The Income Tax Department has uncovered large-scale suppression of sales in the Food and Beverage (F&B) sector after conducting a nationwide verification exercise targeting restaurants suspected of under-reporting turnover. The exercise revealed that restaurants collectively suppressed sales worth approximately ₹408 crore.

The investigation began in November 2025, when the department initiated a probe into possible tax evasion patterns in the F&B industry. Authorities found that several restaurants were allegedly deleting bulk sales entries or making modifications in their records to understate actual revenue.

To identify discrepancies, the department conducted advanced analytics on transaction data from around 1.77 lakh restaurants using AI-enabled analytical tools. The data was then cross-verified with the turnover figures reported in their Income Tax Returns. The analysis indicated widespread under-reporting, with certain businesses failing to fully reflect recorded sales in their financial accounts or tax filings. In some cases, specific transactions were excluded from reported sales altogether.

Following these findings, the department conducted a nationwide survey on March 8, 2026, covering 62 restaurants across 46 cities in 22 states. Preliminary results from the survey revealed suppression of sales amounting to roughly ₹408 crore. Authorities have confirmed that further investigations are currently underway.

The department has reiterated its focus on promoting voluntary tax compliance through a trust-based approach. As part of this initiative, taxpayers are being encouraged to rectify mistakes by updating their returns under Section 139(8A) of the Income Tax Act, which allows the filing of updated returns.

In the first phase of this compliance drive, the department plans to send emails and messages to approximately 63,000 identified restaurants, requesting them to review and update their tax returns by March 31, 2026.

Officials stated that the initiative forms part of the government’s broader effort to improve transparency in the F&B sector and curb tax evasion through data-driven enforcement mechanisms.

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