IT alleges tax evasion and other illegality following raids on the Indian headquarters of Chinese telecommunications company ZTE. (Representative image) | Image credit: BCCL
New Delhi: The Income Tax (IT) division on Tuesday raided the Gurugram-based offices of Chinese government-controlled telecom operator ZTE in India and interviewed the company’s CEO, along with other top executives, after uncovering a tax debt of hundreds had from crores over the years, allegedly illegal monies and omitted withholding tax (TDS) for several fiscal years.
Searches were carried out at the Chinese telecommunications equipment manufacturer’s five offices, including the company’s headquarters, the residence of the overseas director, the company secretary, the accountant and the company’s cash handler. ZTE’s new CEO Li Jian Jun was also interviewed and the company’s computers and other electronic equipment were confiscated.
The raids revealed that the Chinese telecommunications equipment provider made huge profits from trading telecommunications equipment, but posted losses over the years, avoiding taxes during those years.
According to a statement by the Ministry of Finance, the examination of import invoices versus sales invoices shows that trading these items generates an enormous gross profit (approx. 30 percent). However, the company has made huge losses over the years.
“It is thus evident that losses by the company are booked through bogus expenses in relation to the services it provides. Few recipients have been identified who have incurred significant expenses over the years. It has been found that these entities do not exist at their addresses. In addition, these companies do not file income tax returns (ITRs). Other such dubious entities are being investigated. The fake spending is expected to run into hundreds of millions over the years, “the Treasury Department said in a statement.
During the search, tax detectives found incriminating evidence showing WhatsApp chats by the CEO, CFO and other key people pointing to illegal payments to telecommunications companies.
Those WhatsApp chats also revealed the payment of a commission to an Australia resident for the purchase of shares in a telecommunications company in India. These transactions will be checked further.
The Treasury Department’s statement went on to say that “Evidence in the form of electronic data and physical papers found in the course of the search shows that unrecorded money, which runs into billions each year, is in the form of counterfeit money the books was brought back “. Scrap sale, etc.
Incriminatory documents found from the electronic records of key people, including the overseas chief financial officer, reveal that the company’s employees were involved in the illegal currency exchange from rupee to RMB. They were also found to be involved in the large-scale illicit drug trade from India to China. “
The company was determined to have failed to deduct TDS from the provisions it made for expenses. In addition, the company also only reported two bank accounts on its income tax returns (ITRs), despite having around 12 operational bank accounts. Accountability of transactions on other bank accounts is verified.
Cash in excess of Rs 62 lakh was found on the premises and three lockers were also found during the search and were brought under control.