A nationwide investigation by the Income Tax Department has uncovered what officials describe as a large-scale tax evasion network within India’s restaurant industry, revealing concealed sales estimated at nearly ₹70,000 crore since the financial year 2019–20. The probe, which began as routine survey operations at a few restaurants in Hyderabad last November, expanded into a major data-driven investigation after authorities detected patterns suggesting systematic suppression of turnover through the misuse of a widely used billing software platform.
The inquiry was carried out under Section 133A of the Income Tax Act and involved analysing nearly 60 terabytes of transactional data covering six financial years from 2019–20 to 2025–26. According to officials, the billing platform under scrutiny is used by more than one lakh restaurants nationwide and accounts for roughly 10 per cent of India’s restaurant market, making the findings significant for the broader hospitality sector.
Investigators conducted a detailed backend examination after gaining access to the software provider’s systems at its facility in Ahmedabad. The forensic analysis was then processed at the department’s digital laboratory at Aayakar Bhavan in Hyderabad. Using Artificial Intelligence and Generative AI tools, officials analysed data connected to approximately 1.77 lakh restaurant identification records, cross-referencing GST numbers and PAN details through open-source datasets to map financial discrepancies.
The analysis revealed total billing transactions worth about ₹2.43 lakh crore during the examined period. Of this, around ₹13,317 crore was flagged as “post-billing deletions,” suggesting that sales entries were removed after invoices were generated, indicating potential manipulation of revenue records before tax filings were made.
Authorities identified several alleged methods used by restaurants to suppress turnover. In many cases, establishments reportedly recorded all payments — including card, UPI, and cash transactions — within internal billing systems but selectively deleted portions of cash invoices before submitting tax returns, thereby lowering reported income. Some entities were found to have carried out bulk deletions of billing records for specific date ranges, sometimes covering periods of up to 30 days, and subsequently filed returns reflecting only a fraction of actual sales. In other instances, restaurants allegedly retained billing entries within the system but still under-reported turnover in their income tax filings despite higher recorded revenues.
State-level analysis indicated widespread irregularities. In Andhra Pradesh and Telangana alone, examination of 3,734 PAN-linked entities suggested sales suppression of ₹5,141 crore over five years. A closer probe of 40 restaurants in these two states detected nearly ₹400 crore in concealed turnover, with investigators estimating that as much as 27 per cent of total sales may have gone unreported in certain cases.
Among states, Karnataka recorded the highest volume of suspected deletions at approximately ₹2,000 crore, followed by Telangana at ₹1,500 crore and Tamil Nadu at ₹1,200 crore. The top five states where alleged evasion was identified include Tamil Nadu, Karnataka, Telangana, Maharashtra, and Gujarat. Initial enforcement actions focused on Hyderabad before expanding to Visakhapatnam and other locations across Telangana and Andhra Pradesh, after which the Central Board of Direct Taxes broadened the investigation nationwide.
Officials clarified that the current findings relate specifically to one billing software system but indicated that other platforms used across the restaurant industry may also come under scrutiny. The department stated that enforcement action will be initiated against entities found to have suppressed turnover or evaded taxes, signalling a wider compliance push backed by large-scale digital forensic analysis.
