitoring System (NMS), Income Tax Department identifies non-filers with potential tax liabilities. Data analysis is carried H

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A out to identify non-filers about whom specific information was available in AIR, CIB data and TDS/TCS Returns. Email/SMS and letters are sent to the identified non-filers communicating the information summary and seeking to know the submission details of Income tax return. In a large number of cases (more than I 0 lac PAN every year) it is seen that the PAN holder neither submits the response and in many cases the B letters are return unserved. Field verification by fields formations have found that in a large number of cases, the PAN holder is untraceable. In many cases, the PAN holder mentions that the transaction does not relate to them. There is a need to strengthen PAN by linking it with Aadhaar/biometric information to prevent use of wrong PAN for high c value transactions.

122. While considering the aforesaid submission of the petitioners, one has to keep in mind the aforesaid purpose of the impugned provision and what it seeks to achieve. The provision is aimed at seeding Aadhaar with PAN. We have already held, while considering the submission D based on Article 14 of the Constitution, that the provision is based on reasonable classification and that has nexus with the objective sought to be achieved. One of the main objectives is to de-duplicate PAN cards and to bring a situation where one person is not having more than one PAN card or a person is not able to get PAN cards in assumed/fictitious names. In such a scenario, if those persons who violate Section 139AA E of the Act without any consequence, the provision shall be rendered toothless. It is the prerogative of the Legislature to make penal provisions for violation of any law made by it. In the instant case, requirement of giving Aadhaar enrolment number to the designated authority or stating this number in the income tax returns is directly connected with the F issue of duplicate/fake PANs.

123. At this juncture, we will also like to quote the following passages from the nine Judge Bench judgment of this Court in Jindal Stainless Ltd.51, which discussion though is in different context, will have some relevance to the issue at hand as well: G "109. It was next argued on behalf of the dealers that an unreasonably high rate of tax could by itself constitute a restriction offensive to Article 301 of the Constitution. This was according to learned counsel for the dealers acknowledged even in the minority judgment delivered by Sinha, CJ in Atiabari 's H " Footnote 40 above

BINOY VISWAM v. UNION OF INDIA & ORS. 117 [A. K. SIKRI, J.]

case (supra). If that be so, the only way such a. restriction could meet the constitutional requirements would be through the medium of the proviso to Article 304(b) of the Constitution. There is, in our opinion, no merit in that contention either and we say so for two precise reasons. Firstly, because taxes whether high or low do not constitute restrictions on the freedom of trac;le and commerce. We have held so in the previous paragraphs of the judgment based on our textual understanding of the provisions of Part XIII which is matched by the contextual interpretation. That being so the mere fact that a tax casts a heavy burden is no reason for holding that it is a restriction on the freedom of trade and commerce. Any such excessive tax burden may be opert to · C challenge under Part III of the Constitution but the extent of burden would not by itself justify the levy being struck down as a restriction contrary to Article 301 of the Constitution.

110. Secondly because, levy of taxes is both an attribute of sovereignty and an unavoidable necessity. No responsible government can do without levying and collecting taxes for it is only through taxes that governments are run and objectives of general public good achieved. The conceptual or juristic basis underlying the need for taxation h~s not, therefore, been disputed by learned counsel for the dealers and, in our opinion, rightly so. That taxation is essential for fulfilling the needs of the government is even otherwise well-settled. A reference to "A Treatise on the Constitutional Limitatiops" (81h Edn. 1927 - Vol. ll Page 986) by Thomas M Cooley brings home the point with commendable clarity. Dealing with power of taxation Cooley says: "Taxes are defined to be burdens or charges imposed by the legislative power upon persons or property, to raise money for public purposes. The power to tax rests upon necessity, and is inherent in every .sovereignty. The legislature of every free .. State will possess it under the general grant oflegislative power, whether particularly specified in the. constitution among the powers to be exercised by it or not. No constitutional government can exist without it, and no arbitrary government without regular and steady taxation could be anything but an oppressive and vexatious despotism, since the only alternative to taxation would be a forced extortion for the needs of H

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A government from such persons or objects as the men in power might select as victims."

