Income Tax Department Launches Extensive Survey of Restaurants Across India
The Income Tax (I-T) investigation wing initiated a comprehensive pan-India survey on Sunday, targeting approximately 70 restaurants as part of a follow-up to the ongoing Rs 70,000 crore sales suppression investigation. This probe is centered on allegations of billing software manipulation used to evade taxes.
Nationwide Coverage and Key Locations
The survey spanned multiple states, including Andhra Pradesh, Delhi, Maharashtra, Karnataka, and Gujarat, among others. The 70 restaurants were distributed across nearly 45 cities, ranging from Madurai to Shimla and Godhra to Guwahati, with major metropolitan areas like New Delhi and Mumbai also included. All establishments under scrutiny are suspected of involvement in sales suppression amounting to around Rs 700 crore in the current survey.
In Andhra Pradesh, surveys were conducted in Rajahmundry, Nellore, and Visakhapatnam. Other notable cities included Mumbai, Thane, Pune, and Amravati in Maharashtra; Gurugram in Haryana; Noida, Hapur, Ghaziabad, and Lucknow in Uttar Pradesh; and Chennai, Coimbatore, and Madurai in Tamil Nadu.
Additional locations covered restaurants in Godhra, Dahod, Rajkot, and Ahmedabad in Gujarat; Goa; Bengaluru in Karnataka; Indore and Bhopal in Madhya Pradesh; Korba in Chhattisgarh; Samalkha in Haryana; Shimla in Himachal Pradesh; Jalandhar, Amritsar, and Ludhiana in Punjab; Puri, Cuttack, and Bhubaneswar in Odisha; 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. This extensive exercise was carried out under the directives of the Central Board of Direct Taxes, in accordance with Section 133A of the Income Tax Act.
Background and Investigation Details
The nationwide action follows an earlier crackdown in Telangana, where detailed inspections and surveys were conducted in about 40 restaurants, with suspected tax evasion estimated at over Rs 490 crore. Officials have stated that the current exercise is part of a broader investigation into the manipulation of restaurant billing software.
According to sources from the I-T department and CBDT, Hyderabad was among the initial locations where investigators began examining this issue. The Hyderabad income tax investigation unit first conducted searches on a chain of biryani restaurants and later analyzed several establishments, uncovering various methods used to suppress revenue.
Methods of Tax Evasion Uncovered
Restaurants typically maintain billing software to prevent internal manipulation by staff such as waiters, cashiers, or managers, with all sales—whether through card, UPI, or cash—recorded in the system. However, investigators discovered that in some cases, certain cash transactions were allegedly deleted from the software at the end of the month to reduce declared income and avoid payments of income tax and GST. Only a portion of the cash entries was retained in the system, while the rest were removed.
Another method detected during the probe involved declaring only a limited percentage of revenue in I-T returns without deleting entries, under the assumption that inspections would not occur.
Data Analysis and Forensic Investigation
Investigators gained access to terabytes of data from a software company in Ahmedabad. This data was meticulously analyzed for hours in the digital forensic and analytics laboratory of the Hyderabad I-T unit at Aayakar Bhavan. Based on this analysis, officials identified patterns indicating possible suppression of sales in several establishments, as confirmed by I-T and CBDT sources.
This investigation highlights the ongoing efforts by tax authorities to combat sophisticated methods of tax evasion in the restaurant industry, ensuring compliance and fairness in the financial system.
