Income tax department searches Chinese telecom firm ZTE’s India office

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The offices of Chinese government-controlled telecom vendor ZTE in India were searched by Income Tax (I-T) department on August 17, according to a report in The Times of India. The IT department is questioning the CEO of the company and other top authorities, after it discovered a variety of infringements, including massive tax evasion, bogus expenses worth hundreds of crores, illegal share purchases, and currency exchange and accounting discrepancies.

The searches at the company’s India headquarters in Gurugram began on August 16. The department questioned the CEO of the company Li Jian Jun. It also confiscated the computers and other electronic devices of the company and key officials.

The department searced five premises, including the corporate office, residence of foreign director, the residence of the company secretary, accounts person, and the cash handler of the company.

ZTE is engaged in the trading of telecom equipment and installation and servicing of these items for various mobile operators in India.

The Central Board of Direct Taxes (CBDT) has said that the examination of import bills vis-à-vis sale bills shows that there was a gross profit of approximately 30% on the trading of the equipment. But the company had been booking “huge” losses over the years. The department has unearthed evidence from the chats of the CEO, and other key persons. The chats indicate illegal payments to telecom companies.

The documents found in searches also revealed that the employees of the company were engaged in illegal currency exchange from Rupee to RMB. They were also found to be engaged in the large-scale illegal trade of medicines from India to China.

“It has been found that the company failed to deduct on provisions made by them for expenses. Further, the company has also declared only two bank accounts in its Income Tax Returns (ITRs) despite having around 12 operative bank accounts,” the finance ministry said.