Capital gain tax

Hello,

In the ITRs, you must be declaring these transactions of purchase of jewelry to gift others as drawings(personal expenses) from your capital account.

The question is hypothetical. Scrutiny selection depends upon various things, which return form are you filing, what details are being declared in those returns, etc.

If you declare these expenses on jewelry purchase as drawings from the capital account, it won't create any problem.

I hope that this answer satisfies your requirements.

Regards,

CA Hunny Badlani

For them to ask any question in scrutiny they should have some base that you have sold jewellery in cash they can't just say that you had purchased something and now you don't have that so you have sold it in cash. Income tax department doesn't work like this.

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Thank you

Hi

I assume such purchases would not form a very substantial amount. You may maintain records of such gifts given. 

Further, if you are preparing balance sheet, you can show it as drawings.

Please let us know if transaction amounts are substantially large.

- You should keep the record of giving jewellery to others on gift.

Its not something which is done practically.

Income tax department cant just go and say where is the gold you have purchased and if you dont have them you have sold them in cash. They need to quantify amount, they also need to have something on record to ask you such questions.

- It is acceptable that you have given gift on relative marriages which is also very rare. In case of gifts to non-relatives on marriages, it is difficult to digest. AO will not do physical inspection but he may ask for declaration.

It depends upon the materiality of the amount involved. If the amounts of gold purchase are huge they might get into details and ask for proofs. If the amount involved is not much, you souldn't worry about it.

Dear Sir,

If the amount involved in said scenario are huge then you need to maintain proper records.

Otherwise, it will be very difficult to justify the same at the time of scrutiny.

Hi,

Anyway, income tax department cannot allege you of selling gold in cash unless they find some evidence of sale. 

The burden of proof will be on the department.

let me give you a scenario where income tax department can allege such sale.

Eg.I your income comes directly in bank account and from your bank account you don't have substantial cash withdrawal but income tax department notices huge cash expenses such as foreign travel tickets booked in cash etc.. In this scenario, they may challenge.

At the time of scrutiny, the AO may charge capital gain tax liability on the same.