TDS paid without purchase of property

[Deepak Bubna]

Hello,

When a sale deed was not executed yet the potential buyer paid TDS on entire consideration of the agreement, the onus to prove that sale did not take place shall lie on the department or the assessee ? The assessee has made every possible document available to prove that sale did not take place. This transaction was not reported in SFT either as required u/s 258BA of the Act. Since the seller is non-cooperative and has not even returned the amount paid as advance, confirmation from the seller is hard to obtain.

 

Thanks

[YAGAY andSUN]

In such a case, where the assessee has already furnished substantial documentary evidence to establish that the sale did not materialize—such as cancellation agreement, legal notices, absence of possession, and non-registration of the sale deed—the onus shifts to the department to prove otherwise. Payment of TDS under Section 194-IA, by itself, does not conclusively establish transfer of property under the Income Tax Act or the Transfer of Property Act. The department cannot solely rely on TDS deduction to infer that the transaction was completed, especially in the absence of registered title transfer or possession.

Furthermore, the non-reporting of the transaction in the SFT by the registrar and lack of corroborative documents from the seller support the assessee’s claim that the sale did not take place. In such cases, judicial precedents have held that where the assessee has discharged the primary burden of proof, the department must bring on record substantive material to rebut the claim. Non-cooperation from the seller cannot be held against the assessee, particularly where bona fide efforts and records substantiate the assessee’s position.

AI Summary

Onus of proof shifts to the department where TDS was paid but no registered property transfer or possession occurred. Payment of TDS is not conclusive proof of transfer where sale deed was not executed, registration absent, and possession not transferred; substantive documentary evidence such as cancellation agreements, legal notices, absence of possession, and non-registration shifts the onus to the department to produce material contradicting the assessee's claim. Non-reporting in the statement of financial transactions and seller non-cooperation, when the assessee has made bona fide efforts, further support that the sale did not materialize and cannot be held against the assessee.