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Crackdown on Chinese firms linked to 'spy' Charlie Peng's arrest: Sources

The Income Tax Department caught Charlie Peng in raids related to a Rs 1,000 crore Hawala network in August 2020

ANI | Updated on: Wednesday, May 04, 2022, 08:38 PM IST

As the investigation progressed, IT officials got to know through the evidence that Charlie Peng was doing hawala transactions for Chinese mobile companies and some fintech firms./ Representative image | Photo credit: ANI
As the investigation progressed, IT officials got to know through the evidence that Charlie Peng was doing hawala transactions for Chinese mobile companies and some fintech firms./ Representative image | Photo credit: ANI
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Recent crackdown on Chinese firms by the Income Tax Department and enforcement agencies is linked to the arrest of Chinese national Luo Sang alias Charlie Peng, who was running the Hawala network, government sources said. However, the companies have denied the allegations.

The Income Tax Department caught Charlie Peng in raids related to a Rs 1,000 crore Hawala network in August 2020.

After the search, while examining the Hawala transaction and the evidence gathered from the premises of Peng, a government source told ANI that the department got to know that he was running the hawala network for top Chinese mobile and fintech companies.

As the investigation progressed, IT officials got to know through the evidence that Charlie Peng was doing hawala transactions for Chinese mobile companies and some fintech firms.

Top officials in the Central Board of Direct Taxes (CBDT), the parent body of the Income Tax Department, were informed about the Charlie Peng hawala network.

Peng was doing the hawala transaction through his web of sham companies and laundered funds to and from China.

After looking at the evidence, the department gave a go-ahead to officials and the Delhi investigation wing of the Income Tax Department was tasked to curb the hawala nexus of Charlie Peng.

Another source said that after the income tax search at Charlie Peng in August 2020, searches at ZTE Corp were conducted at five premises in August 2021.

Later, the finance ministry issued a statement without naming ZTE said, "The examination of import bills vis-a-vis sale bills shows that there was a gross profit of approximately 30 per cent on the trading of the equipment, though the company has been booking huge losses over the years".

The statement further reads, "It is thus evident that losses are being booked by the company through bogus expenses in respect of services provided by it. Few such recipients have been identified in whose case, substantial expenses have been booked over the years. These entities have been found to be non-existent at their addresses."

"Moreover, the said entities also do not file their Income Tax Returns (ITRs). More such dubious entities are being examined. It is expected that bogus expenses would run into hundreds of crores over the years," the finance ministry said.

After ZTE Corp, the Income Tax Department conducted raids on more than two dozen premises of Xiaomi, OPPO, Oneplus and some fintech companies in December 2021.

CBDT's statement said that the two major companies have made remittances in nature of royalty, to and on behalf of its group companies located abroad, which aggregates to more than Rs 5500 crore.

"The claim of such expenses does not seem to be appropriate in light of the facts and evidence gathered during the search action, it said. Such lapses make them liable for penal action under income tax act, 1961, the quantum of which could be in the range of more than Rs 1000 crore," the CBDT statement added.

A search at Huawei Technologies at its New Delhi, Gurugram and Bengaluru premises in February 2022 was the last one in this connection.

In a statement without naming the company, CBDT said a major telecom group did not account for the income of Rs 4 billion in its book and showed expenses of Rs 4.8 billion that the firm failed to justify.

Sources told ANI that the search at Charlie Peng led to more than a dozen searches by the central investigation agencies like the Income Tax Department and Enforcement Directorate at Chinese mobile and fintech companies.

Peng is currently on bail after he was arrested by the Enforcement Directorate under the Prevention of Money Laundering Act (PMLA) last year.

Peng is facing cases from ED, Special Cell, Delhi Police. He is accused of spying for China also. Peng was earlier arrested by Delhi Police in 2018 and later granted bail for allegedly living in India under a false identity.

A Huawei spokesperson said that the company categorically denies any connection with Charlie Peng.

According to the statement, "Company categorically denies such baseless and false rumours and reserve its legal rights to protect its reputation against any such misleading information. We emphasise again that Huawei in India has been carrying its operations in manner compliant with all applicable laws of the land."

Xiaomi spokesperson said, "We completely deny any knowledge of, or linkage with, the person you have noted in your email. We neither know of this individual nor have indulged in any sort of transaction with the said individual. We are committed to our group policy of best ethical practices and deny any dealings or transactions that falls foul of Indian laws and regulations. In short, we emphatically deny any association with the individual mentioned in your email."

"We reserve our rights in all respects and will take steps as we may be advised to safeguard our reputation," Xiaomi spokesperson said. Mobile company OPPO denied to comment on the story while OnePlus has not reverted with their version till the filing of this story.

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Published on: Wednesday, May 04, 2022, 08:38 PM IST