However, the apex court upheld the validity of Section 139AA of the I-T Act, subject to the outcome of the batch of petitions before its Constitution bench which is examining if the Aadhaar scheme infringes on the Right to Privacy and if there is threat of data leakage.
A bench comprising Justices A K Sikri and Ashok Bhushan also upheld the legislative competence of Parliament in enacting the law to this effect.
The bench asked the government to take appropriate steps to ensure there was no leakage of data from the Aadhaar scheme.
"The government to take proper and appropriate steps and the scheme in this regard has to be devised at the earliest till confidence among the citizens that the data would not be leaked," the bench said.
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The bench made it clear that there was no conflict between the impugned provisions of the Income Tax Act and the Aadhaar Act.
It said previous transactions won't be affected or nullified with partial stay on the new law till privacy issue linked to Aadhaar is decided.
The Centre had earlier said that the programme of PAN had become suspect as it could be faked, while Aadhaar was a "secure and robust" system by which the identity of an individual could not be faked.