Post-Death ITRs Require Financial Verification for Income Assessment: SC

Smt. Rekha & Ors. Vs Dinesh Porwal & Ors. (Supreme Court of India)

The Supreme Court allowed a civil appeal arising from a claim under Section 166 of the Motor Vehicles Act, 1988 relating to compensation for the death of a 28-year-old wholesale grocery trader in a motor accident. The claimants, being the legal representatives of the deceased, sought compensation of Rs.90,25,000, stating that the deceased earned Rs.5,00,000 annually and was the sole breadwinner of the family.

The Motor Accident Claims Tribunal (MACT), Mandsaur, assessed the deceased’s monthly income at Rs.7,000 based on the net profit reflected in the Income Tax Return (ITR) for the previous year and awarded compensation of Rs.15,36,560 with interest at 7% per annum from the date of filing of the claim petition. On appeal, the High Court enhanced the compensation to Rs.38,40,850 by assessing the monthly income at Rs.16,750 based on the average income disclosed in the ITRs for Assessment Years 2012-13 and 2013-14. The High Court excluded two ITRs filed after the death of the deceased while determining his income.

Before the Supreme Court, the claimants contended that the High Court had wrongly excluded the two most recent ITRs from consideration. Referring to the principles laid down in Rashmirekha Tripathy, the Court examined the issue of assessing income where ITRs had been filed after the death of the deceased.

The Court observed that the ITRs for Assessment Years 2014-15 and 2015-16 had been filed after the deceased’s death and disclosed annual incomes of Rs.2,35,881 and Rs.4,98,671 respectively. The Court held that whether these figures had been unduly enhanced could only be determined by examining the surrounding financial statements, which were not available before it. The Court further observed that remanding the matter at that stage would not be in the interest of justice.

Taking into account the ITRs available on record and the nature of the deceased’s profession as the owner of a wholesale grocery business, the Supreme Court fixed the annual income at Rs.3,25,000. It recalculated the compensation by adding 40% towards future prospects considering the deceased’s age of 28 years, deducting one-fourth towards personal expenses, and applying a multiplier of 17. The Court also awarded compensation under the conventional heads of loss of estate, funeral expenses and loss of consortium.

On this basis, the total compensation payable was determined at Rs.60,79,550. The Court noted that the compensation had increased from Rs.15,36,560 awarded by the MACT and Rs.38,40,850 awarded by the High Court to Rs.60,79,550.

Accordingly, the Supreme Court allowed the appeal and modified the High Court’s judgment as well as the award of the MACT. It directed that interest on the enhanced compensation be paid at the rate awarded by the Tribunal. The respondents were directed to remit the compensation directly to the claimants’ bank accounts within four weeks after receipt of the necessary bank account particulars. All pending applications were disposed of.

Cases Discussed:

• Rajwati alias Rajjo and Ors. v. United India Insurance Company Ltd. and Ors., 2022 SCC OnLine SC 1699
• United India Insurance Co. Ltd. v. Satinder Kaur, (2021) 11 SCC 780
• National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680
• Rashmirekha Tripathy and Anr. v. The Branch Manager (Legal Claims), Sriram General Insurance Company Limited and Ors., C.A. @ SLP (C) No. 27220 of 2024

FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER

1. Leave granted.

2. This appeal is directed against the judgment and order dated 30.07.2024 passed in Misc. Appeal No. 1932 of 2018 by the High Court of Madhya Pradesh at Indore, which, in turn was preferred against the order dated 20.12.2017 passed in MACT Case No. 155/2017 by the Motor Accident Claims Tribunal¹, Mandsaur².

3. The brief facts giving rise to this appeal are that on 15.06.2015, the deceased namely Krishnavallabh, then aged 28 years, was travelling from Sakhtali to Barkheda, on his motorcycle. On the main road, near Miriyakhedi nai abadi, the offending vehicle bearing registration number MP 43 C 8969, struck the motorcycle at a very high speed, in a rash and negligent manner. As a result of the injuries suffered, the deceased passed away during treatment.

