Huawei Provided Insufficient Data: Auditor To I-T Department

The Chinese smartphone and telecom gear maker Huawei seems to be sinking deeper into trouble as the company’s auditor has told the Income Tax (I-T) Department that the raw ERP data dump provided by the company to the department was ‘not sufficient’ to audit its books.

The company’s statutory auditor said that the raw data dump provided by Huawei Telecommunications (India) had to be reconciled with the financials of the company. The I-T department added that the “completeness of the ERP also needs to be established by appropriate procedures”, the department said.

An ET report citing court records stated that the I-T department further claimed that the auditor’s statement supported its initial claim that Huawei India’s data dump was insufficient to calculate its taxable income.

It is prudent to mention here that the I-T department has accused Huawei of sending a significant amount of money back to its parent company in China in form of dividends. The move reduced its taxable income in India.

The tax department informed Delhi High Court earlier this month that Huawei Telecommunications had not produced its accounts books, making it “impossible to ascertain the veracity of the income declared by the company.”

The I-T department also claimed that it has recorded various statements during searches it conducted at Huawei’s premises earlier this year. The department said it has recorded the statement of the head of tax function-indirect tax and direct tax at the company. According to the department, the official said it would take a substantial amount of time to provide the details sought.

The same official also stated, as the I-T department claimed, that a “separate database is maintained for inventory, which was not part of the dump provided to the department.”

Along with the tax official, the department also recorded the statements of chief executive Li Xiongweng, senior manager (tax) and in-charge of transfer pricing issues; deputy chief financial officer and head of the legal department.

Huawei has been experiencing a turbulent time in India for the past few years, as allegations of links with China’s ruling party have sidelined the telecom giant.

In March, the I-T department started proceedings against Huawei, stating that the Chinese OEM had manipulated account books to reduce its taxable income. In June, a Delhi court summoned CEO Xiongwei and three other top company officials, after the I-T department filed a complaint stating that Huawei withheld information it sought.

After being banned by the US, the Chinese company has faced similar mistrust elsewhere in the world. Huawei’s smartphone business was, at one time, among the biggest in the world. The company accounted for 20% of the global smartphone shipments in Q2 2022, according to Statista.

India, on its part, has been limiting Huawei’s involvement in its telecom network.

By introducing the ‘trusted products’ and ‘trusted vendors’ lists last year, the Department of Telecommunications (DoT) effectively asked everyone to go through the process and get their products on the list. 

Just days ago, the DoT amended the telecom equipment procurement norms again, limiting Huawei and compatriot ZTE’s capability to keep on participating in expansion projects from Indian telcos.