What began as a probe into a few popular biryani chains in Hyderabad has now exposed what officials believe could be one of the biggest tax fraud cases in India’s food and beverage industry.
According to a report by The Times of India, the Income Tax Department’s investigation team in Hyderabad used artificial intelligence and data analysis tools to dig deeper and uncover a massive tax evasion scam. They reviewed nearly 60 terabytes of billing and transaction data collected from a common restaurant billing software used across the country and found that these eateries were supressing sales turnover of at least Rs 70,000 crore since 2019-29 financial year, the report added.
This software is widely popular, with more than one lakh restaurants using it. It is estimated to cover about 10% of the restaurant billing software market in India. As investigators studied the data, the software platform became central to uncovering the larger network behind the suspected tax evasion.
How did restaurants dodge crores in Income tax?
Investigators said most restaurants record every sale, whether paid by card, UPI or cash, in their billing software. This is usually done to avoid misuse by staff such as servers, cashiers or managers.
However, documents reviewed by The Times of India showed a pattern where some restaurants allegedly deleted selected cash bills. In many cases, only part of the cash transactions were kept in the system, while the rest were removed. This, officials believe, was done to lower income tax and GST liability.
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Another method involved large-scale deletions. Bills for specific dates, sometimes covering up to 30 days, were reportedly erased in bulk. After this, tax returns were filed showing only a small share of the actual sales.
The data examined covered six financial years, from 2019–20 to 2025–26, and included billing worth about Rs 2.43 lakh crore.
The investigation relied on powerful data systems. Artificial intelligence tools, were used to quickly match GST numbers with restaurants by studying open-source and publicly available online information.
The first searches took place in Hyderabad, Visakhapatnam and other towns in Telangana and Andhra Pradesh. These checks indicated that the software was being used to hide sales. After these findings, the Central Board of Direct Taxes decided to widen the investigation across India.
How did AI help crack the investigation?
The Income Tax team collected records from the billing software firm’s headquarters in Ahmedabad. These records were later studied carefully at the department’s digital forensic and analytics facility in Ayakar Bhavan, Hyderabad, the TOI report said.
The I-T officials turned to AI and big data tools, including Generative AI, to study records linked to nearly 1.77 lakh restaurant IDs.
Their analysis showed that, across the country, bills worth about Rs 13,317 crore were deleted after being generated, out of a total billing value of around Rs 70,000 crore recorded by the software company.
In just Andhra Pradesh and Telangana, sales worth Rs 5,141 crore were allegedly hidden through such deletions, pointing to large-scale suppression of income.
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To confirm what the digital data showed, officials carried out on-ground and electronic inspections at 40 restaurants in Andhra Pradesh and Telangana. During these checks, they found nearly Rs 400 crore in sales that had not been reported.
Karnataka records highest deletion close to Rs 2,000 cr
The TOI report highlighted that the investigation also identified five states as key centres of suspected tax evasion: Tamil Nadu, Karnataka, Telangana, Maharashtra and Gujarat.
Among them, Karnataka reported the highest deleted transactions, close to Rs 2,000 crore. Telangana followed with around Rs 1,500 crore, while Tamil Nadu accounted for about Rs 1,200 crore.
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In several instances, officials found that some restaurants had not even removed digital records properly, even though the same sales figures were shown as lower in their tax returns.
Officials told TOI that in many cases, restaurants kept full digital records and didn’t even bother to delete the transactions, but still showed lower sales in their income tax returns.
After studying sample data, investigators estimated that around 27% of total sales were hidden.
Officials say the current findings may represent only a small part of the overall picture. They pointed out that many other billing software platforms operate in the sector and may also come under detailed scrutiny. |
