Jeeten Jayshukhlal Mehta Vs DCIT (ITAT Mumbai Bench)
Ledger Mismatch Is Not Unexplained Money: ITAT Deletes ₹27.39 Lakh Addition but Rejects Unsupported Travel Claim
Summary: In Jeeten Jayshukhlal Mehta v. DCIT, ITA No. 2997/Mum/2026, decided on 27 August 2026, the Mumbai Bench of the Income Tax Appellate Tribunal examined whether differences appearing in third-party ledgers could justify an addition of ₹27,39,649 u/s 69A, as well as whether travelling expenditure of ₹4,45,803 was allowable as a business deduction. The Tribunal partly allowed the assessee’s appeal by deleting the addition u/s 69A but sustained the travelling-expense disallowance.
Relevant Facts
The assessee, a resident individual, filed his return for AY 2023-24, declaring total income of ₹3,15,73,180. The return was selected for scrutiny on several grounds, including profits reported under specified business codes, disallowance u/s 40(a)(ia), high-value loan transactions outside banking channels & high income not corresponding with the assets & liabilities schedule.
During scrutiny, the AO issued notices u/s 142(1) & 143(2), seeking details & supporting evidence. On examining purchases from Zim Integrated Shipping Services (India) Ltd., the AO noticed that the assessee’s purchase register reflected purchases of ₹9,64,998, whereas departmental information showed purchases of ₹26,39,034. The supplier’s ledger allegedly reflected payments of ₹1,19,04,219, while the assessee maintained that actual payments were only ₹1,06,52,328.
The AO further observed from Zim’s bank statement that a payment of ₹5,87,744 was not recorded in the assessee’s books. He treated this amount as unexplained money u/s 69A.
A separate discrepancy arose in the account of Star Shipping Services India Pvt. Ltd. The assessee’s books reflected payments of ₹2,36,61,980, whereas departmental information showed ₹3,02,06,697. According to the assessee, Star Shipping had mistakenly recorded certain payments twice & subsequently reversed the duplicate entries. The AO rejected this reconciliation & ultimately added ₹27,39,649, comprising ₹5,87,744 relating to Zim & ₹21,51,905 relating to Star Shipping. The NFAC confirmed the addition.
The AO also disallowed travelling expenses of ₹4,45,803, observing that the expenditure related to journeys undertaken by various individuals whose relationship with the assessee’s business was not established. This disallowance was also upheld by the first appellate authority.
Issues Involved
The principal issues before the Tribunal were:
1. Whether third-party ledger discrepancies, despite being reconciled through bank statements & reversal entries, could be treated as unexplained money u/s 69A.
2. Whether travelling expenditure incurred for various individuals was deductible where the assessee failed to establish their connection with the business or demonstrate the resulting business benefit.
Assessee’s Submissions
Regarding the Zim transaction, the assessee submitted that the amount of ₹5,87,744 had been received from Voyage India Pvt. Ltd., a company, whereas Voyage India, without the corporate suffix, was the assessee’s proprietary concern. The AO had confused two legally distinct entities & wrongly treated the entry as an unrecorded payment by the assessee.
For Star Shipping, the assessee relied upon his bank statement, the supplier’s ledger in his books & his ledger in Star Shipping’s books. These records demonstrated that only ₹20,70,819.18 had actually been paid. The apparent difference arose because Star Shipping had entered certain transactions twice, though the duplicate entries were later reversed. The authorities had considered the original duplicate entries but ignored the corresponding reversal.
On travelling expenses, the assessee broadly contended that the journeys were undertaken for business purposes. However, he could not produce sufficient evidence identifying the travellers’ roles, their relationship with the business or the commercial purpose served by their journeys.
Revenue’s Contentions
The Revenue relied on third-party information & ledger differences to argue that payments remained unexplained. Since the figures appearing in the assessee’s records did not initially correspond with the supplier data, the addition u/s 69A was defended. Regarding travelling expenditure, the Revenue contended that a mere assertion of business purpose was insufficient without documentary evidence establishing a direct commercial connection.
