The Income Tax department’s Hyderabad Investigation Unit has exposed a massive case of turnover suppression in India’s restaurant industry, estimating concealed sales of at least ₹70,000 crore since the financial year 2019-20. The investigation focused on a widely used pan-India billing software that serves more than one lakh restaurants across the country, covering approximately 10 percent of the market.
Investigators analysed 60 terabytes of transactional data from the billing platform under Section 133A of the Income Tax Act. The probe examined backend records spanning six financial years from 2019-20 to 2025-26. During this period, the software recorded total billing of approximately ₹2.43 lakh crore, within which officials identified ₹13,317 crore classified as post-billing deletions.
Using Artificial Intelligence and Generative AI tools, the investigation team mapped 1.77 lakh restaurant IDs and linked GST numbers to entities through open-source data and publicly available information. The forensic analysis was conducted at the department’s digital lab in Aayakar Bhavan, Hyderabad, after accessing backend data at the software provider’s centre in Ahmedabad. Officials stated that the pattern of deletions and edits indicated structured suppression of turnover in several cases.
The investigation revealed two primary methods of tax evasion. Officials found that restaurants typically enter all transactions including card, UPI and cash into the billing software to maintain internal control. However, a flagged pattern involved selective deletion of cash invoices, where only a portion of cash sales was retained and the rest removed to lower reported income. Another pattern involved bulk deletion, allowing bills to be wiped for a chosen date range, including up to 30 days of billing, followed by filing returns that reflected only a fraction of actual sales.
In Andhra Pradesh and Telangana, analysis of 3,734 PANs showed sales suppression of ₹5,141 crore over five years when compared with income tax returns. Detailed enquiries in a sample of 40 restaurants in the two states detected suppression of about ₹400 crore. Based on sample estimates, officials assessed that up to 27 percent of sales may have been suppressed in examined cases.
Among states, Karnataka logged the highest deletion figures at about ₹2,000 crore, followed by Telangana at ₹1,500 crore and Tamil Nadu at ₹1,200 crore. The top five states where evasion was detected include Tamil Nadu, Karnataka, Telangana, Maharashtra and Gujarat. Officials noted that some entities under-reported turnover even without deleting records from the billing system.
Searches were initially conducted in Hyderabad, Visakhapatnam and other towns in Telangana and Andhra Pradesh. The Central Board of Direct Taxes has now expanded the probe to other parts of the country. The investigation continues to examine additional cases across multiple states as part of the nationwide crackdown on tax evasion in the food and beverages sector.
Officials emphasized that the findings relate to one software platform and that multiple billing systems operate in the restaurant sector, indicating that further scrutiny may follow. The department is expected to issue notices to restaurants identified in the investigation and take appropriate action under income tax laws based on the evidence collected during the data-driven probe.
