HYDERABAD — India’s Income Tax investigation wing has launched a sweeping nationwide survey targeting around 70 restaurants across nearly 45 cities, part of an expanding probe into alleged manipulation of billing software used to suppress sales and evade taxes.
Officials said the action follows earlier investigations into suspected revenue suppression linked to restaurant billing systems. The current exercise, conducted under the directions of the Central Board of Direct Taxes (CBDT) under Section 133A of the Income Tax Act, focuses on establishments believed to be connected to a broader tax evasion network.
Investigators accessed terabytes of data stored at a software company in Ahmedabad, where billing systems used by several restaurants were reportedly developed or managed. The data was examined for hours at the digital forensic and analytics laboratory of the Hyderabad Income Tax unit at Aayakar Bhavan.
According to Income Tax and CBDT sources, the analysis revealed patterns suggesting the possible suppression of sales across multiple establishments.
Hyderabad Probe Triggered Wider Investigation
Officials said Hyderabad was among the first locations where investigators began examining the issue. The city’s Income Tax investigation unit initially conducted searches on a chain of biryani restaurants, an inquiry that later expanded as investigators reviewed records from several other establishments. The probe revealed what officials described as different methods allegedly used by restaurants to underreport revenue.
Restaurants typically rely on billing software to record all sales transactions—whether paid through card, UPI or cash—ensuring that entries cannot easily be manipulated by waiters, cashiers or managers. Such systems are designed to create a complete digital record of business transactions. However, investigators said that in certain cases, cash transactions appeared to have been removed from the system records.
Methods of Revenue Suppression
According to officials familiar with the investigation, one of the methods detected involved deleting selected cash transaction entries from billing software at the end of the month.
By removing some cash sales from the system while retaining only a portion of the entries, establishments could reduce the revenue reflected in their records. This, investigators said, potentially lowered the income declared in tax filings and reduced liability under both income tax and the Goods and Services Tax (GST).
Another method identified during the probe involved declaring only a limited percentage of actual revenue in income tax returns without necessarily deleting the underlying entries from the software. Officials said this approach appeared to rely on the assumption that inspections or detailed verification would not occur.
Surveys Across Dozens of Cities
The nationwide survey follows earlier inspections conducted in Telangana, where authorities carried out detailed surveys and inspections at about 40 restaurants. Officials estimated suspected tax evasion in that phase alone at more than ₹490 crore. The present operation significantly expands the scope of the investigation.
Survey teams visited establishments in multiple cities including Mumbai, Thane, Pune and Amravati in Maharashtra; Gurugram in Haryana; Noida, Hapur, Ghaziabad and Lucknow in Uttar Pradesh; and Chennai, Coimbatore and Madurai in Tamil Nadu.
Additional inspections were conducted in Godhra, Dahod, Rajkot and Ahmedabad in Gujarat; Bengaluru in Karnataka; Indore and Bhopal in Madhya Pradesh; Korba in Chhattisgarh; Samalkha in Haryana; Shimla in Himachal Pradesh; Jalandhar, Amritsar and Ludhiana in Punjab; Puri, Cuttack and Bhubaneswar in Odisha; Jaipur and Ajmer in Rajasthan; Malappuram and Kozhikode in Kerala; Kolkata and Siliguri in West Bengal; Guwahati in Assam; Patna and Saran in Bihar; and Koderma in Jharkhand.
Authorities said the restaurants surveyed are suspected to be linked to sales suppression amounting to roughly ₹700 crore as part of the ongoing inquiry. Officials described the current exercise as part of a broader investigation into the manipulation of restaurant billing software and the mechanisms used to evade taxes.