111. Reference may also be made to the following passage appearing in McCulloch v. Maryland, 17 US 316 ( 1819) where Chief Justice MarshaU recognized the power of taxation and B pointed out that the only security against the abuse of such power lies in the structure of the government itself.The court said: "43. ..It is admitted that the power of taxing the people and their property is essential to the very existence of government, and may be legitimately exercised on the objects to which it is c applicable to the utmost extent to which the government may choose to carry it. The only security against the abuse of this power is found in the stmcture of the government itself. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. · D

44. The people of a State, therefore, give to their government a right of taxing themselves and their property; and as the exigencies of the government cannot be limited, they prescribe . no limits to the exercise of this right, resting confidently on the interest of the legislator, and on the influence of the constituents E over their representative, to guard them against its abuse."

112. To the same effect is the decision of this Court in State of Madras v. N.K. Nataraja Mudaliar (AIR 1969 SC 147) where this Court recognized that political and economic forces would operate against the levy of an unduly high rate of tax. The Court F said: "16 .... Again, in a democratic constitution political forces would operate against the levy of an unduly high rate of tax. The rate . of tax on sales of a commodity may not ordinarily be based on arbitrary considerations, but in the light of the facility of trade G in a particular commodity, the market conditions internal and external - and the likelihood of consumers not being scared away by the price which includes a high rate of tax. Attention must also be directed sub-Section (5) of Section 8 which authorizes the State Government, notwithstanding anything contained in Section 8, in the public interest to waive tax or H

BINOY VISWAM v. UNION OF INDIA & ORS. 119 [A. K. SIKRI, J.]

impose tax on sales at a lower rate o'n inter-State trade or commerce. It is clear that the legislature has contemplated that elasticity of rates consistent with economic forces is clearly intended to be maintained."

124. Therefore, it cannot be denied that there has to be some provision stating the consequences for not complying with the requirements of Section I 39AA of the Act, more particularly when these requirements are found as not violative of Articles 14 and 19 (of course, eschewing the discussion on Article 21 herein for the reasons already given). If Aadhar number is not given, the aforesaid exercise may not be possible. c

125. Having said so, it becomes clear from the aforesaid discussion that those who are not PAN holders, while applying for PAN, they are reqµired to give Aadhaar number. This is the stipulation of sub-section (1) of Section 139AA, which we have already upheld. At the same time, as far as existing PAN holders are concerned, since the impugned provisions are yet to be considered on the touchstone ofArticle 21 of the D Constitution, including on the debate around Right to Privacy and human dignity, etc. as limbs of Article 21, we are of the opinion that till the aforesaid aspect of Art~cle 21 is decided by the Constitution Bench a partial stay of the aforesaid proviso is necessary. Those who have alr~ady enrolled themselves under Aadhaar scheme would comply with the requirement of sub-section (2) of Section I 39AA of the Act. Those who still want to enrol are free to do so. However, those assessees who are not Aadhaar card holders and do not comply with the provision of Section 139(2), their PAN cards be not treated as invalid for the time being. It is only to facilitate other transactions which are mentioned in Rule 114B of the Rules. We are adopting this course ofaction for more than one reason. We are saying so because of very severe consequences that entail in not adhering to the requirement of sub-section (2) of Section 139AA of the Act. A person who is holder of PAN and if his PAN is invalidated, he is bound to suffer immensely in his day to day dealings, which situation should be avoided till the Constitution Bench authoritatively determines the argument of Article 21 of the Constitution .. Since we are adopting this course of action, in the interregnum, it would be permissible for the Parliament to consider as· to whether there is a need to tone down the effect of the said proviso by limiting the consequences ..

