A seemingly ordinary compliance check at a few biryani restaurants in Hyderabad unexpectedly exposed one of the largest suspected tax evasion schemes in India’s restaurant sector. During routine inspections, Income Tax Department officers noticed irregularities between the number of diners and the bills generated — hints that some sales were not being recorded properly.

What initially appeared to be local accounting anomalies led investigators to a common billing software used by over 1.7 lakh eateries nationwide. Detailed forensic analysis of nearly60 terabytes of billing data— spanning the 2019-20 to 2025-26 financial years — revealed a systematic pattern ofdeleted or altered sales recordsthat artificially lowered reported income before tax filing.

Tax sleuths found that restaurants used the software’s “delete” and bulk erase functions to remove cash transaction records or entire blocks of billing data — in some instances covering up to 30 days — before filing GST and income tax returns. Investigators leveragedartificial intelligence and big data toolsto match billing logs with external identifiers like GST numbers, reconstruct missing entries, and correlate them to actual restaurant activity.

Preliminary findings estimate that ₹13,317 crore in deleted bills has been identified directly from software logs, while suppressed turnover across these establishments could total about₹70,000 crore, representing substantial tax liabilities. States like Karnataka, Telangana and Tamil Nadu were among the highest contributors to the detected evasion. Detailed physical audits at select outlets confirmed hundreds of crores of unreported sales.

The investigation, which began in Hyderabad and expanded to other cities including Visakhapatnam, highlighted how digital billing systems — once seen as safeguards — can be manipulated to conceal actual earnings. Authorities are now matching reconstructed data with tax returns and bank records, and are preparing to issue notices, recover dues with penalties, and initiate prosecutions where warranted.

What started with mismatched restaurant bills has now become a major data-driven crackdown on tax evasion, underscoring both the sophistication of digital fraud tactics and the increasing role of AI in uncovering them.