Average Income Is To Be Considered If Variations Found In Income Tax Returns Filed By Claimant: Karnataka High Court

The Karnataka High Court has held that if income tax returns are available the same should be considered as best a piece of evidence and if variations are found in the income tax returns, considered for different assessment years, it would be appropriate to consider the average income of three assessment years to arrive at the annual stable income of the claimant seeking compensation under the Motor Vehicles Act.

A division bench of H.T.Narendra Prasad and Justice K V Arvind made the observation while partly allowing the appeal filed by Jayashree questioning the order of the trial court and sought enhancement of compensation granted.

The claimant argued that the disability assessed at 35% to the right lower limb is to be considered as whole body functional disability, considering he being an advocate. The disability suffered would deprive the claimant to continue her profession. The income of the claimant has to be assessed on the basis of the income tax returns for the Assessment Year 2018-2019. It is further submitted that the compensation awarded under various heads by the Tribunal is on the lower side.

Counsel for Reliance General Insurance Co Ltd argued that the disability to the right lower limb is 35%. In the absence of the assessment of whole body disability by the doctor, the Tribunal is justified in assessing the disability of the whole body at 5%.

Further, the date of the accident is 09.04.2019, but no income tax returns have been filed for the Assessment Year 2019-20. The income disclosed as per income tax returns for the years 2016-17, 2017-18 and 2018-19. They cannot be considered in the absence of income tax returns for the Assessment Year 2019-20. The compensation awarded by the Tribunal is just and reasonable.

Firstly the bench noted that the doctor (P.W.2) while issuing the disability certificate has not assessed the whole body disability. It is a settled position of law that in the absence of assessment of whole body disability, 1/3rd of disability assessed to a particular part of the body is to be considered as whole body disability.

Thus it was said “In view of the settled position of law and also considering the nature of the injuries and disability suffered, we are of the view that it would be appropriate to assess the whole body disability at 12%.”

Referring to the Income Tax returns filed by the claimant, it was said “The contention of the claimant that while considering the income tax returns for three assessment years the return of income having higher income is to be considered, is not acceptable and the contrary contention of the insurer that income on the lower side among three years is to be considered is equally not sustainable.”

Then it held “When the income declared by a person engaged in a profession or business is not stable, in order to assess the income of the injured/deceased to arrive at established income, which would be the foundation for assessing the compensation, the average of the income of the years considered would be appropriate. Further the average income would be appropriate in the interest of the claimant as well as the insurer. If average income is not considered, if an established income of the injured/deceased is reduced in the year of accident or due to windfall the income of the victim/deceased increased in the year of accident, the process of determining the established income would fail.”

It added “We are of the view that when the income of the victim/deceased is inconsistent in the income tax returns filed, it is the aggregate income declared in the income tax returns is to be considered.”

Noting that the accident took place on 09.04.2019 and the due date for filing income tax returns for the Assessment Year 2019-2020 was still available. It said “Hence, the returns filed and available on record for the immediate previous Assessment Years to the date of the accident are to be considered.”

Accordingly it allowed the appeal in part and modified the compensation amount to Rs.12,92,268 as against Rs.6,96,704, awarded by the Tribunal. The Insurance Company is directed to deposit the compensation amount along with interest @ 6% p.a. from the date of filing of the claim petition till the date of realisation, within a period of six weeks.

Appearance: Advocate Chandrakala for Appellant.

Advocate Preeti Patil Melkundi for R4.

Citation No: 2024 LiveLaw (Kar) 141

Case Title: Jayashree AND Mahaningappa & Others

Case No: MFA 202275 OF 2023

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