Pista House, Shah Ghouse, and Mehfil under scanner; systematic deletion of cash sales exposed
Hyderabad, November 28, 2025 – The Income Tax Department’s investigation wing in Hyderabad has uncovered what officials describe as one of the biggest tax evasion networks in the city’s food and hospitality sector, following three days of coordinated searches on three major biryani chains—Pista House, Shah Ghouse, and Mehfil.
Rs.600 Crore Unaccounted Income
Preliminary estimates point to Rs.600 crore in unaccounted income suppressed over several years. At an effective tax rate of 60%, the potential evasion alone is pegged at about Rs.360 crore, with investigators now unraveling the full extent of concealed sales and cash movements.
How the Scam Worked
According to officials, the core of the evasion mechanism lay in how cash transactions were recorded and later erased from billing software.
Before launching searches, the department made multiple decoy purchases using both cash and UPI payments across different outlets. These test transactions allowed investigators to map the deletion pattern and understand how billing systems were being manipulated.
Software Companies Searched
Searches carried out on three software companies in Hyderabad and Ahmedabad, which developed and maintained the billing systems, yielded what officials call end-to-end proof of how instructions to delete transactions were generated and executed.
Systematic Deletion of Cash Sales
The restaurants were found to be recording every order in their internal software. However, investigators identified that cash entries were systematically deleted, especially during month-end—typically 8-10 days before GST filings.
Two methods were used:
- Manual deletion of cash entries one by one
- Software command to reduce the day’s overall cash tally by a preset amount
UPI and card payments, which generate invoice numbers tied to the banking system, remained intact, making only cash sales vulnerable to manipulation.
When confronted with missing entries, restaurants attributed gaps to ‘cancelled orders’. Officials rejected this explanation, noting that 40-50% cancellations—exclusively of cash orders—could not occur as a regular business pattern.
Rs.10 Crore Cash Seized
About Rs.10 crore in cash has been seized so far, mostly from undisclosed premises linked to Mehfil and Shah Ghouse, with some amount also recovered from Pista House.
In one instance, investigators found Mehfil had rented a flat solely to keep a locker. No one lived there. When questioned, the owner initially claimed a new locker had been ordered. Further investigation led officials to the flat where cash was kept.
UPI Rotation Scheme
Another trail involved multiple UPI IDs created in the names of employees. Each floor or service area had a separate QR code linked to a different staff member’s account, though management controlled the collections.
Every two months, these UPI IDs were rotated among employees to avoid large or suspicious deposits in any single account. Cash withdrawn from these accounts was handed over to management, forming another layer of off-book income.
Six Years of Records
Mehfil’s records provided a long trail. Investigators seized hand-written and digital entries detailing cash deposits, withdrawals, and usage patterns spanning six years.
Scale of Suppression
Pista House: May account for Rs.250-300 crore of unaccounted income
Shah Ghouse and Mehfil: Together suspected to have hidden around Rs.150 crore
The final figure is expected to rise significantly once investigators finish analyzing sales during peak seasons, particularly Ramzan haleem rush and extended business hours.
Unhygienic Conditions
Though outside the tax probe’s primary scope, search teams also documented unhygienic conditions in some kitchens—rat infestation, poor sanitation, and unsafe food handling practices.
International Investments
Investigators also came across investments in real estate in Dubai and other emirates by some promoters. These details will be pursued through separate channels and international information requests.
GST Action Pending
Since GST liability is directly tied to turnover, the reconstructed sales figures will trigger follow-up action from GST authorities. Notices are expected once the income tax department completes data reconstruction.
Ongoing Investigation
The operation is ongoing, with digital forensics teams analyzing six years of billing patterns, software logs, server backups, and communication trails.
Officials believe the final tax demand and penalties will extend not only to the three restaurant chains but also to the software firms involved in operating and modifying the billing systems.
The investigation has exposed systematic tax evasion in Hyderabad’s popular food establishments, raising questions about compliance across the hospitality sector.
