I connect aux out from my laptop to USB soundcard mic in and use arecord to record audio. But I am getting noise even recording at CD quality. The nature of the noise is really strange as it seems to vary with the sound. To understand the noise better I played a 440 Hz sinewave and a 200 Hz sinewave to see if the noise remains the same, strangely enough it doesn't. Here is what it looks like .
There is no noise using the same USB soundcard and recording to laptop