REAL SURFACE FINISH PVT LTD vs BANK OF BARODA on 27 August 2025

**JUDGMENT**

1. This Appeal has been preferred by the Appellant Third Party challenging the impugned order dated 19-06-2025 passed by the Ld. Recovery Officer-II of DRT-II, in Recovery Proceeding No: 488/2000. By the impugned order, Ld. Recovery Officer has set aside the auction conducted on 31-12-2024.

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1. 2. It is necessary to mention here that while this Appeal was initially filed against the CH Bank and Respondent Nos: 2 to 7, during the proceedings of this Appeal by allowing IA No: 1929/2025 filed by the Appellant, the name of Respondent Nos: 2 to 7 has been deleted from the array of Memo of Appeal vide order dated 06-08-2025 of this Tribunal.

2. 3. 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 on 26-12-2024 tendered bid of Rs.66,00,000/- for immovable property. The Appellant also participated in the said auction sale scheduled on 31-12-2024.

3. 4. The Appellant has submitted that he was declared as the H-1 bidder for the property for an amount of Rs.66,20,000/- and he has also deposited the entire amount within the prescribed time limit as per the auction sale notice with the Respondent Bank which is confirmed by the Respondent Bank by filing an affidavit before the Ld. Recovery Officer. He has further submitted that he has paid Rs.66,200/- being 1% TDS amount in the PAN card details provided by the Respondent i.e. Bank of Baroda and also paid requisite poundage fees of Rs.66,210/- with the Hon'ble Tribunal vide Demand Draft No.001241 and dated 08/01/2025.

4. 5. He has further submitted that although he 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.83/2025 before the Ld. Recovery Officer-II, DRT-II, Ahmedabad seeking immediate confirmation of auction sale. He further submitted that although the Respondent Bank conceded and consented for confirmation of sale in his

favour, the Ld. Recovery Officer kept the matter pending under one pretext or the other till June 2025. He has submitted that the impugned order dated 19-06-2025 passed by the Ld. Recovery Officer has erroneously set aside the auction, holding that the deduction of TDS amounted to short payment of the bid amount and that the purchaser failed to comply with the terms of the auction. 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.

1. 6. Per contra, the Ld. Counsel for the Respondent Bank has submitted that the submissions made by the Appellant in Para 1 to 4 are the factual aspects and are not countered as the same is within the bracket of law. He has further submitted that the say of the Appellant that the Respondent Bank has confirmed the receipt of entire payment on an affidavit is not correct but the same is given on a plain paper signed by the Authorized Officer of the Respondent Bank but at the same time the PAN number details was provided by the Respondent Bank to the Appellant by email for deducting 1% TDS towards Income Tax.

2. 7. He further submitted that the crux of the case is the impugned order of Ld. Recovery Officer who has not confirmed the auction sale on the ground that 100% payment was not made and there is no any requirements of 1% TDS U/s 1941A of the I. T. Act, 1961 and terms and conditions of the Auction Sale Notice is not complied with. He has further submitted that in the past experience of sale of property in auction by the DRT, there was a tendency / customs of making 1% TDS, and also the Honb'le P. O. DRT - 1 Ahmedabad, in Appeal No 12 / 2023 in case of Priyam R Sheth V/s Bank of India, confirmed the Auction Sale validating TDS deduction at 1%, hence the concerned Officer of the Bank provided necessary details of PAN for making TDS, which is adjusted by the CH Bank, against ADVANCE PAYMENT OF TAX every quarter end. He further submitted that the Bank is always in a dilemma when it comes to the issue of

deduction of 1% TDS because there is always a difference of opinion between Ld. Recovery Officer of DRT- I and DRT – II.

1. 8. He further submitted that as per the averment of the Appellant about mandate of Section -194 IA of the Income Tax Act , 1961 for the deduction of tax, the CH Bank is not transferor of the property, but as RES JUDICATA is applicable to this case and the TDS made by the Auction Purchaser, is accounted in the loan account of borrower, settled against ADVANCE TAX, the CH Bank is of the opinion that, the bank had received 100 percent payment.

2. 9. He has further submitted that as per the say of the Appellant, the Respondent Bank has not issued any unconditional No Objection for confirmation of sale in favour of the Appellant. He further submitted that all the grounds raised by the Appellant is rotating around Section 194 IA of the Income Tax Act, 1961 except that the CH Bank is "person" as defined in Section 2(31) of the I.T. Act.

3. 10. He further submitted that after passing of the impugned order dated 19-06- 2025, the entire sale consideration amount including TDS to the tune of Rs.66,08,034/- was refunded on 07-07-2025 against receipt of Rs.66,20,000/- after deducting nominal charge of paper publication etc. to the Rs.11,966/- and the Appellant had accepted the reversal/refund without any objection. On these grounds, it is prayed that the Appeal be rejected as auction sale in question has already been set aside by the impugned order.

4. 11. I have heard the Ld. Counsels for both the parties and perused the records of this Appeal and also the records of RP No: 488/2000 arising out of Original Application No: 367/1998 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?**

12. 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 31-12-2024 concerning the mortgaged property which is subject matter of Original Application No: 367/1998 and also RP No: 488/2000 and the bid price was Rs.66,20,000.

(b) It is also an accepted fact that H 1 bidder deposited Rs.65,53,800/- i.e. 99% of the sale proceed within the prescribed time limit and deducted 1% TDS of Rs.66,200/- under Section 194IA 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 through email, copy of which has been filed by the H 1 bidder Appellant on the records of RP No: 488/2000.

(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 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 8 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 this connection, the contention of the CH Bank is also noteworthy who under the head of **Counter of Relief & Prayer** in his reply has submitted that on one hand the Appellant is praying through this Appeal for confirmation of sale in favour of the Appellant for the property in question by allowing IA No: 83/2025 in RP No: 488/2000 but at the same time he has accepted the reversal (refund) of sale consideration paid by him and had not objected at all and neither made any request with the CH Bank to deposit the amount of sale proceed in No Lien A/c or High interest bearing account and at this juncture the CH Bank is not having a single rupee of the Appellant. The entire sale proceed was refunded on 07-07-2025 only after deduction of expenses to the tune of Rs.11,966/-. According to CH Bank, it shows the malafide of the Appellant. On perusal of record, it transpires that the Appellant has not accepted the refund without any objection but he has filed his objection in the shape of this Appeal before this Tribunal. The Ld. Counsel for the Appellant has also submitted at the time of argument that the Appellant is ready and willing to pay the entire sale proceed to the CH Bank as soon as it is directed by the competent authority and it is not by its sweet will that the amount was refunded. It was refunded because of impugned order and it cannot be said that by accepting the refund, the Appellant has shown any malafide intention.

(iii) 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 ^ruled 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. 13. 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 3/2025 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 31-12-2024 vide order dated 19-06-2025 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 19-06-2025, 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).

6. 6. After these payments are made within the prescribed time, the Ld. Recovery Officer is directed to decide the IA No: 83/2025 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.

7. The file of RC No: 488/2000 with a copy of this judgment be sent immediately to the Ld. Recovery Officer for necessary compliance.

8. File be consigned to records.

Pronounced in the Open Tribunal on **27^th August, 2025**

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

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