Why is screencapture taking the screenshot of the desktop image and not the windows on top in Catalina?

I got same issue and finally found out what was wrong. Go to System Preference>Security & Privacy>Screen Recording, And give them permission to capture.

Starting with macOS Catalina, applications must be granted the ScreenCapture permission before they can capture any content from the screen. How do I configure Screen Recording permission on macOS Catalina? Normally when you run a command like screencapture you should be presented with an authorization prompt like this one:

If you don't see this prompt, you might need to reset your screen recording permissions for the Terminal application you are using: How do I reset Screen Recording permission on macOS Catalina?

tccutil reset ScreenCapture com.apple.Terminal

Instead of screencapture -s ~/Downloads/screen.png source where -s is for

Only allow mouse selection mode.

try -w. It will show a camera icon and wait for you to select a window. Hit esc to cancel the process.

screencapture -w ~/Downloads/screen.png

-w Only allow window selection mode.

I cannot say why -s doesn't work, but on Mojave, the man page says

The screencapture utility is not very well documented to date. A list of options follows.