Income Tax Return filed after death of the deceased can not be ignored for arriving at amount of compensation under Motor Vehicles Act
In a recent judgment, the Hon’ble Supreme Court has held that Income Tax Return of the financial year in which accident took place but filed after death of the deceased can not be ignored for arriving at amount of compensation under Motor Vehicles Act.
ABCAUS Case Law Citation:
4529 (2025) (04) abcaus.in SC
In the instant case, the appellant had challenged the order passed by the Single Judge of the High Court in reducing the compensation payable to the Appellants in a Claim Petition under Motor Vehicles Act 1988.
In August 2008, a bus driven by the driver in an allegedly negligent manner, hit a motorcycle killing the husband of the appellant and injuring the appellant.
The Appellants and other legal heirs of the deceased filed a Claim Petition under Section 166 read with Section 140 of the Motor Vehicles Act, 1988 (the Act) before the Tribunal, claiming compensation for the death of the deceased for Rs. 40 Lakhs.
After hearing the parties, the Tribunal by a common judgment awarded a compensation of Rs. 31 Lakhs with interest at the rate of 9% per annum from the date of filing of the Claim Petition.
The Appellants, being aggrieved by the Award preferred an appeal before the High Court for enhancement of the compensation awarded by the Tribunal. The Respondent Insurance Company also challenged Award before the High Court.
The High Court held that the Income Tax Returns of the deceased for the Assessment Year 2008-2009 were filed after the date of the accident, therefore, the income of the deceased had to be assessed on the basis of Assessment Year 2007-2008.
Accordingly, the High Court reduced the compensation payable to the Appellants to Rs. 17 Lakhs. The High Court also reduced the compensation under various heads.
Before the Hon’ble Supreme Court the appellant submitted that the High Court had erred in ignoring the gross income shown by the deceased assessee for the Assessment Year 2008-2009. It was submitted that the Assessment Year for the Return filed in 2008-2009 was, in fact, the gross income of the deceased-Assessee for the Financial Year 2007-08 for which, the accounts of the Assessee were already sealed, as cut-off date i.e., 31.03.2008, was prior to the date of the accident. It was submitted that there was no question of any manipulation by the Assessee or the persons claiming through him.
The Hon’ble Supreme Court observed that as per the reasoning adopted by the Hon’ble High Court the income tax returns for assessment years 2008-09 was excluded as it was filed after the day of accident.
The Hon’ble Supreme Court opined that just because on the date of the accident i.e., the Return for the Assessment Year 2008-2009 had not been filed, cannot disadvantage the appellants, for the reason that the period for which the Return is to be submitted covers the period starting 1st of April, 2007 and ending 31st March, 2008 and date of submission would be post 31.03.2008. No income earned beyond 31.03.2008 would reflect in the Income Tax Return for the Assessment Year 2008-2009. To reject the Return on the sole ground of its submission after the date of accident alone, cannot be legally sustained.
The Hon’ble Supreme Court observed that in various decisions it had held that the Income Tax Return is a legally admissible document on which the income assessment of the deceased could be made. It was affirmed that the determination of income must proceed on the basis of Income Tax Return(s), when available, being a statutory document.
The Hon’ble Supreme Court further observed that it was not in dispute that the deceased was a businessman. The relevance of the Income Tax Return stems, in the context of the Act, for the period which it relates to i.e., the Financial Year concerned, and not on the date on which it is filed with the Income Tax Department. When faced with Returns for different Assessment Years, it would be upto the Tribunal concerned to adopt either the average income therefrom or choose an Assessment Year to rely upon. There is good reason to leave judicial discretion on the Tribunal to adopt one of the afore-noted two courses of action, bearing in nature the social purpose and object behind the Act, which is a beneficial legislation.
The Hon’ble Supreme Court opined that it was quite unfortunate that the High Court in the present case has dealt with the matter in such a casual and superficial way where the rightful claim of the appellants under a welfare legislation has been drastically reduced without any cogent reason on a very tenuous ground, which was totally unjustified.
Accordingly, the Hon’ble Supreme Court restored compensation awarded by the Tribunal.
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