Shri Manish Sharvanbhai Gurjar vs HDFC BANK on 12 January 2026

**JUDGMENT**

1. 1. This Appeal has been preferred by the Appellant Third Party challenging the impugned order dated 11-08-2025 passed by the Ld. Recovery Officer-II of DRT-II, in Recovery Proceeding No: 86/2022. By the impugned order, Ld. Recovery Officer has set aside the e-auction conducted on 25-04-2025.

2. 2. As per the memorandum of Appeal, the case of the Appellant is that the Appellant is the Third Party and in pursuance to Public Notice issued and published by the Ld. Recovery Officer-II of DRT-II, Ahmedabad inviting bids from the public for public auction for sale of properties shown in the said notice, the present Appellant deposited the Earnest Money Deposit (EMD) of Rs.9,00,000/- on 24-04-2025 via RTGS bearing UTR No: KKBKR52025042400956070.

3. 3. The Appellant has submitted that he was declared as the H-1 bidder for the property for an amount of Rs.90,10,000/-, which was above the reserve price and he has also deposited the entire amount within the prescribed time limit as per the auction sale notice with the Respondent Bank. She has further submitted that the Appellant had paid 1% TDS amount in the PAN card details provided by the Respondent i.e. HDFC Bank Ltd and also paid requisite poundage fees of Rs.90,100/- with the Hon'ble Tribunal vide Demand Draft No.636197 dated 08/05/2025.

4. 4. She has further submitted that although the Appellant had paid the entire sale consideration and also paid requisite poundage fees, neither the auction sale was confirmed in his favour nor Sale Certificate was issued and hence he had to file I.A. No: 133/2025 on 07-07-2025 before the Ld. Recovery Officer-II, DRT-II, Ahmedabad seeking immediate confirmation of auction sale and issuance of sale

certificate. He further submitted that although the Respondent Bank conceded and consented to the aforesaid application and supported the Appellants' prayer for issuance of the sale certificate and handing over of possession and the Appellant also filed a subsequent affidavit providing a detailed clarification regarding the payment of the TDS amount, including proof of timely deduction and deposit in compliance with Section 194-IA of the Income Tax Act, the Ld. Recovery Officer failed to consider or even refer to the affidavit and passed the impugned order. He has submitted that the impugned order dated 11-08-2025 passed by the Ld. Recovery Officer has erroneously set aside the auction, holding that the deduction of 1% TDS amounted to short payment of the bid amount and that the payment was not made within the prescribed time limit of 15 days, as per Rules 57 and 58 of the Income Tax (Certificate Proceedings) Rules, 1962, read with Section 29 of the Recovery of Debts and Bankruptcy Act, 1993 and simultaneously proceeded to initiate steps for re-auction of the same property. As per the impugned order dated 11-08-2025, Respondent No: 1 has unilaterally transferred the sale proceeds back into the account of the Appellant, treating the auction sale as non-est.

1. 5. It has been submitted that the impugned order is invalid and has been passed ignoring express provisions of law and accordingly, it is prayed to be set aside and the impugned sale to be confirmed in favour of the Appellant. He has further submitted that this Tribunal, in **Appeal No. 3 of 2025 decided on 27.08.2025**, has categorically held that deduction and deposit of TDS under Section 194 IA does not constitute short payment and cannot invalidate an auction sale.

2. 6. Per contra, the Ld. Counsel for the Respondent Bank has submitted that the submissions made by the Appellant in Para 6 is undisputed and the Respondent Bank has supported the Appellant before the Ld. Recovery Officer by filing Written Submission for confirmation of the sale. He has further submitted that the Respondent Bank has confirmed the receipt of entire payment including the

deduction and remittance of 1% TDS as per the applicable provision, against the PAN card details provided by the Respondent Bank for deducting 1% TDS towards Income Tax.

