Corporate Tax

IT raids on the Indian headquarters of the Chinese language telecommunications supplier ZTE for tax evasion and different illegalities

NEW DELHI: The Income Tax (IT) department raided the offices of Chinese government-controlled telecommunications company ZTE in India and interviewed the company’s CEO, along with other top officials, after a variety of violations, including massive tax evasion, were uncovered , fake issues worth hundreds of crores, illegal stock purchases, and currency conversion and accounting inconsistencies.
The raids on the company’s Indian headquarters in Gurugram and the questioning of employees began at around 8 a.m. on Monday and are still ongoing.
The company’s new CEO, Li Jian Jun, is also being interrogated and the company’s computers and other electronic equipment and key officials have been confiscated, sources said.
Company officials made no comments when contacted about the matter.
Searches were carried out on a total of five premises, including the company headquarters, the residence of the foreign director, the company secretary, the accountant and the company’s cash handler.
ZTE is engaged in the trade in telecommunications equipment and the installation and maintenance of these items for various cellular operators in India.
According to a statement by the Ministry of Finance, the examination of import invoices versus sales invoices showed that trading with the devices resulted in a gross profit of around 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 counterfeit spending is expected to run into hundreds of millions over the years, ”the Treasury Department said.
The searches also uncovered incriminating evidence found in WhatsApp chats from the CEO, CFO and other key people, pointing to illegal payments to telecommunications companies, the government said.
“WhatsApp chats also show the payment of a commission to a person based in Australia for the purchase of shares in a telecommunications company in India. These transactions are being further investigated, “the Treasury Department said, adding that electronic data and physical papers showed unrecorded money that amounts to billions of dollars each year and is being returned to the books in the form of fake junk sales, etc.
“Incriminatory documents found from the electronic records of key people, including the overseas chief financial officer, show that the company’s employees were involved in the illegal currency exchange from rupee to RMB. They were also found to have been heavily involved in the illegal drug trade from India to China. ”
The government’s review of ZTE India’s books also revealed major discrepancies. “It was determined that the company did not deduct TDS from the cost provisions it had set up. In addition, the company also only reported two bank accounts on its income tax returns (ITRs), despite having around 12 operational bank accounts, ”the Treasury Department said.
Cash in excess of Rs 62 lakh was also found on the company’s premises and three lockers were also locked.

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