INOPERATION OF PERMANENT ACCOUNT NUMBER AND ITS CONSEQUENCES

Quoting of Aadhaar Number

Section 139AA was inserted vide the Finance Act, 2017 with effect from 01.04.2017.  The newly inserted section 139AA provides that 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.

If the person does not possess the Aadhaar Number, the Enrolment ID (Enrolment ID' means a 28 digit Enrolment Identification Number issued to a resident at the time of enrolment) of Aadhaar application form issued to him at the time of enrolment shall be quoted in the application for permanent account number or  in the return of income furnished by him.

 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.  In case of failure to intimate the Aadhaar number, the permanent account number allotted to the person shall be ²[made inoperative after the date so notified in such manner as may be prescribed.

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.

Making PAN inoperative

Vide Notification No. 11/2020, dated 13.02.2020 the Central Board of Direct Taxes inserted a new Rule 114AA which provides the procedure for making the PAN inoperative.   The newly inserted Rule 114AA provides that if a person, who has been allotted the permanent account number as on the 1st day of July, 2017 and is required to intimate his Aadhaar number has failed to intimate the same on or before the 31.03.2020, the permanent account number of such person shall become inoperative immediately after the said date for the purposes of furnishing, intimating or quoting under the Act.

The last date 31.03.2020 has been extended to 31.03.2022 vide Notification No. 17/2022, dated 29.03.2022.  Where a person, who has been allotted the permanent account number as on the 01.07.2017 and is required to intimate his Aadhaar has failed to intimate the same on or before the 31.03.2022, the permanent account number of such person shall become inoperative immediately after the said date for the purposes of furnishing, intimating or quoting under the Act.  He shall be liable for all the consequences under the Act for not furnishing, intimating or quoting the permanent account number.  Where the person who has failed to intimate his aadhaar number after 31.03.2022, after payment of fee as detailed below-

• Rs.500/-, in a case where such intimation is made within three months from 31.03.2022; and
• Rs.1000/- in other cases,

 his permanent account number shall become operative from the date of intimation of Aadhaar number for the purposes of furnishing, intimating or quoting under the Act and provisions of sub-rule (2) shall not be applicable from such date of intimation.

Latest amendments

Rule 114AAA was substituted by a new section vide Notification No. 15/2023, dated 28.03.2023 which will come into effect from 01.04.2023. 

The newly substituted Rule 114AAA(1)  provides that where a person, who has been allotted the permanent account number as on the 01.07.2017 and is required to intimate his Aadhaar number has failed to intimate the same on or before the 31.03.2022, the permanent account number of such person shall become inoperative, and he shall be liable for payment of fee as discussed above. If such person has intimated his Aadhaar number after the 31.03.2022 after payment of fee, his permanent account number shall become operative within 30 days from the date of intimation of Aadhaar number.

Rule 114AAA(3) provides that a person, whose permanent account number has become inoperative, shall be liable for further consequences for the period commencing from the date as specified under sub-rule (4) till the date it becomes operative-

• refund of any amount of tax or part thereof, due under the provisions of the Act shall not be made;
• interest shall not be payable on such refund for the period, beginning with the date specified under sub-rule (4) and ending with the date on which it becomes operative;
• where tax is deductible under Chapter XVIIB in case of such person, such tax shall be deducted at higher rate, in accordance with provisions of section 206AA;
• where tax is collectible at source under Chapter XVII-BB in case of such person, such tax shall be collected at higher rate, in accordance with provisions of section 206CC.

Rule 114AAA(4) provides that the provisions of sub-section (3) will be effective from the ate specified by the Board.

Rule 114AAA(5) provides that the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall specify the formats and standards along with the procedure for verifying the operational status of permanent account number under sub-rule (1) and sub-rule (2).