7. He has further submitted that the Bank has filed an affidavit dated 30.06.2025 before the Hon'ble Tribunal confirming receipt of the entire sale consideration along with supporting documents such as challan receipts and Form 26QB. It is submitted that TDS under Section 194-IA is an integral part of the total sale consideration and is a statutory deduction from the bid amount, not an additional payment. The TDS deducted by the buyer is deposited on behalf of the seller and credited to the seller under Section 199 of the Income Tax Act. Reliance is placed on **Smt. Varsha G. Salunke vs. DCIT (2006) 98 ITD 147(Mumbai) wherein Section 199** serves two objectives

- i) to treat TDS as payment of tax on behalf of the person whose income is subjected to deduction and

- ii) to determine the assessment year in which credit of such TDS is to be granted, namely, the year in which the related income is offered to tax.

Accordingly, TDS deducted by the buyer at the source is deemed to be tax paid on behalf of the seller, and the seller is entitled to claim credit for the same under Section 199 in the appropriate assessment year.

8. He has further submitted that in view of the facts and legal submissions, compliance has been done in time and there is no irregularity or illegality for depositing 1% TDS out of total sale consideration and hence, sale conducted on 25.04.2025 deserves to be confirmed in favour of the successful auction purchasers.

9. I have heard the Ld. Counsels for both the parties and perused the records of this Appeal and also the records of RP No: 86/2022 arising out of Original Application No: 655/2021 for deciding this appeal. In views of this Tribunal, following points of

determination are necessary to be dealt with and decided for just and proper adjudication of this Appeal :-

- **(I) Whether Appellant was under statutory obligation to deduct 1% TDS of the sale proceed and deposit it with the PAN Number of CH Bank?**

- **(II) Whether the 1% TDS is required to be deposited in addition to the 100% sale proceed, as it is required to be deposited in the case of poundage fees?**

- **(III) Whether by depositing 99% of sale proceed with the CH Bank and 1% as TDS through the PAN Number of CH Bank to the Income Tax department, the Appellant has failed to deposit 100% of the sale proceed within the statutory time limit?**

- **(IV) To what relief, if any, Appellant is entitled?**

**POINT OF DETERMINATION NO: I**

**Whether Appellant was under statutory obligation to deduct 1% TDS of the sale proceed and deposit it with the PAN Number of CH Bank?**

- 10. Before proceeding to decide this point, it is necessary to mention the fact which are admitted by all the parties and which can be accepted as the truth. The admitted facts, relevant to this appeal are as following :

- (a) The Appellant in this case was declared H 1 bidder in the e-auction dated 25-04-2025 concerning the mortgaged property which is subject matter of Original Application No: 655/2021 and also RP No: 86/2022 and the bid price was Rs.90,10,000.

- (b) It is also an accepted fact that H 1 bidder deposited Rs.90,10,000/- i.e. 99% of the sale proceed within the prescribed time limit and deducted 1% TDS of

Rs.90,100/- under Section 194 IA IT Act within the prescribed time limit fixed for depositing 100% of sale proceed.

(c) It is also an admitted fact that the CH Bank has given its consent for depositing the 1% TDS with the PAN number of CH Bank as it is admitted by the CH Bank that the PAN number of the CH Bank was provided by it to the Appellant H 1 bidder for the purpose of depositing 1% of TDS. copy of which has been filed by the H 1 bidder Appellant on the records of RP No: 86/2022.

(d) It is also an admitted statutory position that the CH Bank qualified as **"Person" under Section 2(31) of the I.T. Act.**

(e) It is also an admitted fact that not only the Appellant but the CH Bank has also submitted before the Ld. RO for confirmation of sale as there was no objection against the impugned auction proceeding.

Keeping the above mentioned admitted facts in mind, now this Tribunal will proceed to decide the point of Determination No: I.

(i) In this regard, it is necessary to reproduce the provision of Section 194 I.T. Act which is as under :

**"Payment on transfer of certain immovable property other than agricultural land.**

194-IA.

