Rapid rise in luxury cafes, restaurants, coffee houses and food outlets across Nagpur has come under the scanner of the Income Tax (IT) Department amid suspicions that some establishments used to channel black money. Officials are examining whether the huge investments made in some of these businesses are proportionate to their declared income and whether the city’s rapidly expanding food and beverage sector is being used to channel black money. According to sources, the department has identified a pattern where establishments with premium interiors, costly commercial kitchen equipment, expensive branding and high rentals are reporting turnover that appears inconsistent with the level of investment and apparent business activity.

 

“Such cases are being subjected to closer financial examination,” a senior IT official shared. The focus is no longer limited to possible suppression of sales. The department is also examining whether some establishments have been created primarily to introduce unaccounted cash into the financial system by routing it through business receipts and subsequently regularising it after payment of applicable taxes. New establishments have come up across Dharampeth, Shankar Nagar, Sitabuldi, Amravati Road, Wardha Road and Mohan Nagar, while premium cafes have also appeared in outer locations, including Butibori and other industrial corridors. “Investment in several such establishments appears difficult to reconcile with the consumer base available in those areas.

 

This makes location viability itself a parameter under examination,” an official explained. Officials are independently verifying financial disclosures by matching income tax returns with GST filings, banking transactions and point-of-sale software records. Business activity, customer footfall and investment patterns are also being compared with declared turnover wherever required, sources said. The department is understood to be focusing on independent cafes and food outlets rather than organised national chains, which operate under established compliance systems. Where financial records fail to justify the level of investment or indicate unexplained sources of funds, proceedings under the IT Act could follow. If evidence points towards laundering of proceeds of crime, provisions of the Prevention of Money Laundering Act (PMLA) may also become relevant, which would further bring the Enforcement Directorate (ED) into the process. An official stated that the ongoing exercise is a sign of change in enforcement priorities. The food and beverage sector, earlier considered a low-risk area from a tax enforcement perspective, is now being subjected to scrutiny through GST data, banking information, AI-based analytics and income tax assessments. Establishments whose financial disclosures do not match the scale of their investment are expected to face closer examination in the coming months, he said.