A Mumbai taxpayer faced reassessment proceedings for assessment year 2018-19 after the tax department treated ₹1,24,55,654 from bitcoin sales as unexplained investment under Section 69 of the Income-tax Act. The Income Tax Appellate Tribunal, Mumbai Bench, has now quashed the reassessment after finding that the approval obtained for reopening the assessment was not from the authority prescribed under Section 151(ii).
The case concerns Mohammed Hasseb Mohammed Hanif Khan vs Income Tax Officer, Ward 34(2)(1), Mumbai, ITA No. 4713/Mum/2026. The tribunal pronounced its order on 11 September 2026.
Why did the bitcoin tax reassessment fail?
The taxpayer’s assessment for AY 2018-19 was reopened through a notice issued under Section 148 on 13 April 2022. The taxpayer challenged the reopening and the addition relating to bitcoin sales. He also raised an additional legal ground that the required approval under Section 151 had not been obtained from the competent authority.
The ITAT admitted this additional ground because it went to the jurisdiction and validity of the assessment proceedings.
The tribunal noted that the notice under Section 148 had been issued more than three years after the end of the relevant assessment year. The approval, however, had been granted by the Principal Commissioner of Income Tax-3, Mumbai.
The tribunal then examined the approval requirement under Section 151.
What does Section 151 say about reopening after three years?
The tribunal relied on the reassessment provisions introduced by the Finance Act, 2021.
Under Section 151(i), where three years or less have elapsed from the end of the relevant assessment year, the specified authorities include the Principal Commissioner, Principal Director, Commissioner or Director.
But where more than three years have elapsed, Section 151(ii) requires approval from a higher authority. This includes the Principal Chief Commissioner, Principal Director General, Chief Commissioner or Director General.
The tribunal referred to the Supreme Court’s judgment in Union of India vs Rajeev Bansal, which it said had clarified that the specified authority under Section 151 is linked to the time when the reassessment notice is issued.
The Supreme Court had also held that obtaining sanction from the appropriate specified authority is a precondition for the Assessing Officer to assume jurisdiction under Section 148, the tribunal noted.
The ITAT also considered the Bombay High Court’s decision in Alag Property Construction (P.) Ltd. vs ACIT, which dealt with a similar issue involving approval from the PCIT when Section 151(ii) required approval from a higher authority.
ITAT says approval from PCIT was not sufficient
Applying these principles, the Mumbai tribunal held that the approval in the taxpayer’s case had been obtained from the Principal Commissioner of Income Tax, even though the reassessment notice was issued after the three-year period.
According to the tribunal, the approval should have been granted by the Principal Chief Commissioner of Income Tax or another authority specified under Section 151(ii).
The tribunal therefore held that the Section 148 notice was bad in law because the approval had come from an authority specified under Section 151(i), rather than the authority required under Section 151(ii).
It consequently held that the reassessment framed under Section 147 read with Section 143(3) was void ab initio and quashed it. The taxpayer’s appeal was allowed.
Importantly, the tribunal’s order was based on the validity of the reassessment proceedings. It did not adjudicate whether the ₹1,24,55,654 relating to bitcoin transactions was taxable on merits. The underlying addition under Section 69 therefore was not decided by the tribunal.