The Supreme Court has ruled that Income Tax Returns (ITR) filed after an accident or death can be taken into consideration for calculating income to award compensation in motor accident claims. The Court held that rejecting a return solely on the ground of its submission after the date of the accident “cannot be legally sustained.”
In the case of Sayar & Ors. vs. Ramkaran & Ors., the Bench comprising Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh observed that business profits are “seldom static and often exhibit a progressive growth trajectory,” thereby enhancing the compensation awarded to the claimants from Rs. 16,01,200/- to Rs. 19,09,900/-.
Background of the Case
The appeal challenged the judgment dated April 25, 2025, passed by the High Court of Judicature for Rajasthan, Bench at Jaipur. The matter originated from a fatal accident on June 27, 2006, where the deceased, Rajendra Singh Gena (32 years), died after a truck driven negligently by Respondent No. 2 collided with his vehicle.
The claimants sought compensation under Section 166 of the Motor Vehicles Act, 1988, asserting that the deceased earned Rs. 84,000/- in the financial year 2004-05 and Rs. 1,26,000/- in 2005-06 from his transport business and agriculture.
The Motor Accident Claims Tribunal (MACT), Ajmer, in its order dated June 9, 2009, assessed the income at Rs. 84,000/- per annum, disregarding the higher income claimed for the subsequent year. The High Court, while enhancing the total compensation to Rs. 16,01,200/- under other heads, upheld the income assessment of Rs. 84,000/-, agreeing with the Tribunal that the ITR for 2005-06 was not genuine due to posthumous filing and signature discrepancies.
Arguments of the Parties
The appellants contended before the Supreme Court that the lower courts erred in fixing the annual income at Rs. 84,000/- instead of Rs. 1,26,000/-. They submitted that the deceased’s additional agricultural income of Rs. 60,000/- was also overlooked.
Furthermore, the claimants argued that the High Court failed to apply a 10% increase for conventional heads as per the law laid down in National Insurance Company v. Pranay Sethi, and that the interest rate of 5% awarded was inadequate.
Court’s Analysis
Addressing the rejection of the ITR filed for the year 2005-06, the Supreme Court relied on its recent decision in Nidhi Bhargava v. National Insurance Co. Ltd. (2025). The Court quoted:
“To reject the Return on the sole ground of its submission after the date of accident alone, in our considered view, cannot be legally sustained.”
The Bench clarified the legal position stating, “What flows from Nidhi Bhargava (supra) is that the Income Tax Returns filed after the accident/death can also be taken into consideration for calculation of income to award compensation.”
However, in the specific facts of this case, the Court noted the Tribunal’s doubts regarding the genuineness of the specific return due to signature variations. Instead of accepting the return outright, the Court adopted a “different approach” based on business growth principles. The Court observed:
“In the instant case, it cannot be simply assumed that is no profit accruing from the business of the deceased at the time of the accident… Rather, the returns for the preceding year or years must be taken as a foundational benchmark, subject to careful judicial examination, recognizing that business profits are seldom static and often exhibit a progressive growth trajectory.”
Based on this reasoning, the Court re-assessed the annual income at Rs. 1,00,000/- per annum, ruling that a fair assessment must consider the financial benefits the deceased would have earned.
Decision
The Supreme Court allowed the appeal and enhanced the compensation based on the re-assessed income:
- Annual Income: Rs. 1,00,000/-
- Future Prospects (40%): Rs. 40,000/-
- Deduction (1/4th): (-) Rs. 35,000/-
- Net Annual Dependency: Rs. 1,05,000/-
- Multiplier (16): Rs. 16,80,000/-
- Conventional Heads (Estate, Funeral, Consortium): Rs. 2,29,900/-
Total Award: Rs. 19,09,900/-
The respondents were directed to remit the amount directly to the claimants’ bank account within four weeks. The interest rate awarded by the Tribunal was maintained.
Case Details:
- Case Title: Sayar & Ors. v. Ramkaran & Ors.
- Case No.: Civil Appeal arising out of SLP(C) No. 24501/2025
- Coram: Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh
