The Income Tax Department has launched a nationwide verification exercise targeting restaurants suspected of suppressing their turnover and under-reporting income. The initiative is part of the government’s effort to improve tax compliance in the Food and Beverage (F&B) sector, where discrepancies between reported sales and actual transactions have been detected.
The announcement was made through a press release issued by the Central Board of Direct Taxes (CBDT) on 9 March 2026.
Background of the Investigation
According to the Income Tax Department, the investigation into possible tax evasion patterns in the restaurant and food service industry began in November 2025.
During preliminary investigations, authorities found that several restaurants were engaged in practices such as:
- Deletion of bulk bills from accounting systems
- Modification of sales records
- Under-reporting of turnover in tax returns
These activities resulted in suppression of actual sales and income, leading to possible tax evasion.
AI-Based Data Analysis Used by Department
The Income Tax Department used AI-enabled analytical tools and advanced data analytics to examine financial information related to the sector.
Key aspects of the analysis included:
- Examination of data from about 1.77 lakh restaurants
- Comparison of transaction data with income tax returns
- Identification of large-scale discrepancies in reported sales
The analytics revealed that in several cases:
- Sales recorded in internal systems did not match tax filings.
- Some transactions were excluded from official accounts.
- Certain restaurants reported lower turnover compared to actual transactions.
Nationwide Survey Conducted on 8 March 2026
Based on the findings of the data analytics, the Income Tax Department conducted a nationwide survey operation on 8 March 2026.
Key details of the operation include:
- 62 restaurants surveyed
- Operations conducted in 46 cities
- Spread across 22 states
Preliminary findings suggest that suppression of sales amounting to approximately ₹408 crore has been detected.
Investigations are still ongoing to determine the exact extent of under-reported income.
Launch of SAKSHAM NUDGE Campaign
To encourage voluntary compliance, the Income Tax Department has started a special initiative known as the SAKSHAM NUDGE Campaign.
This campaign aims to:
- Guide taxpayers to correct mistakes in their returns
- Promote voluntary compliance
- Reduce litigation through trust-based communication
Instead of immediately taking strict enforcement action, the department is providing taxpayers with an opportunity to review and correct their income tax filings.
Emails and Messages to Identified Restaurants
In the first phase of the campaign, the Income Tax Department will send:
- Emails
- SMS messages
- Compliance advisories
to approximately 63,000 identified restaurants where discrepancies have been observed.
The communication will advise them to review their financial records and correct any reporting errors.
File Updated Return before 31 March 2026
The Income Tax Department has urged affected taxpayers to file Updated Returns under Section 139(8A) of the Income Tax Act.
This provision allows taxpayers to:
- Correct previously filed returns
- Report omitted income
- Pay additional tax and interest
The deadline provided by the department for making corrections is:
31 March 2026
Taxpayers who voluntarily update their returns within the allowed time may avoid stricter enforcement actions.
What is Updated Return under Section 139(8A)?
Section 139(8A) allows taxpayers to file an Updated Return (ITR-U) even after the normal deadlines have expired.
This provision enables taxpayers to:
- Declare previously unreported income
- Correct mistakes in filed returns
- Pay applicable tax and additional charges
However, updated returns cannot be used to:
- Claim refunds
- Increase losses
- Reduce tax liability
The objective is to encourage taxpayers to voluntarily disclose income and improve tax compliance.
Importance of Voluntary Compliance
The Income Tax Department has reiterated its focus on voluntary compliance and transparency.
Through initiatives like the SAKSHAM NUDGE campaign, the government aims to:
- Encourage honest tax reporting
- Reduce tax evasion
- Improve the efficiency of the tax system
Taxpayers are advised to carefully review their financial records and ensure that all income and sales transactions are correctly reported in their tax returns.
The nationwide verification exercise conducted by the Income Tax Department highlights the increasing use of data analytics and AI tools to detect tax evasion. With the detection of approximately ₹408 crore of suppressed turnover in the restaurant sector, the department has intensified monitoring of financial reporting practices.
At the same time, the government is encouraging voluntary compliance through the SAKSHAM NUDGE campaign, giving taxpayers an opportunity to correct mistakes by filing updated returns under Section 139(8A) before 31 March 2026.
Restaurants and other businesses receiving communication from the Income Tax Department should promptly review their records and take necessary corrective action to remain compliant with tax laws.
Visit www.cagurujiclasses.com for practical courses
