TAX AUDIT

[malhar shenoy]

Is Tax Audit compulsory for person Trading in Shares ?

Shares are bought by  Demat & sold within a week time, So itension  to  hold the assets as investment cannot be established .Whether the same can be treated as Capital Gain ? If yes let me know the supporting case law , also  please  critically analyse the circular issued by CBDT.

As per my view it is Business Income ,  what would be the Turnover for the same , as considering the Share Price as Turnover it will definately be more than Rs 60 Lakhs. Or as per section 44 AD , it will not have a profit more than 8% of the total turnover.

So cost of compliance for Tax Audit  would be more than the Earnings made on the Share Trading.

Please consider any other aspects relating to this issue & reply.

[CAGOPALJI AGRAWAL]

Yes, the transactions would be considered in the business nature. For the purpose turnover calculation, you may refer guidance note on tax audit issued by ICAI.

AI Summary

Tax audit applicability for frequent share trading hinges on business classification and turnover computation guidance, affecting compliance burden. Frequent short-hold share transactions where investment intention cannot be shown are treated as business income, making tax-audit applicability depend on turnover computed in accordance with the ICAI guidance note on tax audit; capital-gains treatment is inappropriate where facts indicate trading, and the ICAI guidance is the practical reference for determining whether turnover triggers audit compliance.