Tribunal’s Findings & Legal Reasoning
The Tribunal found that the ₹5,87,744 addition resulted from a factual misappreciation. The payment was connected with Voyage India Pvt. Ltd., a company distinct from the assessee’s proprietary concern. Since the AO had confused the identities of the two entities, the addition could not survive.
Regarding Star Shipping, the Tribunal examined the bank statement & corresponding ledgers. No payment beyond ₹20,70,819.18 appeared in the assessee’s bank account or Star Shipping’s ledger. The difference resulted from duplicate entries subsequently reversed. As the reversal entries had not been considered by the departmental authorities, the Tribunal held that the discrepancy stood fully reconciled. It therefore directed the AO to delete the entire addition of ₹27,39,649.
However, the travelling-expense disallowance was sustained. The assessee failed to explain the capacity in which the concerned individuals were connected with his business or how their travel benefited it. In the absence of supporting evidence, the expenditure could not be regarded as incurred wholly for business purposes. The Tribunal accordingly concurred with the departmental authorities.
Practical Implications
The decision establishes that ledger mismatches alone cannot justify an addition u/s 69A where bank records, entity identification & reversal entries satisfactorily reconcile the figures. The tax authorities must examine the entire accounting trail rather than selectively relying on unreconciled third-party data. The statutory framework governing unexplained money is discussed by TaxGuru in its Section 69A analysis.
Conversely, taxpayers claiming travel expenditure must maintain traveller details, business correspondence, itineraries, approvals & evidence of commercial purpose. Section 37 generally permits business expenditure only when the statutory conditions, including expenditure incurred wholly & exclusively for business or profession, are satisfied. ([TaxGuru][1])
The ruling therefore protects genuine accounting reconciliations while reaffirming that business deductions require credible documentary support.
FULL TEXT OF THE JUDGMENT/ORDER OF INCOME TAX APPELLATE TRIBUNAL, MUMBAI
This is an appeal by the assessee against order dated 23.01.2026 passed by National Faceless Appeal Centre (‘NFAC’ for short), Delhi for the assessment year (A.Y. for short) 2023-24.
2. In ground no. 1, the assessee has challenged the addition of Rs.27,39,649/- u/s. 69A of the Income Tax Act, 1961 (‘the Act’ for short).
3. Briefly the facts relating to this issue are, the assessee is a resident individual. For the assessment year under dispute, the assessee filed his return of income on 28.10.2023, declaring income of Rs.3,15,73,180/-. The return of income so filed by the assessee was selected for scrutiny to examine the following issues:
a. Profit earned by certain specific business codes including other services.
b. Lower amount disallowed u/s. 40(a)(ia) of the Act in ITR (Part A-OI) in comparison to audit report.
c. Large value receipt or repayment of loans other than through banking channels and
d. High income reported in the return and not in course of any Schedhule Assets and Liabilities of return of income.
4. Accordingly, the Assessing Officer (A.O. for short) issued notices u/s. 142(1) and 143(2) of the Act calling upon the assessee to furnish necessary details with supporting evidences. In response to queries raised by the A.O., the assessee made compliances from time to time. After examining the submissions of the assessee, in the context of facts and materials on record, the A.O. found discrepancy with regard to purchases made from Zim Integrated Shipping Services (I) Ltd. He observed, though as per the purchase register of the assesse, purchases from the concerned party was shown at Rs.9,64,998/-, however, as per the information available with the department, the purchases were to the tune of Rs.26,39,034/-. He further observed that on perusal of the ledger account submitted by Zim Integrated Shipping Services (I) Ltd., it was found that the assessee had paid an amount of Rs.1,19,04,219/-. Thus, he proposed to add the differential amount to the income of the assesse, through a show cause notice issued to the assessee. In response to the show cause notice, the assessee again furnished a detailed reply stating that the actual payment made was to the tune of Rs.106,52,328/-, as against the amount of Rs.1,19,04,219/- alleged to have been paid by the assessee. Referring to the bank statement of Zim Integrated Shipping Services (I) Ltd., the A.O. observed that the assessee had paid an amount of Rs.5,87,744/- which is not recorded in the books of accounts of the assesse. Accordingly, he treated the said amount as unexplained money u/s.69A of the Act.
