Ledger Discrepancies Cannot Trigger Section 69A Addition Without Full Accounting Trail Examination: ITAT Mumbai
Case Overview
Case Name: Jeeten Jayshukhlal Mehta Vs DCIT (ITAT Mumbai Bench)
Appeal Number: ITA No. 2997/Mum/2026
Date of Order: 27/08/2026
Assessment Year: 2023-24
Forum: Income Tax Appellate Tribunal, Mumbai Bench
The Mumbai Bench of the Income Tax Appellate Tribunal, in ITA No. 2997/Mum/2026, delivered a significant ruling on 27 August 2026, addressing two distinct issues — the validity of an addition of ₹27,39,649 made under Section 69A of the Income Tax Act, 1961 on the basis of third-party ledger differences, and the permissibility of a travelling expenditure deduction of ₹4,45,803 claimed as a business expense. The Tribunal arrived at a split verdict, directing deletion of the Section 69A addition while simultaneously upholding the disallowance of travel expenses.
Background and Factual Matrix
Return Filing and Scrutiny Selection
The assessee, a resident individual, filed his return of income on 28.10.2023 for Assessment Year 2023-24, reporting a total income of ₹3,15,73,180. The return was subsequently flagged for scrutiny proceedings to examine the following specific concerns:
- Profits declared under certain specified business activity codes, including other services
- Lower disallowance reported under
Section 40(a)(ia)of the Income Tax Act, 1961 in the ITR (Part A-OI) compared to figures appearing in the audit report - High-value loan receipts and repayments transacted outside banking channels
- Reported income appearing disproportionate relative to the assets and liabilities schedule in the return
Consequent to scrutiny selection, the Assessing Officer (AO) issued statutory notices under Section 142(1) and Section 143(2) of the Income Tax Act, 1961, requiring the assessee to furnish relevant details along with supporting documentary evidence.
Discrepancy Relating to Zim Integrated Shipping Services (India) Ltd.
Upon examining the assessee's purchase records, the AO identified a mismatch between the figures appearing in the assessee's purchase register and those available with the department. Specifically:
- As per assessee's purchase register: ₹9,64,998 recorded as purchases from Zim Integrated Shipping Services (I) Ltd.
- As per departmental information: Purchases amounting to ₹26,39,034
Additionally, the supplier's ledger submitted by Zim Integrated Shipping Services (I) Ltd. reflected total payments received from the assessee at ₹1,19,04,219, while the assessee maintained that actual payments stood at only ₹1,06,52,328. A further examination of Zim's bank statement revealed a specific payment of ₹5,87,744 that did not find any corresponding entry in the assessee's own books of account. The AO treated this unrecorded amount as unexplained money under Section 69A of the Income Tax Act, 1961.
Discrepancy Relating to Star Shipping Services India Pvt. Ltd.
A separate set of differences emerged in connection with Star Shipping Services India Pvt. Ltd.:
- As per assessee's books: Total payments of ₹2,36,61,980 reflected
- As per departmental information: Amount appearing in the party's account stood at ₹3,02,06,697
- Gross difference identified: ₹65,47,717
The assessee sought to reconcile this gap by explaining that Star Shipping Services India Pvt. Ltd. had erroneously recorded certain payments against the assessee's account on a duplicate basis, which were subsequently reversed. The AO, however, declined to accept this reconciliation, finding no merit in the explanation offered.
Ultimately, the AO added ₹27,39,649 to the assessee's income under Section 69A, representing the combined differential — ₹5,87,744 attributable to the Zim transaction and ₹21,51,905 relating to Star Shipping. This addition was challenged before the National Faceless Appeal Centre (NFAC), Delhi, which confirmed it in its order dated 23.01.2026.
Disallowance of Travelling Expenditure
During the course of assessment proceedings, the AO scrutinised the assessee's travelling expense claim of ₹4,45,803. On review, it was noted that the expenses were incurred on travel undertaken by multiple individuals. The AO called upon the assessee to demonstrate how these expenditures were connected to or incurred for the purposes of the assessee's business. The assessee broadly contended that the travel was business-related, but could not substantiate the claim with documentary proof. Accordingly, the AO disallowed ₹4,45,803, and this disallowance too was confirmed by the first appellate authority.
Issues Before the Tribunal
The Tribunal was required to adjudicate upon two principal questions:
Whether differences emerging from third-party ledger records, particularly where the assessee had offered a reconciliation supported by bank statements and reversal entries, could legitimately sustain an addition under
Section 69Aof the Income Tax Act, 1961.Whether travelling expenditure incurred for various individuals is deductible as a business expense under
Section 37of the Income Tax Act, 1961 when the assessee fails to establish the travellers' connection with the business or demonstrate any resultant commercial benefit.
Submissions of the Parties
Assessee's Position
**On the Zim Transaction (₹5,87,744)😗*
The assessee brought to the Tribunal's attention a critical distinction between two similarly named entities:
- VOYAGE India — a proprietary concern belonging to the assessee
- VOYAGE India Pvt. Ltd. — a legally distinct incorporated company
The assessee argued that the payment of ₹5,87,744 was received from VOYAGE India Pvt. Ltd., i.e., the company, and not from the assessee's proprietary concern. The AO had conflated two legally separate entities, thereby misattributing the transaction. The addition was therefore premised on a factual error rather than any genuine concealment.
**On the Star Shipping Transaction (₹21,51,905)😗*
The assessee placed reliance on a three-document reconciliation:
- His own bank statement
- The ledger copy of Star Shipping Services India Pvt. Ltd. maintained in the assessee's books
- The assessee's ledger copy as maintained in Star Shipping's books