Law:

Section:

Section 206AA, read with section 139A, of the Income-tax Act, 1961 and article 14 of the Constitution of India, 1950 - Deduction of tax at Source - Requirement to furnish permanent account number - Whether provisions of section 206AA is unconstitutional and has to be read down from statute and made inapplicable to persons whose income is less than taxable limit - Held, yes - Whether, therefore, banking and financial institution shall not invariably insist upon PAN from small investors as well as persons who intend to open an account in bank or financial institution - Held, yes [In favour of assessee] HELD The very intent of section 206AA is to make it conditional for every person who wish to have a transaction in the bank or financial institution including small investors/depositors, invariably to have a PAN. This runs contrary to what has been contemplated under section 139A which was introduced by the legislature in its wisdom. What is not in dispute is, persons whose income is below the taxable limit need not have a PAN and also they need not furnish income tax declaration/returns. Of course, under the Finance Act, it is made clear that a person whose income is less than the taxable limit is not taxable. Such of the small investors who come forward to invest their savings from earnings as security for their future, by virtue of the present section 206AA necessarily have to give their PAN. The poor and illiterate/uneducated persons are finding it difficult rather to approach the various Government departments particularly the Income tax department to get their PAN. It is, therefore, held that it may not be necessary for such persons whose income is below the taxable limit to obtain PAN. Such investments/savings from their earnings or by way of agriculture or any other source, in banking and financial institutions would also further the financial position from the point of the country's economy. But imposing condition to invariably go for a PAN on such small depositors would cause hindrance and discourage such small investors to come forward to invest their money for secured returns and as security for their future. [Para 8] The difficulty expressed by the…

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