Mumbai: Bombay High Court has quashed criminal proceedings initiated by the income-tax department against fashion designers Abu Jani and Sandeep Khosla over delayed payment of tax.“Mere failure to pay or delayed payment cannot be equated to wilful evasion of tax… What is required is a positive act done with knowledge and intention to evade the tax,” said Justice Ranjitsinha Bhosale on Sept 10.He allowed a petition by Andheri (West)-based Abu Jani Sandeep Khosla Designers Pvt Ltd and its directors, both the designers. They challenged the Feb 6, 2020, order of a Ballard Pier magistrate directing process against them under sections 276C (2) (wilful attempt to evade tax) and 278B (offences by companies) of the Income Tax Act.According to the I-T complaint, in Nov 2017, the company declared Rs 15.2 lakh income for the 2017-18 assessment year. After deducting Rs 4,405, Rs 5.27 lakh tax was payable. Following an Oct 16, 2018, show-cause notice, the company paid Rs 5.27 lakh three days later. However, I-T issued another show-cause notice in Dec 2018. It stated that only after a show-cause notice did the company pay Rs 5.27 lakh tax and had failed to pay Rs 1 lakh interest for delayed payment. Also, that the company deliberately evaded payment of tax and Jani and Khosla, being directors, controlling its affairs, are responsible for it. The I-T complaint was filed in Sept 2019. The designers approached the HC in 2023.Their advocate Shivani Shinde argued that the magistrate’s order showed non-application of mind as the complaint noted that tax was paid on Oct 19, 2018. Further, her clients’ conduct in belatedly paying the tax “was not a case of wilful evasion of tax but mere failure to pay in time.” The authority had also accepted interest on delayed payment. I-T advocate P C Chhotaray said had a show-cause notice not been issued, the petitioners would not have paid tax.Justice Bhosale agreed with Shinde that a wilful attempt is where there is “conscious, positive or overt act… done with the intention to evade payment of tax.” He noted that while tax was immediately paid in Oct 2018, the complaint was filed in Sept 2019. Also, after process was issued, interest was paid in March 2020. “That petitioners paid the amount, though belatedly after issuance of show cause notice cannot be termed as an act wilful evasion of payment of taxes,” Justice Bhosale added.He said allowing I-T’s complaint to continue would amount to “a manifest abuse of the process of law.” “Therefore, this is a fit case to invoke the inherent jurisdiction of this Court to prevent the abuse of the process of the Court and to secure the ends of justice,” he concluded.
