The Income Tax Department on Tuesday raided the Gurgaon-based corporate office and residences of senior executives of Chinese telecom equipment company ZTE.
According to the income tax department, raids were conducted at five premises, including the corporate office, residence of foreign director, residence of company secretary, accounts person and the cash handler of a foreign subsidiary company in India.
The raids have revealed that the Chinese telecom company made huge profits on trading of telecom equipment but had been booking losses over the years, thus evading taxes of hundreds of crores over those years.
The tax department said that the company has been booking losses through bogus expenses. These expenses were claimed against services provided to other companies. The I-T department says that it has identified a few companies, against whose name ZTE had booked substantial expenses over the years. However, these entities were found to be non-existent at their addresses. Besides, these entities also do not file their Income Tax Returns (ITRs). The tax department is examining more such dubious entities.
“It is expected that bogus expenses would run into hundreds of crores over the years,” says the tax department in a statement.
It has also been found during the raids that the company has failed to deduct TDS on provisions made by them for expenses. During 2014-15 and 2015-16, the company failed to deduct TDS on such provisions amounting to more than Rs 120 crore. The company has claimed expenses of more than Rs 100 crore on account of provisions created by it for doubtful debts in 2017-18.
According to the tax department, expenses of hundreds of crores have been claimed over the years on account of provision for doubtful debts and provision for doubtful loans and advances. The department is also examining the admissibility of such expenses.
During the searches, the department detected incriminating evidence in Whatsapp chats of the CEO, CFO and other key persons indicating illegal payments to telecom companies.
These Whatsapp chats also revealed payment of commission to a person based in Australia for purchase of shares of a telecom company in India. The tax department is examining these transactions.
The department said in a statement that evidence in the form of electronic data and physical papers, found during the course of the search shows that unaccounted money, running into several crores every year, has been brought back into the books in the form of bogus scrap sales, etc. “Incriminating documents found from the electronic data of key persons, including the foreign CFO, show that the employees of the company were engaged in illegal currency exchange from Rupee to RMB. They were also found to be engaged in large scale illegal trade of medicines from India to China,” the department said.
The tax department found unaccounted cash of more than Rs 62 lakh has during the raids. Three lockers have also been found during the course of the search, which have been placed under restraint. Search operation is still continuing.