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Is audit necessary in this case?

Ankit (None) (75 Points)

29 August 2016

Hi, consider a person 'X'. 'X' suffered loss of Rs. 6.7 lacs due to intraday and delivery based trading in F.Y 14-15. He got his activities audited by a C.A and submitted his return. In F.Y 15-16, he only did trading (intraday and delivery) for a week as he ran out of money by 8 th April, 2015. He received Rs. 3,60,000 as his PF from which he bought shares but held them up to end F.Y. This P.F amount will be taxable as he left his job before 5 years. 'X' has no other income in this F.Y as he was unemployed. My question is whether 'X' is liable to get an audit in F.Y 15-16 too because he did trading for a week. The turnover of this trading was 1.6 lacs and gain made was Rs 23. Thanks.

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5 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178099 Points)
Replied 29 August 2016

Audit in this case not applicable

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Ankit (None) (75 Points)
Replied 29 August 2016

Originally posted by : Dhirajlal Rambhia
	Audit in this case not applicable

Thank you for your kind reply. May I ask the reasoning behind it? Is it because it cant be treated as business so Sec 44AE, AD etc are not applicable? Also, is it because of that that it escapes the 8% rule of Sec AD too? 'X' has taxable income due to his P.F and he was unemployed.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178099 Points)
Replied 29 August 2016

This year main activity in shares trading is investment and not Business.

The 23 Rs. income can be taken as Income from other sources.

Ankit (None) (75 Points)
Replied 29 August 2016

Originally posted by : Dhirajlal Rambhia
	This year main activity in shares trading is investment and not Business. The 23 Rs. income can be taken as Income from other sources.

Okay, so even if he was unemployed with no other source of income, his holding of shares is treated as investment. Hence, no audit required. Thank you a lot for your help.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178099 Points)
Replied 29 August 2016

The source of income in this year is 3.6L from PF. And the same has been (remained) invested till the end of the year. So question of business doesn't arise!