Is Section 206AA Unconstitutional? Why is the Karnataka High Court, in Kowsalya Bai, Wrong?

While on one side India and its citizens have been grappling with black money and blaming the Government for being unable to come out with the means to effectively tackle the social menace, on the other hand statutory provisions effectuating the Government intent to come to terms with the parallel economy is criticized as unfair and intrusive. This article deals with one such regulatory measure, being Section 206AA of the Income Tax Act, which provides for consequences for failure of income earners in furnishing their Permanent Account Number (PAN). This provision has generated wide spread controversy and drawn criticism from all quarters and has been dubbed as arbitrary and capricious. Recently the Karnataka High Court in its decision in Kowsalya Bai has endorsed this view and declared the provision unconstitutional. This article makes an attempt to critically examine, especially from a legal theory perspective, the correctness of the decision in Kowsalya Bai by apprising the peculiar position which Section 206AA addresses and revisiting the tests for declaring a statute unconstitutional and invalid. Upon appraisal of the relevant factors the author has concluded that while the sympathy garnered by non-taxable citizens can indeed be appreciated, such considerations are hardly any guide to adjudge upon the validity of fiscal enactments and especially those provisions which are meant to promote compliance and curb evasion. In the light of the decisions setting out the parameters for judicial review it is difficult to concur with the reasoning of the High Court in Kowsalya Bai. It is well ingrained in the judicial history of the commonwealth that ‘hard cases make bad laws'. The instant case is a quintessential reflection of this trend. However, as pointed out by the Supreme Court, “artificial and unduly latitudinarian rules of construction which, with their general tendency to give the tax-payer the breaks are out of place where the legislation has a fiscal mission.” Thus one would be advised to tread with caution while placing reliance upon this decision in Kowsalya Bai