The development comes after the department carried out a detailed investigation into suspected tax evasion patterns in the food and beverage (F&B) sector in November 2025.
AI analytics flags under-reporting by restaurants
During the investigation, officials analysed transactional data of around 1.77 lakh restaurants across India using advanced AI-enabled analytical tools.
The department compared this transactional data with the turnover reported in income tax returns filed by these establishments. The analysis revealed large-scale discrepancies, with several restaurants allegedly under-reporting income.
According to the tax department, investigators found that some establishments were deleting bulk bills from their systems or modifying transaction records to suppress actual sales. In other cases, recorded sales were not fully reflected in financial accounts or tax filings, while certain transactions were entirely excluded from reported turnover.
These practices, income tax department said, pointed to a systematic pattern of income suppression in parts of the restaurant industry.
Nationwide survey conducted across 22 states
Based on the findings from the data analysis, the department conducted a nationwide survey operation on March 8, 2026, targeting selected establishments flagged by its risk assessment system.
The surveys were carried out at 62 restaurants located in 46 cities across 22 states, according to the government.
Preliminary findings from these surveys indicate that suppression of sales amounting to nearly ₹408 crore has been detected. The department said further investigation is currently underway to determine the full extent of the tax evasion.
63,000 restaurants identified for compliance review
Alongside enforcement action, the tax department has also initiated a compliance outreach programme aimed at encouraging businesses to correct discrepancies in their tax filings.
Under the first phase of the initiative, around 63,000 restaurants identified through data analytics will receive emails and text messages from the department.
Sources said that the locations covered includes: Shimla, Murthal , Guwahati , Delhi , Mumbai , Chennai , Kolkata , Siliguri , Godhra , Ahmedabad , Bengaluru , Kollam, Kochi , Madurai , Coimbtore , Raipur , Bhopal , Indore , Ajmer , Jaipur , Gurgaon , Chandigarh , Ludhiana Koderma , Patna , Cuttack , Puri etc.
These communications will request them to review their returns and voluntarily correct any errors or omissions.
Restaurants have been advised to file updated returns under Section 139(8A) of the Income Tax Act, which allows taxpayers to revise previously filed returns within a specified period by paying applicable additional tax.
The department has asked the identified entities to update their filings before March 31, 2026.
“SAKSHAM NUDGE” campaign launched
The outreach effort is part of a new campaign called “SAKSHAM NUDGE”, through which the tax department aims to encourage voluntary compliance rather than relying solely on enforcement measures.
Tax department claims that the campaign is designed to guide and nudge taxpayers to correct mistakes in their filings, reinforcing the department’s broader push towards a trust-based tax administration framework.
Growing role of technology in tax enforcement
The latest verification drive reflects the increasing use of data analytics and artificial intelligence in tax administration to detect evasion patterns across sectors.
With a growing share of restaurant transactions now taking place through digital billing systems, point-of-sale machines and online payment platforms, tax authorities are able to analyse large volumes of transactional data and compare it with reported income.
Tax experts say such sector-specific analytics-led verification exercises are likely to become more frequent as authorities deepen the use of technology to identify discrepancies and improve tax compliance.
For the restaurant industry, which has witnessed rapid growth and digitisation over the past few years, the latest action signals that financial reporting and tax disclosures are likely to face closer scrutiny going forward.
