Uneven illumination and shadows in document images cause a challenge for digitization applications and automated workflows. In this work, we propose a new method to recover un-shadowed document images from images with shadows/uneven illumination. We pose this problem as one of estimating the shading and reflectance components of the given original image. Our method first estimates the shading and uses it to compute the reflectance. The output reflectance map is then used to improve the shading and the process is repeated in an iterative manner. The iterative procedure allows for a gradual compensation and allows our algorithm to even handle difficult hard shadows without introducing any artifacts. Experiments over two different datasets demonstrate the efficacy of our algorithm and the low computation complexity makes it suitable for most practical applications.