Prosecutors are calling for Domenico Dolce and Stefano Gabbana's jail sentences to be overturned.
The design duo were found guilty last June of evading taxes on the sale of their D&G and Dolce & Gabbana brands to a holding company in Luxembourg in 2004 and sentenced to 20 months imprisonment, but during the first day of their appeal hearing this week, it was argued they should be spared jail.
''If we deserved the sentence, there would be nothing to say. But we do not deserve it, and so unfortunately we would have to close.''
Prosecutor Gaetano Santamaria said the designers were "not guilty as charged" of wilfully failing to report company incomes and also argued it would "run counter to common sense" if the conviction were upheld.
The designers have not served any of their jail term yet as under Italian law, they are entitled to two levels of appeal before having to fulfill their sentence.
The duo recently admitted they would have to close their business if they had to pay out the hefty €343.3 million (£296.1 million) in fines they were given by the court when found guilty.
Dolce said: ''We will close. What do you want us to do? We will close. We will not be able to deal with it. It's impossible."
Gabbana added: ''If we deserved the sentence, there would be nothing to say. But we do not deserve it, and so unfortunately we would have to close.''
The designer pair - who were accused of evasions of up to €400 million (£345.2 million) - recently shut down all nine of their Milan stores after the city's mayor, Giuliano Pisapia, banned the duo from Milian's communal spaces due to their alleged crimes.
The appeal continues.
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