Hyderabad Income Tax unearths massive tax evasion by biryani chains
HYDERABAD: The income tax department’s investigation wing has uncovered what officials describe as one of the largest tax evasion networks in the city’s food and hospital sector, following three days of coordinated searches on three major biryani chains Pista House, Shah Ghouse and Mehfil.
Preliminary findings indicate ₹600 crore in unaccounted income suppressed over several years. At an effective tax rate of 60%, investigators estimate potential evasion of ₹360 crore. Teams are now reconstructing the full extent of concealed sales and cash movements as reported by TOI.
Systematic deletion of cash sales
Officials said the evasion centred on how cash transactions were recorded and later erased from billing software. Before the searches, teams conducted multiple decoy purchases using cash and UPI payments at various outlets. These test transactions helped map deletion patterns and identify how the systems were manipulated.
Searches on three software companies in Hyderabad and Ahmedabad which developed and maintained the billing platforms produced what officials described as end-to-end evidence showing how instructions to delete transactions were generated and executed. This allowed investigators to recreate the complete workflow of the evasion process.
Restaurants recorded every order internally because the system triggered kitchen preparation and kept the order open until cash was deposited. What began as a safeguard against staff-level theft was allegedly repurposed to delete cash sales, particularly during month end usually 8–10 days before goods and services tax filings.
Two methods were identified: manual deletion of individual cash entries, and batch deletion using a software command that reduced the day’s cash tally by a preset amount. UPI and card payments, which generate bank-linked invoice numbers, remained intact, leaving only cash sales vulnerable.
When questioned about missing entries, the restaurants cited “cancelled orders”. Officials rejected this, noting cancellation rates of 40–50%, all involving cash orders, could not reflect normal business activity.
Hidden cash recovered from flats
About ₹10 crore in cash has been seized so far, mostly from undisclosed premises linked to Mehfil and Shah Ghouse, with some amounts traced to Pista House. In one case, Mehfil had rented a flat solely to house a locker. No one lived there.
When the locker key was first found, the owner claimed a new locker had been ordered. Further questioning led officials to the flat where cash was stored.
Investigators also detected a network of multiple UPI IDs created in the names of employees. Each floor or service area had a unique QR code linked to a staff member’s account, though collections were controlled by the management. These UPI IDs were rotated every two months to avoid large or suspicious deposits. Cash withdrawn from these accounts was handed over to the management, forming another off-book layer.
In another instance, teams monitored the movements of a person close to one of the promoters after repeated visits to a locality raised suspicion. Searches at the site led to recovery of additional cash.
Records seized from Mehfil included hand-written and digital entries detailing cash deposits, withdrawals and usage over six years. Investigators believe these trails will help reconcile long term flows of unreported income with suppressed sales.
Scale of suppressed income
Initial assessments suggest Pista House alone may account for ₹250–300 crore of the unaccounted income identified so far. Shah Ghouse and Mehfil together are suspected to have concealed ₹150 crore.
The final figure is expected to rise after analysis of peak-season sales, particularly the Ramzan haleem rush and extended operating hours, with early morning tea and paya counters at 4–5 am and biryani sales past midnight.
Organisational structures also differ. Pista House and Mehfil are run by single-family promoters, while Shah Ghouse operates through six companies with distributed ownership.
During the searches, teams also documented unhygienic conditions in some kitchens, including rat infestation, poor sanitation and unsafe food handling. These findings have been recorded in inspection notes.
International investments and GST action
Investigators also found details of real estate investments in Dubai and other emirates by some promoters. These are likely to be pursued through separate international information requests.
As GST liability is tied to turnover, the reconstructed sales figures will lead to follow-up action by GST authorities. Notices are expected after the income tax department completes data reconstruction and finalises suppressed sales.
The operation is ongoing, with digital forensics teams analysing six years of billing logs, server backups and communication trails. Officials expect the final tax demand and penalties to extend not only to the three restaurant groups but also to the software companies that enabled the deletions.
