Sessions court overturns summons to Huawei executives in tax evasion case

The tax department has alleged tax evasion and inflated payments for technical services by Huawei India outside the country

A sessions court in India has reversed the summoning orders issued by a magistrate to Huawei India, its CEO Li Xiongwei, and three other executives in a tax evasion case, according to a report by The Economic Times (ET). The court deemed the summoning a "serious matter" and emphasised that it should not be done in a "mechanical manner". The tax department had sought to prosecute the company and its executives for allegedly withholding information. However, the sessions court criticised the magistrate's order for lacking clarity and application of independent judgment, providing significant relief to Huawei India.

Background on the case

The tax department conducted search and seizure operations in Gurgaon and Karnataka offices, alleging tax evasion and inflated payments for technical services by Huawei India. Beginning on February 15, the search and seizure operations lasted eight days, when documents and electronic records were seized. This included laptops, hard drives, and even employees' mobile phones.

Following this, the tax department approached a magistrate court, which issued summoning orders based on claims of deliberate non-cooperation and vague answers from Huawei India. The summons were issued for June.

Advocate Vijay Aggarwal, representing Huawei India, argued that Section 275B of the Income Tax Act did not prosecute the company, and executives were only required to provide the "necessary facility" required for the department's inspection. He also added that the trial court had no territorial jurisdiction and that the executives had fully cooperated with the tax officials.

The session court's judgment

The court noted that the offence alleged against the accused pertained to not affording necessary facilities for inspection rather than providing false information or withholding books of accounts. The sessions court also criticised the magistrate's order, stating that it lacked clarity and did not reflect independent judgment.

The court said, "Reasons are heart and soul of the judicial order and in the absence thereof, such orders become vulnerable. Also, if the reasons given turns out to be ex facie incorrect, the order would be bad in law".

The sessions court overturned the summoning orders, providing significant relief to Huawei India, its CEO, and executives.