126. However, at the same time, we find that proviso to Section H

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A 139AA(2) cannot be read retrospectively. If failure to intimate the Aadhaar number renders PAN void ab initio with the deeming provision that the PAN allotted would be invalid as ifthe person had not applied for allotment of PAN would have rippling effect of unsettling settled rights of the parties. It has the effect of undoing all the acts done by a person on the basis of such a PAN. It may have even the effect of B incurring other penal consequences under the Act for earlier period on the ground that there was no PAN registration by a particular assessee. The rights which are already accrued to a person in law cannot be taken away. Therefore, this provision needs to be read down by making it clear that it would operate prospectively. c 127. Before we part with, few comments are needed, as we feel that these are absolutely essential: (i) Validity of Aadhaar, whether it is under the Aadhaar scheme or the Aadhaar Act, is already under challenge on the touchstone of Article 21 of the Constitution. Various facets of Article 21 are D pressed into service. First and foremost is that it violates Right to Privacy and Right to Privacy is part of Article 21 of the Constitution. Secondly, it is also argued that it violates human dignity which is another aspect of Article 21 of the Constitution. Since the said matter has already'been referred to the Constitution E Bench, we have consciously avoided discussion, though submissions in this behalf have been taken note of. We feel that all the aspect ofArticle 21 needs to be dealt with by the Constitution Bench. That is a reason we have deliberately refrained from entering into the said arena.

F (ii) It was submitted by the counsel for the petitioners themselves that they would be confining their challenge to the impugned provision on Articles 14 and 19 of the Constitution as well as eompetence of the Legislature, while addressing the arguments, other facets of Article 21 of the Constitution were also touched upon. Since we are holding that Section 139AA of the Income G Tax Act is not violative of Articles 14 and l 9(1)(g) of the Constitution and also that there was no impediment in the way of Parliament to insert such a statutory provision (subject to reading down the proviso to sub-section (2) of Section 139AA of the Act as given above), we make it clear that the impugned provision has H . passed the muster of Articles 14 and 19(1 )(g) of the Constitution.

BINOY VISWAM v. UNION OF INDIA & ORS. 121 [A. K. SIKRl, J.]

However, more stringent test as to whether this statutory provision violates Article 21 or not is yet to be qualified. Therefore, we make it clear that Constitutional validity of this provision is upheld subject to the outcome of batch of petitions referred to the Constitution Bench where the said issue is to be examined. (iii) It is also necessary to highlight that a large section of citizens feel concerned about possible data leak, even when many of those support linkage of PAN with Aadhaar. This is a concern which needs to be addressed by the Government. It is important that the aforesaid apprehensions are assuaged by taking proper measures so that confidence is instilled among the public at large that there is no chance of unauthorised leakage of data whether it is done by tightening the operations of the contractors who are given the job of enrollment, they being private persons or by prescribing severe penalties to those who are found guilty of leaking the details, is the outlook of the Government. However, we emphasise that measures in this behalf are absolutely essential and it would be in the fitness of.things that proper scheme in this behalf is devised at the earliest.

128. Subject to the aforesaid, these writ petitions are disposed of in the following manner: (i) We hold that the Parliament was fully competent to enact Section E 139AA of the Act and its authority to make this law was not diluted by the orders of this Court. (ii) We do not find any conflict between the provisions ofAadhaar Act and Section 139AA of the Income Tax Act inasmuch as when interpreted harmoniously, they operate in distinct fields. F· (iii) $ection l 39AA of the Act is not discriminatory nor it offends equality clause enshrined in Article 14 of the Constitution. (iv) Section 139AA is also not violative of Article 19(1 )(g) of the Constitution insofar as it mandates giving of Aadhaar enrollment number G 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. (v) The validity of the provision upheld in the aforesaid manner is H

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A subject to passing the muster of Article 21 of the Constitution, which is the issue before the Constitution Bench in Writ Petition (Civil) No. 494 of 2012 and other connected matters. Till then, there shall remain a partial stay on the operation of proviso to sub-section (2) of Section 139AA of the Act, as described above. B No costs.

Devika Gujral Writ Petitions disposed of.