India’s Income Tax Department has launched a nationwide probe into alleged tax evasion in the restaurant industry, conducting coordinated surveys across dozens of cities and uncovering large-scale suppression of sales through manipulation of billing software.
The action, carried out under the direction of the Central Board of Direct Taxes under Section 133A of the Income Tax Act, targeted restaurants suspected of concealing revenue by altering or deleting transaction records. Officials estimate that establishments surveyed in the latest exercise may have suppressed sales worth around Rs 700 crore. The broader investigation itself is linked to suspected tax evasion of nearly Rs 70,000 crore across the sector.
The surveys were conducted on Sunday across about 70 restaurants spread across nearly 45 cities, ranging geographically from Madurai in Tamil Nadu to Shimla in Himachal Pradesh and from Godhra in Gujarat to Guwahati in Assam. Major metropolitan centres, including New Delhi and Mumbai, were also part of the operation.
Nationwide Sweep Across Restaurants
Authorities carried out surveys across several states including Andhra Pradesh, Delhi, Maharashtra, Karnataka and Gujarat, among others. The exercise covered restaurants in Rajahmundry, Nellore and Visakhapatnam in Andhra Pradesh, while establishments in Mumbai, Thane, Pune and Amravati in Maharashtra also came under scrutiny.
Teams visited restaurants in Gurugram in Haryana and in Noida, Hapur, Ghaziabad and Lucknow in Uttar Pradesh. In Tamil Nadu, inspections were conducted in Chennai, Coimbatore and Madurai.
The operation extended to cities such as Godhra, Dahod, Rajkot and Ahmedabad in Gujarat, as well as Bengaluru in Karnataka and locations in Goa. Restaurants in Indore and Bhopal in Madhya Pradesh, Korba in Chhattisgarh and Samalkha in Haryana were also surveyed.
The investigation further covered establishments in Shimla in Himachal Pradesh; Jalandhar, Amritsar and Ludhiana in Punjab; and Puri, Cuttack, and Bhubaneswar in Odisha. Teams also visited 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.
Billing Software Manipulation at the Centre
Investigators believe manipulation of restaurant billing software lies at the centre of the alleged tax evasion. Restaurants typically use such systems to record all transactions, including payments made through cards, UPI or cash, ensuring that sales are documented and preventing internal manipulation by staff.
However, officials found that in some establishments, certain cash transactions were allegedly deleted from the software at the end of the month. By removing these entries, restaurants could understate their revenue and reduce their income tax and GST liabilities.
In other cases, investigators detected a different method in which restaurants declared only a limited portion of their actual revenue in income tax returns without deleting entries, apparently assuming that inspections would not take place.
Digital Forensics and AI-Based Analysis
The investigation gained momentum after officials accessed terabytes of data at a software company in Ahmedabad that develops billing systems for restaurants. The information was analysed at the digital forensic and analytics laboratory of the Hyderabad Income Tax investigation unit at Aayakar Bhavan.
Using advanced analytics and artificial intelligence tools, authorities examined transactional data from about 1.77 lakh restaurants and compared it with the turnover reported in tax filings. The analysis helped identify patterns indicating possible large-scale under-reporting of income.
According to the Central Board of Direct Taxes, preliminary findings from the nationwide survey have already revealed sales suppression amounting to around Rs 408 crore. Officials said the investigation began in November 2025 when the department initiated a probe into the food and beverage sector.
Following the surveys, the department has begun sending emails and messages to approximately 63,000 restaurant outlets requesting them to update their income tax returns before March 31 as the investigation continues.
