Hyderabad restaurant tax probe uncovers deleted bills, 408 crore in sales suppression

Deleted bills and a software “delete” function have turned a Hyderabad restaurant tax probe into a wider audit warning for the industry. The Income Tax Department’s Hyderabad unit began looking at suspected tax evasion patterns in food and beverage businesses in November 2025, starting with three biryani chains, including Pista House, Shah Ghouse and the Mehfil Group, and later uncovered a billing trail that investigators say let sales disappear from the record.

Officials said the analysis drew on 60 terabytes of billing data from restaurant software used by more than one lakh outlets nationwide, covering six financial years from 2019-20 to 2025-26. Using AI-enabled tools, the department compared transactional data from about 1.77 lakh restaurant IDs with income-tax returns and then carried out a nationwide survey on March 8, 2026 across 62 restaurants in 46 cities and 22 states. The department said that preliminary sweep found suppression of sales of around 408 crore.

The larger concern for restaurant operators is not just the size of the alleged evasion, but the mechanics behind it. Reporting on the probe says some billing software allowed entire chunks of sales history to be erased, sometimes up to a month at a time. That pushes the case beyond a one-off fraud inquiry and into a question of how much trust chains place in their point-of-sale systems, who can alter bills, and whether billing logs are preserved well enough to stand up to tax review.

Subsequent reporting said the inquiry expanded into a pan-India probe touching about 70 restaurants, including outlets in Delhi and Mumbai. The Financial Express identified Tamil Nadu, Karnataka, Telangana, Maharashtra and Gujarat as key centres of suspected evasion. Officials also said the software under scrutiny controlled about 10% of India’s restaurant billing-software market, a scale that makes the case relevant to far more operators than the chains first pulled into the spotlight.

Later estimates tied post-billing deletions to 13,317 crore, within a total suppressed turnover of about 70,000 crore, while Andhra Pradesh and Telangana alone were said to account for 5,141 crore in hidden sales. For legitimate restaurant groups, the message is straightforward: POS access, bill deletion rights, daily sales reconciliation and tax return matching are now central compliance risks, not back-office details. The department has said investigations are ongoing and that it is pursuing voluntary compliance alongside the nationwide verification exercise.