The Income Tax Department's investigation wing in Hyderabad has exposed what officials are calling one of the most extensive tax evasion networks ever discovered in the city's food and hospitality industry. Following three days of coordinated searches across three prominent biryani chains—Pista House, Shah Ghouse, and Mehfil—authorities have uncovered systematic financial manipulation on a massive scale.
The Scale of Evasion
Preliminary investigations reveal approximately Rs 600 crore in unaccounted income suppressed over several years. At an effective tax rate of 60%, the potential tax evasion alone amounts to roughly Rs 360 crore. Investigators are currently working to determine the full extent of concealed sales and cash movements.
Initial assessments indicate that Pista House alone may account for Rs 250-300 crore of the unaccounted income, while Shah Ghouse and Mehfil together are suspected of hiding around Rs 150 crore. Officials expect these figures to increase significantly as they analyze sales during peak seasons, particularly the Ramzan haleem rush and extended business hours that begin with early morning tea service at 4-5 AM and continue with biryani sales past midnight.
Sophisticated Evasion Techniques
The core of the evasion mechanism involved sophisticated manipulation of billing software systems. Restaurants would record every order in their internal software to trigger kitchen preparation and keep orders open until cash was physically deposited. This system, originally designed to prevent staff-level theft, was allegedly repurposed to selectively delete cash sales, particularly during month-end—typically 8-10 days before GST filings.
Investigators identified two primary deletion methods. Some outlets manually removed cash entries one by one, while others used a single software command to reduce the day's overall cash tally by preset amounts, erasing multiple entries simultaneously. UPI and card payments, which generate invoice numbers tied to the banking system, remained intact and visible, making only cash sales vulnerable to manipulation.
Before launching searches, the department conducted multiple decoy purchases using both cash and UPI payments across different outlets. These test transactions helped investigators map the deletion pattern and understand how the billing systems were being manipulated.
Digital Evidence and Software Company Involvement
Searches carried out at three software companies in Hyderabad and Ahmedabad—which developed and maintained the billing systems—provided what officials describe as end-to-end proof of how instructions to delete transactions were generated and executed. This evidence has helped investigators piece together the complete workflow of the evasion system.
When confronted with missing entries, restaurant management attributed the gaps to 'cancelled orders.' Officials rejected this explanation, noting that 40-50% cancellations—exclusively affecting cash orders—could not occur as a regular business pattern. "That explanation did not hold," an official stated.
Hidden Cash and Concealment Methods
Approximately Rs 10 crore in cash has been seized so far, primarily from undisclosed premises linked to Mehfil and Shah Ghouse, with smaller amounts recovered from Pista House. In one notable instance, investigators discovered that Mehfil had rented a flat solely to store a locker, with no one actually living there.
Another concealment method involved creating multiple UPI IDs in employee names. Each floor or service area had separate QR codes linked to different staff member accounts, though management controlled all collections. These UPI IDs were rotated among employees every two months to avoid large or suspicious deposits in any single account. Cash withdrawn from these accounts was then handed over to management, creating another layer of off-book income.
Investigators also monitored the movements of an individual believed to be close to one of the owners after his frequent visits to a particular locality raised suspicion. Subsequent searches of that location yielded significant cash stores.
Organizational Structure and Additional Findings
The organizational structure differs across the restaurant groups. Pista House and Mehfil are reportedly run by single-family promoters, while Shah Ghouse operates through six companies with control distributed among several family members.
Though outside the primary scope of the tax probe, search teams documented unhygienic conditions in some kitchens, including rat infestation, poor sanitation, and unsafe food handling practices. These observations have been recorded in official inspection notes.
Mehfil's records provided particularly extensive evidence, with investigators seizing handwritten and digital entries detailing cash deposits, withdrawals, and usage patterns spanning six years. Officials believe these documents will help trace the long-term flow of unreported income and reconcile it with suppressed sales.
International Investments and Future Actions
Investigators also uncovered investments in real estate in Dubai and other emirates by some promoters. These details are likely to be pursued through separate channels and international information requests.
Since GST liability is directly tied to turnover, the reconstructed sales figures will trigger follow-up action from GST authorities. Notices are expected once the Income Tax Department completes data reconstruction and finalizes the underlying sales that were suppressed.
The operation remains ongoing, with digital forensics teams analyzing six years of billing patterns, software logs, server backups, and communication trails. Officials believe the final tax demand and penalties will extend not only to the three biryani chains but also to the software firms involved in operating and modifying the billing systems.
