Routine Raids in Hyderabad Uncover Massive ₹70,000-Crore Tax Evasion in Restaurant Sector

What began as routine inspections of a handful of eateries in Hyderabad has snowballed into one of the largest tax-evasion investigations in recent years, with authorities estimating suppressed sales of nearly ₹70,000 crore across the country. The probe was initiated last November when the Income Tax Department carried out searches on select restaurants in the city. What initially appeared to be isolated discrepancies soon revealed a pattern of widespread manipulation of billing records. Investigators subsequently widened the scope of the inquiry, examining digital data from a popular restaurant billing software used across multiple states.

Officials analysed nearly 60 terabytes of billing information spanning six financial years from 2019–20 to 2025–26. The data was linked to approximately 1.77 lakh restaurant identification numbers, making it one of the most extensive digital audits undertaken in the hospitality sector. Authorities deployed advanced data analytics and Artificial Intelligence tools to identify inconsistencies between recorded sales and declared income.

Preliminary findings suggest that a significant number of establishments allegedly under-reported revenues or systematically erased transaction records to reduce tax liabilities. Investigators flagged deleted invoices amounting to ₹13,317 crore, which were directly traced through forensic examination of billing logs. However, the total suspected suppression of sales is believed to be much higher.

Officials identified several methods allegedly used to evade taxes. In many cases, cash invoices were selectively deleted before tax returns were filed, even though the transactions had been recorded internally. Some restaurants reportedly carried out bulk deletions of data covering days or even weeks of business activity. In other instances, while billing data remained intact within internal systems, the figures reported to tax authorities reflected substantially lower turnover.

The investigation has since expanded beyond Telangana to other states. In Andhra Pradesh and Telangana, scrutiny of 3,734 Permanent Account Numbers revealed over ₹5,100 crore in suspected suppressed sales. Detailed examination of 40 restaurants in these states alone uncovered nearly ₹400 crore in under-reported income.

State-wise data analysis indicated that Karnataka recorded the highest volume of deleted invoices at approximately ₹2,000 crore, followed by Telangana at around ₹1,500 crore and Tamil Nadu at nearly ₹1,200 crore. The Central Board of Direct Taxes has now broadened the inquiry, signalling that other billing platforms may also come under scrutiny. Authorities are expected to issue notices to entities where discrepancies have been established, and penalties or prosecution could follow in cases of deliberate evasion.

Officials describe the case as a significant step toward tightening oversight in the restaurant industry, particularly in the digital billing ecosystem. The investigation underscores how advanced data analytics is increasingly being deployed to detect financial irregularities on a large scale, potentially reshaping compliance standards in the hospitality sector nationwide.