Guidance on Tax Audit Applicability

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Dhrunil Bhatt

Chartered Accountant

165 Points Posted on 24 August 2020

Dear Tax Experts,

I need guidance on applicability of tax audit in following scenario -

There is one assessee who has a profit from intra day trading activity of 80,000 (Speculative) and a Loss of 90,000 from F&O (Futures and Options) trading (Non Speculative). So, there is net loss from business (PGBP) of 10,000 (80,000 - 90,000). Total Trading Turnover is INR 14,75,000.

Due to other incomes (other than PGBP), the assessee's income has crossed Basic Exemption Limit.

As per my view tax audit is applicable (Reason: There is net loss from PGBP, even though turnover has not crossed the limit of 1 Crore).

Need your guidance if my opinion in this regard is correct or not.

Thanking you in Advance.

Dhrunil Bhatt

Replies (2)

Quick Summary

This discussion seeks clarification on whether a tax audit is applicable for an individual with intra-day trading profits and F&O trading losses. Despite a net business loss of £10,000 and a total trading turnover of £14,75,000, the assessee's total income exceeds the basic exemption limit. The original poster believes a tax audit is necessary due to the net loss from business, even though the turnover is below the £1 crore threshold. Expert opinions are requested to confirm this interpretation.

Ravi SADhiyan

Practice

3087 Points Posted on 24 August 2020

Originally posted by : Dhrunil Bhatt
	Dear Tax Experts, I need guidance on applicability of tax audit in following scenario - There is one assessee who has a profit from intra day trading activity of 80,000 (Speculative) and a Loss of 90,000 from F&O (Futures and Options) trading (Non Speculative). So, there is net loss from business (PGBP) of 10,000 (80,000 - 90,000). Total Trading Turnover is INR 14,75,000. Due to other incomes (other than PGBP), the assessee's income has crossed Basic Exemption Limit. As per my view tax audit is applicable (Reason: There is net loss from PGBP, even though turnover has not crossed the limit of 1 Crore). Need your guidance if my opinion in this regard is correct or not. Thanking you in Advance. Dhrunil Bhatt