4. In connection thereof, an FIR came to be registered³under Section 304A of the Indian Penal Code against the driver being Respondent No. 1 herein.

5. An application was filed under Section 166 of the Motor Vehicles Act, 1988 before the MACT, Mandsaur, Madhya Pradesh, on behalf of the claimant-appellants being the legal representatives of the deceased. A compensation amount of Rs. 90,25,000/- was claimed. It was stated therein that the deceased was running his own grocery business and had an annual income of Rs. 5,00,000/-. Furthermore, he was the sole breadwinner of the family.

6. The Tribunal vide its award dated 20.12.2017 in MACT No. 155/2017 awarded an amount of Rs. 15,36,560/- to the claimant-appellants along with 7% interest from the date of filing of the claim petition. The Tribunal assessed the monthly income of the deceased as Rs. 7,000/- on the basis of the net profit from the ITR of the previous year. The Tribunal further awarded compensation towards conventional heads, in accordance with law.

7. Aggrieved thereof, the claimant-appellants preferred an appeal before the High Court of Madhya Pradesh at Indore. The significant ground of challenge taken was that the Tribunal erred in assessing the monthly income of the deceased, by not considering the average of the previous ITRs filed by him.

8. The High Court vide the impugned judgment dated 30.07.2024 in Misc. Appeal No. 1932 of 2018, allowed the appeal and enhanced the compensation payable by an amount of Rs. 23,04,920/- to a total compensation of Rs. 38,40,850/-. The High Court assessed his monthly income as Rs. 16,750/- per month, on the basis of the average income in his ITRs for AY 2012-13 and AY 2013-14. Two ITRs which were filed after the death of the deceased, were excluded for the purposes of this assessment.

9. Still dissatisfied, the claimant-appellants are now before us. The point of challenge raised is that the High Court has erroneously excluded the two recent ITRs for the purposes of computation of income.

10. Keeping in view the principles laid down by this Court in Rashmirekha Tripathy and Anr. v. The Branch Manager (Legal Claims), Sriram General Insurance Company Limited and Ors⁴, we proceed to examine the issue at hand.

11. It cannot be disputed that this is a case where the claimant-appellants have filed ITRs for the AY 2014-15 and 2015-16 after the death of the deceased. The annual income has been shown as Rs. 2,35,881/- and Rs. 4,98,671/-, respectively. Whether these figures have been unduly enhanced have to be seen from surrounding financial statements, which this Court does not have the benefit of. At this stage, it also not in the interest of justice for the matter to be remanded.

12. It is a matter of record that the deceased was running his own wholesale grocery store. Considering the ITRs available on record and the nature of his profession, we deem it appropriate to fix the annual income of the deceased as Rs. 3,25,000/-.

13. In view of the aforesaid, the compensation now payable to the appellants would be recalculated as under:

CALCULATION OF COMPENSATION

Thus, the difference in compensation is as under:

14. The Civil Appeal is allowed in the aforesaid terms. The impugned award dated 20.12.2017 passed in MACT Case No. 155/2017 by the MACT, Mandsaur as modified by the High Court of Madhya Pradesh at Indore vide the impugned order dated 30.07.2024 in Misc. Appeal No. 1932 of 2018, stands modified accordingly. Interest on the enhanced amount is to be paid, as awarded by the Tribunal.

15. The amount be directly remitted into the bank account of the claimant-appellants. The particulars of the bank account are to be immediately supplied by the learned counsel for the appellant to the learned counsel for the respondent. The amount be remitted positively within a period of four weeks thereafter.

16. Pending application(s), if any, shall stand disposed of.

Notes:

¹ Hereinafter ‘MACT’.

² Hereinafter ‘the Tribunal’.

³ Crime No. 255/2015.

⁴ C.A. @ SLP (C) No. 27220 of 2024.