(1) "**Any person, being a transferee**, responsible for paying (other than the person referred to in section 194LA) **to a resident transferor any sum** by way of consideration for transfer of any immovable property (**other than agricultural land**), **shall, at the time of credit of such sum to the account of the transferor** or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, **deduct an**

**amount equal to one percent of such sum as income-tax thereon.**

(2) **No deduction** under sub-section (1) shall be made **where the consideration for the transfer of an immovable property is less than fifty lakh rupees.**

(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

Explanation.-- For the purposes of this section,-- (a) "agricultural land" means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2; (b) **"immovable property" means any land (other than agricultural land) or any building or part of a building."**

(ii) From bare reading of this Section, **two things** become very clear. **First** that this provision is applicable on transfer of immovable property other than agricultural land being valuation of Rs.50/- lakhs and more. **Secondly, that this section imposes a mandatory duty on the transferee of immovable property** that at the time of credit of the sale proceed to the account of the transferor or at the time of such sum in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one percent of sum as Income Tax thereon.

(iii) Now the question arise that in which PAN number this 1% of TDS is required to be deposited. **Section 194IA** does not provide any Head under which this 1% sum is to be deposited. It simply says that the transferee shall deduct an amount equal to 1% of such sum as Income Tax thereon. There are three entities except the H 1 bidder who are involved, in the present transaction of the impugned auction :-

- (a) The CD borrower who is the owner of the property in person.

- (b) The CH Bank who is the ultimate beneficiary of the sale proceed of the impugned auction.

- (c) The Debts Recovery Tribunal through its Ld. Recovery Officer who plays a role of statutory agency to conduct the recovery procedure including the auction sale in a legal and valid manner.

- (iv) **Whether this 1% TDS should be deposited with the PAN number of CD borrower?** The answer will certainly be in negative because the sale proceeds is not being deposited in personal account of the CD borrower rather it is being deposited in CH Bank in fulfilment of the dues which the CD borrower owes to the Bank. The CD is only entitled of the amount, if any, which is surplus to the outstanding dues with the CH Bank. Accordingly, in the present transaction, the CD/Borrower is not a beneficiary and no income has occurred in his account by the impugned auction sale, accordingly to even think to deposit 1% TDS with PAN number of the CD, will be legally unjustified.

- (v) Similarly, Debts Recovery Tribunal through its Ld. Recovery Officer is also not entitled for 1% TDS to be deposited in PAN number of Debts Recovery Tribunal, if any, because the role of this Tribunal through its Ld. Recovery Officer is limited to conduct the auction as an impartial and fair umpire. The Debts Recovery Tribunal is not gaining any income from this transaction nor it is being benefited in any manner from the sale proceed, so by any stretch of imagination, it cannot be concluded that 1% of TDS should be deposited with the PAN number of Debts Recovery Tribunal.

(vi) On the other hand, the CH Bank is the ultimate beneficiary of the transaction of the impugned auction and if the sale proceed is to be treated as an income as it is under Provision of Section 194IA, the CH Bank will ultimately be responsible to pay Income Tax, if any. It is therefore, concluded that the 1% TDS in this case was to be deposited with the PAN number of the ultimate beneficiary i.e. the CH Bank.

(vii) In this connection, the Ld. Recovery Officer has dealt this case in details with this issue in the impugned order and concluded that as the CH Bank has submitted before the Ld. Recovery Officer that the 1% TDS will be accounted by debiting in the account **"TDS on interest from other"** on submission of challan and Form 16B by the buyer/Auction Purchaser, the Ld. Recovery Officer has expressed surprise on this that the CH Bank itself does not claim its TDS on sale/transfer of the property but claims it as TDS on interest from others which ultimately, in the opinion of Ld. Recovery Officer, be helpful for the CH Bank in evasion of tax and Income Tax department will not get a single rupee tax for this transfer which will make this entire exercise a futile one. In the considered view of this Tribunal, while dealing with this particular issue and discussing about the tax evasion, **the Ld. Recovery Officer has actually travelled beyond its territory** because it comes under the jurisdiction of the Income Tax department to scrutinize whether any tax evasion has been done by the tax payer or not and if there is any probability of tax evasion then how to curve it and these are all the matter to be dealt with by the Income Tax department and not by any other authorities beyond Income Tax department.

