Hyderabad restaurant chain probe expands into nationwide sales suppression case
What started as a targeted review of popular biryani restaurant chains in Hyderabad has escalated into one of the largest alleged tax suppression cases in India’s food and beverage sector.
According to a report by The Times of India, the Income Tax Department’s Hyderabad investigation unit has uncovered suspected sales suppression amounting to at least Rs700 billion since the 2019–20 financial year. The probe, leveraging forensic data analytics and AI tools, examined vast volumes of billing records from restaurants across the country.
Officials said the breakthrough came after analysing 60 terabytes of transactional data from a pan-India billing software platform used by over 100,000 restaurants. The software, which handles roughly 10% of the country’s restaurant billing market, provided access to billing records associated with 177,000 restaurant IDs across India, according to the report.
Big Data
Leveraging big data analytics and AI tools, including Generative AI, investigators examined transactions spanning six financial years from 2019–20 to 2025–26, covering total billing of roughly Rs2.43 trillion. Officials said the probe revealed that restaurants had allegedly suppressed sales turnover of at least Rs700 billion during this period
Across India, the software provider recorded post-billing deletions totaling Rs133 billion out of the Rs700 billion in suppressed sales. In Andhra Pradesh and Telangana alone, sales suppression reached Rs51 billion. Detailed physical and digital audits of a sample of 40 restaurants in these two states uncovered about Rs4 billion in suppressed turnover.
Officials have yet to calculate the tax liability and associated penalties on the undeclared income.
Top Five States
The highest levels of evasion were detected in Tamil Nadu, Karnataka, Telangana, Maharashtra, and Gujarat. Karnataka recorded the largest deletions at roughly Rs20 billion, followed by Telangana (Rs15 billion) and Tamil Nadu (Rs12 billion).
Officials said some restaurants did not even delete records, yet still under-reported sales in their income tax returns. Based on sample estimates, investigators concluded that 27% of total sales were suppressed.
Data was accessed from the billing software provider’s centre in Ahmedabad and analysed at the Income Tax Department’s digital forensic and analytics lab in Ayakar Bhavan, Hyderabad.
Inside the alleged modus operandi
Investigators noted that restaurants typically record all sales — card, UPI, and cash — in the software to prevent internal manipulation by servers, cashiers, or managers.
However, a key pattern flagged during the probe was the selective deletion of cash invoices. In several instances, restaurants allegedly retained only a portion of cash entries while deleting the rest to reduce income tax and GST liability.
Another pattern involved bulk deletions, where entire sets of bills for selected date ranges — sometimes up to 30 days — were wiped, with tax returns subsequently filed showing only a fraction of actual sales.
The probe initially focused on Hyderabad, Visakhapatnam, and other towns in Telangana and Andhra Pradesh, where officials first uncovered evidence of the software being used to suppress sales. The Central Board of Direct Taxes (CBDT) later expanded the investigation nationwide.
Officials caution that the current findings may only represent the tip of the iceberg, noting that multiple billing platforms operate across the sector and could face similar scrutiny in the backend.
