Intimation u/s.154
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
02 September 2016
Sirs,
one of my friend is in service and file ITR 1 A.Y.16-17 he is not showing details of Shares Trading as follows for 16-17.
Short Term Loss 31347/-(Ag.turnover Rs.9,98,000)
Derivatives Loss 73235/-(Ag turnover Rs.8,84,381,394)
Intraday Loss 13188/-(Ag.turnover Rs.53,01,421)
Now he received u/s.154. & my question is
1) is tax audit is required
2)After received 154 what is requirement of document he ready for that
3) Can he revised return
Thanks in advance
Vikas
one of my friend is in service and file ITR 1 A.Y.16-17 he is not showing details of Shares Trading as follows for 16-17.
Short Term Loss 31347/-(Ag.turnover Rs.9,98,000)
Derivatives Loss 73235/-(Ag turnover Rs.8,84,381,394)
Intraday Loss 13188/-(Ag.turnover Rs.53,01,421)
Now he received u/s.154. & my question is
1) is tax audit is required
2)After received 154 what is requirement of document he ready for that
3) Can he revised return
Thanks in advance
Vikas
Expert : Anonymous
Expert :
Anonymous
(Expert)
03 September 2016
Dear user,
Section 154 is a rectification section so r u sure that notice received was under section 154
01 August 2024
### Understanding Section 154 and Requirements for Shares Trading Losses
**Section 154** of the Income Tax Act pertains to rectification of mistakes in the assessment order or processing of income tax returns. If your friend has received an intimation under Section 154, it generally means that there’s been an error or discrepancy in the processing of the return. Here’s a breakdown of what needs to be done:
### **1. Tax Audit Requirement**
Based on the details you provided:
- **Short Term Capital Loss (STCL)**: ₹31,347
- **Derivatives Loss**: ₹73,235
- **Intraday Loss**: ₹13,188
For trading in shares and derivatives, the requirement for a tax audit depends on the nature and volume of transactions:
- **Tax Audit Threshold**:
- If the turnover from business (including trading in shares) exceeds ₹1 crore, a tax audit under Section 44AB is required.
- For derivatives trading, turnover is calculated as the total of absolute values of all trades (buy + sell) which appears to be quite high in this case, making a tax audit mandatory.
Since the aggregate turnover from derivatives trading is significant (₹8,84,381,394), a tax audit is likely required.
### **2. Documents Required for Rectification**
If your friend has received an intimation under Section 154, here’s what he should prepare:
- **Original Return and Supporting Documents**: Keep a copy of the original return filed, including all schedules and documents.
- **Tax Audit Report**: If applicable, ensure the tax audit report is prepared and available.
- **Proof of Losses and Turnover**: Documentation supporting the reported losses and turnover, including:
- **Contract Notes** for share trading.
- **Transaction Statements** from brokers.
- **Bank Statements** showing transaction details.
- **Revised Computation**: If required, prepare a revised computation of income and losses.
### **3. Filing a Revised Return**
- **Revised Return Option**: If the original return did not reflect accurate details and losses were not reported correctly, he can file a revised return under Section 139(5) of the Income Tax Act. However, revised returns should generally be filed before the end of the assessment year or before the completion of assessment, whichever is earlier.
### **4. Section 154 Notice Clarification**
- **Section 154** is indeed for rectification, but the notice could also indicate issues with the original return processing or discrepancies identified. If the notice under Section 154 relates to incorrect reporting or processing issues, a rectification request might be needed to correct the errors.
**Steps to Rectify:**
1. **Login to e-Filing Portal**: Access the [Income Tax e-Filing Portal](https://www.incometax.gov.in/iec/foportal).
2. **File Rectification Request**: Go to **“My Account”** > **“Rectification”**.
3. **Select the Assessment Year** and the **nature of rectification** required.
4. **Provide Details**: Correct any discrepancies or errors found in the original return.
### **Summary**
1. **Tax Audit**: Required due to high turnover in derivatives trading.
2. **Documents**: Prepare original return, tax audit report, proof of losses, and turnover details.
3. **Revised Return**: Can be filed if errors are identified; ensure it's within the allowable period.
4. **Section 154**: Ensure the notice is properly understood; file a rectification if needed based on the specifics of the notice received.
It’s advisable to consult with a tax professional to ensure all details are correctly handled and to navigate through the rectification or audit process effectively.
**Section 154** of the Income Tax Act pertains to rectification of mistakes in the assessment order or processing of income tax returns. If your friend has received an intimation under Section 154, it generally means that there’s been an error or discrepancy in the processing of the return. Here’s a breakdown of what needs to be done:
### **1. Tax Audit Requirement**
Based on the details you provided:
- **Short Term Capital Loss (STCL)**: ₹31,347
- **Derivatives Loss**: ₹73,235
- **Intraday Loss**: ₹13,188
For trading in shares and derivatives, the requirement for a tax audit depends on the nature and volume of transactions:
- **Tax Audit Threshold**:
- If the turnover from business (including trading in shares) exceeds ₹1 crore, a tax audit under Section 44AB is required.
- For derivatives trading, turnover is calculated as the total of absolute values of all trades (buy + sell) which appears to be quite high in this case, making a tax audit mandatory.
Since the aggregate turnover from derivatives trading is significant (₹8,84,381,394), a tax audit is likely required.
### **2. Documents Required for Rectification**
If your friend has received an intimation under Section 154, here’s what he should prepare:
- **Original Return and Supporting Documents**: Keep a copy of the original return filed, including all schedules and documents.
- **Tax Audit Report**: If applicable, ensure the tax audit report is prepared and available.
- **Proof of Losses and Turnover**: Documentation supporting the reported losses and turnover, including:
- **Contract Notes** for share trading.
- **Transaction Statements** from brokers.
- **Bank Statements** showing transaction details.
- **Revised Computation**: If required, prepare a revised computation of income and losses.
### **3. Filing a Revised Return**
- **Revised Return Option**: If the original return did not reflect accurate details and losses were not reported correctly, he can file a revised return under Section 139(5) of the Income Tax Act. However, revised returns should generally be filed before the end of the assessment year or before the completion of assessment, whichever is earlier.
### **4. Section 154 Notice Clarification**
- **Section 154** is indeed for rectification, but the notice could also indicate issues with the original return processing or discrepancies identified. If the notice under Section 154 relates to incorrect reporting or processing issues, a rectification request might be needed to correct the errors.
**Steps to Rectify:**
1. **Login to e-Filing Portal**: Access the [Income Tax e-Filing Portal](https://www.incometax.gov.in/iec/foportal).
2. **File Rectification Request**: Go to **“My Account”** > **“Rectification”**.
3. **Select the Assessment Year** and the **nature of rectification** required.
4. **Provide Details**: Correct any discrepancies or errors found in the original return.
### **Summary**
1. **Tax Audit**: Required due to high turnover in derivatives trading.
2. **Documents**: Prepare original return, tax audit report, proof of losses, and turnover details.
3. **Revised Return**: Can be filed if errors are identified; ensure it's within the allowable period.
4. **Section 154**: Ensure the notice is properly understood; file a rectification if needed based on the specifics of the notice received.
It’s advisable to consult with a tax professional to ensure all details are correctly handled and to navigate through the rectification or audit process effectively.
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