(viii) It is therefore, very clear that the Auction Purchaser, the Appellant was under statutory obligation to deduct 1% TDS as Income Tax from the

sale proceeds being deposited by him with the account of the CH Bank and in this case the CH Bank is the only beneficiary who can be said to have earned income from the transaction of the impugned auction sale. Therefore, this 1% of TDS must be deposited with the PAN number of CH Bank alone.

**Point of Determination No: I is answered in affirmative accordingly.**

**POINT OF DETERMINATION NO: II**

**Whether the 1% TDS is required to be deposited in addition to the 100% sale proceed, as it is required to be deposited in the case of poundage fees?**

- (i) In the impugned order, Ld. Recovery Officer has made an observation at Page 7 of the impugned order that in the RDB Act there is no denial to any of the liability arising under any of the prevailing Central/State Act in form of any charge/dues/taxes but all those will be undoubtedly above the Purchase money. She has further added that to understand this as even as per RDB Act there is requirement of 1% poundage fees and that too is always above the H 1 bid price (purchase money). It is not clear that, whether by this observations, the Ld. Recovery Officer has suggested that the H 1 bidder Appellant should have paid 1% TDS above the H 1 bid price/purchase money but if it is what is implied by this observation, it is totally misconceived. Comparing TDS with poundage fees cannot be justified by any legal logic. The poundage fee is deposited by the H-1 bidder as a fee for conducting the auction proceeding through the Debts Recovery Tribunal and neither in RDB Act nor in any law, it has been provided that the poundage fees should be deducted from the H-1 bid price/purchase money. On the other hand, Section 194 I.T. Act very clearly makes a

mandatory provision for transferee of any immovable property, except agricultural land, to deduct an amount equal to 1% of the sale proceed as Income Tax thereon. Here it is also necessary to make it clear that this provision of Section 194 I.T. Act does not distinguish between any sale between private parties or sale through any authority, rather it makes mandatory for all transferees of immovable property except agricultural land to deduct 1% TDS from the sale proceed. Not only that **Section 201 I.T. Act** prescribes penalty to be levelled on the transferee, as a consequence in case the TDS is not paid within time and it cannot be directed to the transferee to deposit the entire amount without deducting the TDS and suffer the penalty levelled by the Income Tax department. It is also clear that sale cannot be registered unless and until 1% TDS has been deducted by the transferee and has been deposited with the Income Tax department. **In Shubhankar State Pvt. Ltd Versus Sr. Sub Registrar W.P. No: 57385 of 2013 Hon'ble Karnataka High Court** has categorically held that the sale certificate issued by the public authority pursuant to the sale transaction made after 01-06-2013 can only be registered when 1% of the TDS is deducted by the transferee before making the final payment.

- (ii) It cannot be said that the H 1 bidder Appellant should have paid the 1% TDS above the 100% sale proceed because the I.T. Act or any other enactment including RDB Act does not expect that the H-1 bidder should deposit 1% TDS above 100% sale price. Accordingly, to compare the TDS with poundage fee cannot be justified on any legal ground.

**Accordingly, point of Determination No: II is answered in negative.**

POINT OF DETERMINATION NO: III

**Whether by depositing 99% of sale proceed with the CH Bank and 1% as TDS through the PAN Number of CH Bank to the Income Tax department, the Appellant has failed to deposit 100% of the sale proceed within the statutory time limit.**

- (i) Now the question arise that whether the paying 99% of sale proceed with the CH Bank and 1% as TDS with the Income Tax department, the Appellant has failed to deposit the 100% of the sale proceed. This preposition is based on erroneous interpretation of the Term "**Tax Deducted at Source**". TDS is a kind of advance payment of Income Tax which is mandated to be deducted by the transferee/employer or any other person/authority who is required to deduct statutory TDS. For example :

- (a) In case of an employee getting salary of certain amount, the employer/department under which the employee is working is mandated by the Income Tax Act provisions to deduct 10% of the salary as Income Tax and to pay remaining amount to the employee. The question arises that in this case, can an employee claim that he is not getting 100% of his salary?

