Limited Scrutiny Notice

[DSM]

Just a general response to those facing IT scrutiny based on my experience, though if you have doubts consult your CA.

* Take along with you ledger copy and turnover report.
* Printout/XL summary of turnover and P&L

*Since the notice is related to trading, the above two will suffice. And if any further information is required, you can provide on the subsequent visit.

* IT Officers are busy, but have targets especially considering the amnesty scheme declared by the govt. They really do not have time to waste on scrutiny of traders as the Turnover, P&L of the traders is already known to them from brokers side. Traders cannot manipulated any information regards the above so returns filed along with the the ledger copy and transaction report will match their figures as well. And if these are presented to the dept. along with any clear and logical answers to questions asked, there will not be any further questions.

* Other than the above, question that can be asked is regards to capital employed and source of capital.

Good luck folks. Do update this thread with your experience and observation for the benefit of other traders. :thumb:

 

[lemondew]

Thanks DSM for sharing info and 3 good lines in signature

 

[FnOtrader80]

Just met IT offer last week, End of matter.

Sir , Did the officer told you that you wont be issued any further questionnaire / notice ? Because proceedings for scrutiny cases for AY 2015 -16 will only begin from next year as told to me by IT officer when i went for my scrutiny hearing. He also didnt ask me anything and simply took all the evidences i wanted to submit.

 

[FnOtrader80]

I'm from Pune.

BTW, what documents are you taking with you?

I submitted following documents
1)Cover letter stating my only business is trading in equity derivatives and income derived out of it has been duly disclosed in the income tax return. List of documents being submitted.
2)Computation of total income for the relevant year.
3)Profit / loss statement issued by broker
4)ledger statement issued by broker.
5)Bank statement with explanation for each entry for the relevant year
6)Income tax return filed for the relevant year

Lastly i took his signature on a copy of cover letter 1 as proof that i have visited and submitted documents.

 

[DSM]

FnOTrader,

I did not ask anything further, and I think I answered the questions satisfactorily to the officer. If the IT dept. has questions in future, I do not have any problems answering, because all transactions can be verified with the broker's statements as well as records of the stock exchange and at MCX. The IT dept. knows the P&L of every individual trader, even if they trade thru multiple brokers. So only those who have not declared true figures need to worry, which I doubt any trader will need to resort to. So for me, the matter is closed as there are no pending questions to answer, and in future if the IT dept has any questions, will handle them as they arise....

Sir , Did the officer told you that you wont be issued any further questionnaire / notice ? Because proceedings for scrutiny cases for AY 2015 -16 will only begin from next year as told to me by IT officer when i went for my scrutiny hearing. He also didnt ask me anything and simply took all the evidences i wanted to submit.

 

[comm4300]

FnOTrader,

I did not ask anything further, and I think I answered the questions satisfactorily to the officer. If the IT dept. has questions in future, I do not have any problems answering, because all transactions can be verified with the broker's statements as well as records of the stock exchange and at MCX. The IT dept. knows the P&L of every individual trader, even if they trade thru multiple brokers. So only those who have not declared true figures need to worry, which I doubt any trader will need to resort to. So for me, the matter is closed as there are no pending questions to answer, and in future if the IT dept has any questions, will handle them as they arise....

True. We traders do not have to hide anything. Its just the thought of IT dept that creates panic. We haven't done anything wrong or hidden anything. Thank God, i heeded the advise of my broker and went for ITR IV along with Audit from a qualified CA.

Some CAs i met, did not know what was to be done and they suggested filing ITR 1/2 for FnO trading. Idiots. And they had the audacity to ask rs.10k as fees !

I'd rather spend money on a CA who knows his stuff rather and go with one who does not know anything about Trading.

I've 20+ days to go before i meet the IT officer. "She" hopefully had faced such traders before, else its gonna be difficult task to explain details. Will rehearse

One thought that occurred to me was to give up trading and generating such huge turnover just to avoid the IT dept. But then, why fear anyone when our thoughts and intention are crystal clear?

This FY is gonna be even more exciting...i've reached my personal record for Turnover in Derivatives trading :thumb::lol::lol:

Cheers

 

[DSM]

Comm,

On a general note, it's just that the common man has phobia of the IT dept. The officer I met was professional and heard me out on whatever I had to say. The govt. depts. are changing for the better. So rather than be apprehensive or fearful, suggest be open, honest, confident and have a friendly approach to the officer during your interactions. Disclose your side of the story before questions are asked (which I did - regards high turnover and explained my point of view) and as to the questions asked, be objective. If you are fearful or afraid, you will only create an impression that you have something to hide. But as traders, everything is transparent.... So go to the meeting with a positive mindset and be polite.

Good luck.

True. We traders do not have to hide anything. Its just the thought of IT dept that creates panic. We haven't done anything wrong or hidden anything. Thank God, i heeded the advise of my broker and went for ITR IV along with Audit from a qualified CA.

Some CAs i met, did not know what was to be done and they suggested filing ITR 1/2 for FnO trading. Idiots. And they had the audacity to ask rs.10k as fees !

I'd rather spend money on a CA who knows his stuff rather and go with one who does not know anything about Trading.

I've 20+ days to go before i meet the IT officer. "She" hopefully had faced such traders before, else its gonna be difficult task to explain details. Will rehearse

One thought that occurred to me was to give up trading and generating such huge turnover just to avoid the IT dept. But then, why fear anyone when our thoughts and intention are crystal clear?

This FY is gonna be even more exciting...i've reached my personal record for Turnover in Derivatives trading :thumb::lol::lol:

Cheers

 

[lonstud]

Had meeting with IT officer today. Maybe lasted 5 minutes. He simply wanted to know if this my full time business and do I operate brokerage business or trade with my own money. Also, the process will take few months. Got a signature on copy of cover letter mentioning the list of documents I had submitted, as required by the notice.

 

[jassinko]

My meetings with IT officer going from last year........ acc to them...my turnover is 7.5 crore and acc to me..it is 27 lakh.....i was in loss, so didnt get account audited........ now in last meeting they asked for a bribe to settle matter which i denied........ i told take penalty acc to law, if found me guilty... now they again called me on monday...... they threaten with desire consequences...all past transactions will be scrutinised etc etc... but i was firm that i will not pay bribe as i dont have anything to hide.... though bribe amount was small but my religion dont allow me........ lets see what they tell me on monday... anybody...can u please send me any IT dept guideline on turnover calculation or is it a grey area?

 

[lonstud]

When looking into this matter last year, I found following links as informative:

http://tradingqna.com/3720/audit-requirement-losses-income-profession-exceeds-total
http://taxguru.in/income-tax/how-to...audit-us-44ab-of-the-income-tax-act-1961.html
http://www.outlookmoney.com/article.aspx?286519
http://www.charteredclub.com/tax-on-fo/

I actively started trading in the last month of financial year 2014-15 and due to earlier discretionary losses, my trading account was in loss for the financial year. Also, this loss could not be offset with my salary income for that year. As per my understanding, trading in FnO is regraded as business income/loss and in cases of loss, the account needed to be audited, since one is showing profit of less than 8% of turnover.

Other members may help with respect to official guideline listed on income tax department's website.