Bombay High Court Quashes Tax Evasion Case Against Fashion Designers, Says Delayed Payment Alone Is Not Wilful Evasion

The Bombay High Court has quashed criminal proceedings initiated by the Income Tax Department against fashion designers Abu Jani and Sandeep Khosla in a case concerning delayed payment of income tax.

 

Justice Ranjitsinha Bhosale observed that a mere failure to pay tax on time, or a delay in making payment, cannot by itself be treated as wilful tax evasion. For prosecution to sustain, there must be a conscious, positive and deliberate act accompanied by an intention to evade tax.

 

The court allowed a petition filed by Abu Jani Sandeep Khosla Designers Pvt. Ltd. and its directors, challenging a February 6, 2020 order of a Ballard Pier magistrate that had directed issuance of process against them under provisions dealing with wilful attempt to evade tax.

 

According to the Income Tax complaint, the company declared an income of about ₹15.2 lakh for assessment year 2017-18. After deductions, tax of approximately ₹5.27 lakh became payable.

 

Following a show-cause notice issued in October 2018, the company paid the tax amount shortly thereafter. The department later issued another notice, alleging that the company had failed to pay the tax in time and had also delayed payment of interest.

 

The complaint further alleged that the directors were responsible for the company’s affairs and therefore liable for prosecution. The Income Tax complaint was subsequently filed in September 2019.

 

The petitioners approached the High Court in 2025 and argued that the magistrate had failed to properly consider the facts of the case. Their counsel pointed out that the tax had already been paid and that the delay did not amount to a deliberate attempt to evade tax.

 

The court also noted that the department had accepted interest on delayed payment, which further supported the argument that the matter involved delayed compliance rather than a deliberate scheme to avoid tax liability.

 

Wilful Evasion Requires Intent

The High Court emphasised that prosecution for wilful tax evasion requires something more than delayed payment. There must be evidence of a deliberate and conscious attempt to defeat the tax liability.