Supreme Court Declines To Mandate Registry-Level Safeguards For TDS Compliance In Rs.50 Lakh+ Property Transactions
Supreme Court Declines To Mandate Registry-Level Safeguards For TDS Compliance In Rs.50 Lakh+ Property Transactions
Introduction
The Supreme Court dismissed a plea seeking directions to introduce institutional safeguards to prevent inadvertent default by property buyers in complying with tax deduction at source (TDS) obligations under Section 194IA of the Income Tax Act, 1961. The petitioner sought systemic reforms at the stage of property registration to ensure buyers are not exposed to interest and penalty for failure to deduct and deposit TDS when purchasing immovable property valued at ₹50 lakhs or more.
Factual Background
Section 194IA of the Income Tax Act, 1961 mandates that a buyer of immovable property (other than agricultural land), where the sale consideration is ₹50 lakhs or more, must deduct TDS at the rate of 1% of the total consideration payable to the seller. The deducted amount is required to be deposited with the Central Government by filing an online challan-cum-statement in Form 26QB within the prescribed timeline. Thereafter, the buyer must generate and issue a TDS certificate in Form 16B to the seller.
The petitioner, appearing in person, clarified that he was not challenging the constitutional validity of Section 194IA nor disputing the tax liability itself. He stated that he held an M. Tech in Computer Science and was employed with a multinational company, yet remained unaware of the statutory requirement under Section 194IA at the time of purchasing property as a first-time homebuyer. According to him, this demonstrated a systemic gap rather than an individual lapse.
The petitioner contended that the entire statutory obligation to deduct and deposit TDS is placed solely upon the buyer on the implicit assumption that every property purchaser possesses working knowledge of income tax law. He argued that there exists no statutory or administrative mechanism at the stage of property registration to verify compliance with TDS requirements or to alert purchasers about their obligations.
Procedural Background
The matter was heard by a Bench comprising Justice Vikram Nath and Justice Sandeep Mehta. The petitioner advanced arguments in person and sought directions for institutional safeguards, including verification of filing of Form 26QB at the time of registration of property. He emphasized that many buyers complete registration without awareness of TDS obligations and that Registrar Offices do not verify compliance.
The petitioner submitted that in the absence of such safeguards, bona fide purchasers acting in good faith are exposed to interest and penalty for non-compliance, despite lacking any intention to default.
Issues
1. Whether the Supreme Court should issue directions to introduce institutional safeguards at the stage of property registration to prevent inadvertent TDS default under Section 194IA of the Income Tax Act, 1961.
2. Whether the absence of a verification mechanism at the registry stage warrants judicial intervention.
Contentions of the Parties
The petitioner contended that the statutory framework under Section 194IA places the entire burden of compliance upon the buyer without ensuring awareness or verification at the time of property registration. He argued that this assumption is unreasonable, particularly in the absence of any statutory or administrative mechanism requiring registry authorities to verify filing of Form 26QB.
He submitted that honest purchasers, unaware of the legal requirement, are subsequently subjected to interest and penalties despite acting in good faith. He therefore sought directions mandating safeguards such as verification of TDS compliance at the registration stage.
There was no challenge to the validity of Section 194IA, nor was any personal relief sought by the petitioner.
Reasoning and Analysis
After hearing the petitioner, the Court declined to entertain the plea. The Bench did not find it appropriate to issue directions introducing additional procedural safeguards into the statutory framework governing TDS obligations in property transactions. The statutory obligation under Section 194IA clearly places responsibility upon the buyer to deduct and deposit TDS in specified cases. The Court did not consider it a fit case for judicial intervention to restructure or supplement the legislative and administrative scheme by mandating verification mechanisms at the stage of property registration.
In effect, the Court declined to expand the scope of judicial review to direct administrative restructuring in the absence of a challenge to the validity of the statutory provision itself.
Decision
The Supreme Court dismissed the plea seeking directions to introduce safeguards against inadvertent default by property buyers under Section 194IA of the Income Tax Act, 1961. No further directions were issued.