5. Proceeding further, he observed that as per assessee’s books an amount of Rs.2,36,61,980/- was paid to Star Shipping Services India P. Ltd. Whereas, as per information available with the department, an amount of Rs.3,02,06,697/- was appearing in parties account. Thus, according to the A.O. there was different of Rs.65,47,717/-. To reconcile the difference, the assessee furnished a detailed reply stating that Star Shipping Services India P. Ltd. had erroneously shown certain payments in the name of the assessee twice which was subsequently reversed. The A.O., however, did not find merit in the submissions of the assessee. Ultimately, he proceeded to add the amount of Rs.27,39,649/-, being the difference in the payments made to the concerned parties. Though the assessee contested the addition before learned first appellate authority, however, it was confirmed.
5. We have considered rival submissions and perused the materials available on record. Insofar as, the alleged payment of Rs.5,87,744/- to Zim Integrated Shipping Services (I) Ltd. is concerned, the entries in the books of account clearly demonstrate that it was received from VOYAGE India P. Ltd., a company and not VOYAGE India as alleged by the A.O.
6. Before us, the assessee has submitted that VOYAGE India is a proprietary concern of the assesse, whereas VOYAGE India P. Ltd. is a company. Thus, clearly, the A.O. has made the addition on misappreciation of facts. Therefore, the addition made of Rs.5,87,744/- is unsustainable. Insofar as, the balance amount of Rs.21,51,905/- allegedly paid to Star Shipping Services India P. Ltd., perusal of the bank statement of the assessee, ledger copy of Star Shipping Services India P. Ltd. in assessee’s book and assessee’s ledger copy in Star Shipping Services India P. Ltd. book clearly demonstrates that the assessee had only paid amount of Rs.20,70,819.18. Except this amount, no other payment is reflected in assessee’s bank account or in the ledger copy of Star Shipping Services India P. Ltd. The confusion, in our view, regarding the difference has arisen on account of erroneous entries made in assessee’s ledger copy in the books of Star Shipping Services India P. Ltd. On perusal of the said ledger account, placed in the paper book, it is noticed that the amount was erroneously entered twice, which was subsequently reversed. The subsequent reversal entry has not been considered by the departmental authorities. Thus, in our view, the so called difference in the payment figure stands reconciled by the assessee. Hence, there is no case for addition. Accordingly, we direct the A.O. to delete the addition of Rs.27,39,649/-. This ground is allowed.
7. In ground no. 2, the assessee has contested the disallowance of travelling expenses of Rs.4,45,803/-.
8. Briefly stated, in course of assessment proceeding, the A.O. on verification of the details of travelling expenses noticed that the expenses were on account of travel undertaken by various individuals. He, therefore, called upon the assessee to demonstrate how such expenses were in connection with or for the purpose of assessee’s business. Though the assessee emphasized that the expenses were incurred for the purpose of assessee’s business, however, the A.O. remained unconvinced. Accordingly, he disallowed the amount of Rs.4,45,803/-. The said disallowance was also confirmed by learned first appellate authority.
9. Having considered rival submissions and perused the materials on record, we find that the amount in dispute represents travel expenses of various individuals. Neither before the departmental authorities nor before us the assessee has been able to demonstrate in what capacity and manner the concerned individuals are connected with assessee’s business and by incurring such expenses how assessee’s business has benefited. Unfortunately, the assessee has not been able to furnish any reasonable explanation or supporting evidences to demonstrate that the travel expenses were incurred for the purpose of assessee’s business. In view of the aforesaid, we concur with the decision of the departmental authorities to disallow the expenses. This ground is dismissed.
10. In the result, the appeal is partly allowed.
Order pronounced in the open court on 27.08.2026
