Introduction:

In Sandhya Rani Jana and Another v. ICICI Lombard General Insurance Co. Ltd. and Another (F.M.A. 70 of 2023), the Calcutta High Court delivered a significant and clarifying judgment on the evidentiary value of Income Tax Returns (ITRs) in motor accident compensation cases, particularly when the deceased is self-employed. The appellants—the mother and father of the deceased—challenged the award issued by the Motor Accidents Claims Tribunal, contending that it had grossly undervalued the victim’s monthly income despite the existence of duly filed and verified income tax documents. Justice Biswaroop Chowdhury, presiding over the appeal, addressed the crucial question of whether Income Tax Returns accepted by the Income Tax Department constitute reliable and authentic evidence of income, especially when the victim is not a salaried employee but engaged in a self-employed profession. The deceased in this case was a goldsmith earning Rs. 30,000 per month, as reflected in his ITR for AY 2014–2015, submitted during his lifetime. The parents, therefore, sought enhanced compensation based on the actual income declared and accepted by statutory authorities. The High Court ultimately granted compensation of Rs. 39 lakh, setting aside the Tribunal’s assessment that had restricted the monthly income to Rs. 10,000.

Arguments of the Appellants:

The appellants argued that the Tribunal erred in disregarding the Income Tax Returns submitted by the deceased during his lifetime and wrongly insisted on producing additional documents such as bank passbooks and business account statements. According to the appellants, the income tax return for AY 2014–2015 clearly reflected an annual income of Rs. 3,18,470, which the Tribunal ought to have accepted as the correct basis for determining compensation. They highlighted that the ITR was not a post-accident fabrication but an authentic statutory document filed by the victim himself prior to his death. They further relied on the examination of the Income Tax Officer, who testified with certainty that the return was duly filed, processed, and accepted by the Income Tax Department, eliminating any suspicion of inflated income. The appellants also submitted that for self-employed persons, the ITR is the primary and most reliable proof of earnings because such individuals do not have fixed salary slips or employer-issued certificates. The insistence on supplementary documents, they argued, would undermine the very purpose of statutory tax declarations and lead to unnecessary burden on grieving families who already struggle with procedural complexities.

Arguments of the Respondent-Insurance Company:

On the other hand, the insurance company contested the claim for enhanced compensation by supporting the Tribunal’s decision. They argued that income tax returns, particularly for self-employed individuals, cannot automatically be treated as conclusive evidence of income, especially in the absence of supporting financial records such as bank statements or business accounts. The insurer expressed concerns regarding the possibility of manipulation or exaggeration, contending that courts must adopt a cautious approach. They emphasized that the Tribunal was justified in considering Rs. 10,000 as the victim’s monthly income, as the earning capacity of self-employed persons often fluctuates and is not always reflected accurately in tax documents. Moreover, the insurer asserted that motor accident compensation must be assessed conservatively to prevent unjust enrichment. They maintained that bank passbooks or business ledgers would have provided a more accurate and verifiable picture of the deceased’s actual income. Thus, according to the insurer, the Tribunal’s insistence on additional documents was not misplaced and the appeal for enhancement should be dismissed.

Court’s Judgment:

Justice Biswaroop Chowdhury, after carefully considering both sides, delivered a comprehensive judgment affirming the evidentiary sanctity of Income Tax Returns when filed during the lifetime of the deceased and duly accepted by the Income Tax Authority. The Court observed that the distinction between salaried and self-employed individuals is crucial: while salary slips and employer testimony reliably reveal the income of salaried persons, self-employed individuals primarily rely on their own statutory declarations before tax authorities. The Court emphasized that once an Income Tax Return is accepted by the Income Tax Department, it becomes an authentic document, and courts adjudicating motor accident claims should not casually disregard such evidence. Justice Chowdhury noted that in the present case, the Income Tax Officer had been examined and had confirmed the filing and acceptance of the ITR, eliminating any suspicion regarding its genuineness. The Court explicitly rejected the Tribunal’s insistence on supplementary documents such as bank passbooks, stating that such requirements arise only when no ITR exists or when the return is filed after the institution of a compensation claim, raising concerns of fabrication. In this case, however, the ITR was filed during the victim’s lifetime and long before the accident, leaving no possibility of income inflation for compensation purposes. The Court further held that when an income assessment is made by a competent statutory authority—such as the Income Tax Department—courts should not sit in review of that assessment unless there is clear evidence of manipulation. The purpose of compensation under motor accident law is the fair restoration of economic loss, and artificially reducing income amounts to injustice against dependents. Based on the accepted annual income of Rs. 3,18,470 and applying the standard principles for computing compensation, the Court partially allowed the appeal and modified the Tribunal’s award, granting Rs. 39,00,000 to the claimants, payable by ICICI Lombard General Insurance Company. This decision reinforces the legal principle that statutory declarations of income, when verified, must be given due weight in compensation matters.