Routine inspections carried out at several restaurants in Hyderabad in November last year led tax officials to uncover irregularities that eventually exposed a large-scale tax evasion network. During these checks, officers observed a noticeable mismatch between the number of customers visiting the outlets and the comparatively lower sales figures recorded in their billing systems. What initially seemed like a minor inconsistency soon prompted deeper scrutiny.
Following these findings, the Income Tax Department initiated nationwide search operations targeting prominent restaurant chains across multiple states. The action came weeks after investigators detected concealed turnover amounting to nearly ₹70,000 crore at a restaurant outlet in Hyderabad. Authorities suspect that restaurants had been using manipulated billing software to suppress actual sales and avoid paying taxes since the 2019–20 financial year.
Officials stated that the ongoing searches are focused on examining financial documents, point-of-sale systems, and billing records across establishments in different regions. As the investigation expanded, officers discovered that the irregularities were not confined to a single outlet but were linked to a widely used billing platform.
Further examination revealed that the same software was being used by more than one lakh restaurants across India, representing nearly ten percent of the country’s restaurant market. This discovery significantly broadened the scope of the probe, prompting authorities to widen their investigation to restaurant chains operating in several major cities.
As part of the inquiry, investigators conducted an extensive review of transactional records and analysed nearly 60 terabytes of financial data spanning six financial years up to 2025–26. The probe centered on suspected manipulation of billing systems that enabled restaurants to underreport revenue to tax authorities while internally maintaining records that reflected higher actual sales.
Authorities believe that some Hyderabad-based biryani chains were among the early adopters of the tampered software. Investigators suspect that similar practices may have spread to other restaurants nationwide, leading to intensified scrutiny of billing records, financial statements, and POS infrastructure throughout the industry.
Officials identified multiple techniques allegedly used to suppress turnover figures. These included selectively deleting cash invoices, bulk removal of billing records for periods extending up to a month, and systematic under-reporting of revenue even when transactions were properly entered into the system.
In several instances, restaurants reportedly recorded all sales digitally but deleted specific cash transactions before submitting tax returns. This practice reduced the income disclosed to authorities while preserving internal records of the true sales volume.
To strengthen the probe, the department deployed artificial intelligence and advanced data analytics tools to examine records linked to nearly 1.77 lakh restaurant identification numbers. These data points were cross-referenced with GST registrations, PAN information, and other publicly available datasets to detect suspicious patterns across multiple states.
A sample assessment of 40 restaurants located in Andhra Pradesh and Telangana alone uncovered nearly ₹400 crore in undisclosed turnover. In certain cases, investigators found that up to one-fourth of total sales had been deliberately concealed.
Investigators also turned their attention to the high-demand biryani segment in major urban centers such as Bengaluru, Chennai, and Mumbai, where biryani sales contribute a significant portion of restaurant revenues. Authorities noted that irregularities in this segment could have substantial financial implications.
Further red flags emerged when officials compared the procurement of raw materials—such as rice, meat, and other ingredients—with the sales figures reported by restaurants. The mismatch between purchase volumes and declared revenue raised additional suspicion of underreporting.
The Income Tax Department clarified that the current findings are linked to one specific billing software platform, though other POS systems widely used in the hospitality sector may also come under examination as the investigation progresses.
Authorities indicated that strict action will be taken against businesses found to have concealed turnover or evaded taxes, and the scope of the investigation is expected to expand further in the coming months.
