Pre-accident income-tax returns, corroborated by unrebutted evidence, may establish self-employed income for compensation.

Krishna Kumar Dewangan died in a motor-vehicle accident on 19 November 2022. His widow, minor children, and parents filed a claim petition. The Claims Tribunal awarded total compensation of ₹12,55,545 in Claim Case No. 34/2023. The claimants appealed under Section 173 of the Motor Vehicles Act, 1988, seeking enhancement of compensation.

The claimants asserted that the deceased worked as an accountant and earned approximately ₹4,46,680 annually. They relied on photocopies of Income Tax Returns for Assessment Years 2021–22 and 2022–23, disclosing annual incomes of ₹4,39,370 and ₹4,56,990 respectively. A Chartered Accountant, Mayank Agarwal, also testified that the deceased worked as an accountant for several firms and earned approximately ₹40,000–₹45,000 per month.

The Tribunal disregarded the photocopied ITRs and assessed the deceased’s monthly income at only ₹6,000. The insurer contested the reliability of the ITRs, disputed the income assessment, contended that future prospects should be limited to 25%, and sought rejection of the claimants’ request for “pay and recover”.

Whether the deceased’s annual income should be assessed on the basis of the two ITRs and corroborative evidence, notwithstanding that the ITRs were produced as photocopies and were not formally proved by the filing Chartered Accountant or an Income Tax Officer?

Whether the claimants were entitled to enhancement of compensation by applying the appropriate deduction for personal expenses, multiplier, future prospects, tax deduction, and conventional heads of compensation?

Whether the principle of “pay and recover” should be applied because the offending vehicle’s driver did not possess a valid and effective driving licence?

The Court applied Section 173 of the Motor Vehicles Act, 1988, governing appeals against awards of the Claims Tribunal.

It relied on New India Assurance Co. Ltd. v. Sonigra Juhi Uttamchand, holding that ITRs may be considered for income assessment where the surrounding evidence and tax-payment particulars support their reliability, even though income cannot be mechanically fixed on the basis of unproved documents alone.

It further applied Rashmirekha Tripathy v. Branch Manager, Shriram General Insurance Co. Ltd., which recognises ITRs as an important reference point; for self-employed persons, the average income reflected in ITRs for up to the preceding three years may be considered along with the nature and circumstances of the business and the timing of filing.

Under National Insurance Co. Ltd. v. Pranay Sethi, a self-employed deceased aged 40 years was entitled to 25% addition towards future prospects.

The Court applied the principles in Sarla Verma v. Delhi Transport Corporation for personal-expense deduction and multiplier, and Magma General Insurance Co. Ltd. v. Nanu Ram for compensation under conventional heads.

Finally, relying on Amrit Paul Singh v. Tata AIG General Insurance Co. Ltd. and Sunita v. United India Insurance Co. Ltd., the Court applied the “pay and recover” principle where the vehicle was insured but driven without a valid licence.

The Court found that the ITRs had been filed before the accident—on 26 December 2021 and 26 July 2022—and contained computation statements showing that the deceased was engaged in accounting, bookkeeping, and auditing.

Although the documents were photocopies and neither the filing Chartered Accountant nor an Income Tax Officer was examined, the testimony of Chartered Accountant Mayank Agarwal was consistent and remained unrebutted. His evidence corroborated the deceased’s occupation and income, while the insurer failed to specifically disprove the deceased’s accounting work.

Applying the principles in Rashmirekha Tripathy, the Court averaged the two disclosed annual incomes and assessed the deceased’s annual income at ₹4,48,180.

Since the deceased was self-employed and aged 40, 25% was added for future prospects, producing ₹5,60,225. After deducting income tax of ₹25,527, the annual income was fixed at ₹5,34,698.

Applying a one-fourth deduction for personal expenses and a multiplier of 15, the loss of dependency was calculated at ₹60,15,360. Adding ₹2,53,000 under conventional heads, the total compensation came to ₹62,68,360.

As the driver lacked a valid licence but the vehicle was insured, the insurer was directed to satisfy the award first and recover the amount from the owner/driver.

The claimants were held entitled to an additional ₹50,12,815, carrying interest at 6% per annum from the date of filing of the claim petition until realization.

The insurance company was directed to pay the awarded compensation to the claimants in the first instance and thereafter recover it from the owner/driver of the offending vehicle under the “pay and recover” principle.

The Tribunal’s award was modified accordingly.