- (b) Likewise, in case of payment of rent and other dues, certain amount of TDS is mandated to be deduced by the person making the payment. For example, if the Landlord has rented his house at a rent of certain amount and the tenant deposits the rent in the account of the Landlord after deducting the mandatory TDS, can the Landlord claim that he has not received 100% of the rent?

- (c) In the same manner, if the transferee of any immovable property except agricultural land, who has purchased it at a consideration of more than 50 Lakh Rupees, deduct 1% TDS from the total sale

proceed to be deposited with the Income Tax department and deposit the remaining 99% where he has been directed by the authorities to deposit, (in this case the CH Bank) can it be concluded that the transferee has not paid the 100% of the sale proceed?

(ii) In all the above illustrations, the answer will be a big "**NO**". TDS is a kind of part payment mandated by the statute (Income Tax Act in this case), of the total sale proceed and if 99% of the sale proceed has been deposited with CH Bank and remaining 1% has been deducted as TDS and deposited with the Income Tax department that too within the prescribed time limit, it cannot be said that 100% sale proceed has not been deposited by the H 1 bidder/Appellant and if this deposit has been made well within the prescribed time limit then it cannot be said that the 100% sale proceed was not deposited by the transferee/H 1 bidder/Appellant within the prescribed time.

**Point of Determination No: III is accordingly answered in negative.**

**POINT OF DETERMINATION NO: IV**

**To what relief, if any, Appellant is entitled?**

(i) On the basis of conclusion, arrived with regard to point of Determination Nos: I to III, it transpires that the H-1 bidder has deposited the entire sale proceed well within the prescribed statutory time limit and even then the sale was not confirmed rather the auction was cancelled by the impugned order on ground that 100% sale proceed was not deposited within statutory Time Limit, this order cannot be said to be legally justified.

(ii) In the facts and circumstances of this case, it transpires that the auction sale was conducted in a legally justified manner in which the Appellant was the highest bidder and he has paid the entire sale proceed i.e.99% in the

account of the CH Bank and 1% TDS to the Income Tax department in total 100% within the prescribed time limit. In these circumstances, the impugned order does not stand on valid and legal grounds. In **Madras Port Trust Versus Himanshu International by its Proprietor V. Ventadri (dead) by LR's AIR 1999 SC 1144 Hon'ble Apex Court** has observed that the sale certificate cannot be set aside on technical ground. This rule is fully applicable in this case and even technical error has also not been found in the action of the H 1 bidder while deducting 1% TDS under his statutory compulsions and depositing within time with the Income Tax department.

1. 11. Therefore, in the views of this Tribunal, the Ld. Recovery officer has committed illegality in setting aside the e-auction and on the basis of the above discussions the Appeal of the Appellant is liable to be allowed and the impugned order is liable to be set aside.

**ORDER**

1. 1. The Appeal 10/2025 is hereby allowed with no order as to cost.

2. 2. The impugned order passed by Ld. Recovery Officer-II of DRT – II, Ahmedabad setting aside the sale dated 25-04-2025 vide order dated 11-08-2025 is hereby set aside.

3. 3. The Appellant is directed to redeposit the sale proceed which has been refunded to him, in compliance of the impugned order dated 11-08-2025, with the CH Bank within seven (7) days from today.

4. 4. The CH Bank is directed to accept the above mentioned payment.

5. 5. The Appellant/H-1 bidder is further directed to deposit the poundage fees in relevant account within seven (7) days (if it has been refunded to him).

1. 6. After these payments are made within the prescribed time, the Ld. Recovery Officer is directed to decide the IA No: 133/2025 filed by the H-1 bidder/Appellant before the Ld. Recovery Officer for confirmation of the impugned sale, in the light of observations made in this order and further proceed/conclude with the Recovery proceedings in accordance with law.

2. 7. The file of RC No: 86/2022 with a copy of this judgment be sent immediately to the Ld. Recovery Officer for necessary compliance.

3. 8. File be consigned to records.

Pronounced in the Open Tribunal on **12^th January 2026**.

**(PANKAJ KUMAR UPADHYAY)** **PRESIDING OFFICER,** **DRT-II, AHMEDABAD.**

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