The Entry Of Aadhaar Into Income Tax Law And It’s Implications

The amendment made to the Finance Bill, 2017 when it was placed before the Lok Sabha for approval. Among several amendments made to the Finance Bill this one stands out. It is the insertion of a new Section 139AA with effect from July 1, 2017.
The section is as under:

The Section That Makes Aadhaar Necessary To File Taxes

139AA (1): Every person who is eligible to obtain Aadhaar number shall, on or after the 1st day of July, 2017, quote Aadhaar number –
• in the application form for allotment of permanent account number;
• 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.

139AA (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.

139AA (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 –
• “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;
• “Enrolment ID” means a 28 digit Enrolment Identification Number issued to a resident at the time of enrolment;
Implications

Applying for PAN, Need Aadhaar
Thus, as per the new section, any person who is “eligible” to obtain the Aadhaar number has to, on or after July 1, 2017, quote the same if he or she applies for a permanent account number (PAN – necessary to file taxes) and also quote it in the return of income.

Filing Return, Need Aadhaar
Consequently, for the persons who are covered by this amendment, if they want to file a return of income on or after July 1, 2017, it will be mandatory to quote the Aadhaar number in the return. It may be noted that in the income tax return (ITR) forms that we already have, there is a field for quoting the Aadhaar number where it is allotted. With this latest amendment, it has become mandatory for the affected persons to quote the Aadhaar number in the ITR form.
Sub-section (2) of the new section makes it mandatory for existing PAN holders who are “eligible” to obtain the Aadhaar number and to intimate their 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.”
No Aadhaar, PAN Cancelled

Please read the proviso to Sub-section (2)

It says that if an existing PAN holder who is eligible to obtain the Aadhaar number fails to intimate the Aadhhar number then “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.”

Thus, for example, if a person has got a PAN which was allotted to him, say, more than 15 years ago and who has been regularly filing his return of income for all these years using that PAN and who has been assessed also by the income-tax department for so many years, and such person does not 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”, then the PAN will be deemed to be invalid!

No Aadhaar, PAN Cancelled, Pay Penalty
You may keep in mind the provisions of Section 272B(1) which mandate that if a person who is supposed to obtain a PAN as per the provisions of Section 139A does not do so, then he can be penalised with a penalty of Rs. 10,000.
So, the same person who had a PAN and who used it for 15 years can now suddenly be hauled up by an officer under Section 272B for not obtaining a PAN simply because his PAN (which, as mentioned above, was accepted by the income-tax department for 15 years) is now deemed to be invalid.

In any case, such a person will need to reapply for a new PAN. That new PAN application will require the Aadhaar number to be quoted. The new PAN will then have to be intimated to the bank, depository participant, mutual funds etc.

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