18 September 2013
I want to know treatment for the following case. Income tax department made riding on a person who shows an annual income of Rs. 30000 per month. In the ride the department has found 500gms of gold. But actually this gold was not brought by him, and it was the property of his fore fathers or fathers. we didn't know whether they had filed any return. Then what should we do whether we have pay tax for that or we have to pay tax at the time of sold
02 August 2025
Great question! Here’s how you can approach this situation regarding the 500 grams of gold found during the income tax department’s search (riding):
### Key points:
1. **Ownership & Source Proof:**
* If the gold is ancestral property (belonging to forefathers), you need to **prove that it is inherited** and not newly acquired. * Proof could include:
* **Will or succession certificate** showing inheritance. * **Old purchase bills or documents** evidencing acquisition by ancestors. * **Affidavits or sworn statements** declaring ancestral ownership. * **Family records or property registers** that show ownership.
2. **Tax Treatment:**
* If you prove that the gold is ancestral and not newly acquired during the current assessment year, **income tax is not payable on it immediately**. * However, when you **sell the gold in the future**, the capital gains tax will apply on the sale value minus the **cost of acquisition** (which may be considered the date it was inherited). * If cost details are not available, the cost may be considered as **fair market value on 1st April 1981** (long-term capital gains valuation date).
3. **If You Fail to Prove Source:**
* The Income Tax Department may treat the gold as **undisclosed income**. * They can issue a **notice** demanding tax on the estimated value of gold. * You may be subjected to **penalties or prosecution**.
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### What you should do now:
* Collect all possible documents showing ancestral ownership. * File a **response/representation** with the Income Tax authorities explaining the ancestral nature of the gold. * If necessary, hire a **tax consultant or lawyer** to assist in the proceedings. * Maintain records carefully to avoid tax issues when you sell the gold in the future.
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If you want, I can help draft a response letter or guide you on documents that would strengthen your proof. Would you like that?
CAclubindia
