Mumbai: The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has quashed income-tax reassessment proceedings involving more than ₹1.24 crore received from bitcoin sales after finding that the approval obtained to reopen the assessment was not granted by the authority prescribed under the law.
Since more than three years had elapsed when the reassessment notice was issued, the tribunal held that approval from a higher-level authority was required. The case relates to Mohammed Hasseb Mohammed Hanif Khan versus the Income Tax Officer. The Mumbai Bench pronounced its order on September 11, 2026. For assessment year 2018-19, the Income Tax Department had issued a notice under Section 148 of the Income-tax Act on April 13, 2022. The department had treated ₹1,24,55,654 linked to bitcoin sales as unexplained investment under Section 69 and made an addition during the tax assessment.
The taxpayer challenged the validity of the reassessment as well as the addition relating to the bitcoin transactions. During the proceedings, he also raised an additional legal ground that the approval required under Section 151 for reopening the assessment had not been obtained from the competent authority. The tribunal admitted this additional ground, noting that it directly concerned the jurisdiction and validity of the reassessment proceedings.
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The tribunal observed that the notice under Section 148 had been issued more than three years after the end of the relevant assessment year. In such circumstances, Section 151(ii) of the Income-tax Act applies. Under this provision, approval for reopening the assessment must be obtained from the specified higher authorities, including the Principal Chief Commissioner, Principal Director General, Chief Commissioner or Director General of Income Tax.
In the present case, however, the approval had been granted by the Principal Commissioner of Income Tax, Mumbai-3. The tribunal held that this was not the authority prescribed under the provision applicable to reassessment proceedings initiated after more than three years. Section 151(i) specifies the relevant authorities where three years or less have elapsed, while Section 151(ii) requires approval from a higher specified authority when the three-year period has expired.
The tribunal also referred to a Supreme Court ruling dealing with the reassessment provisions. According to the tribunal, the competent authority under Section 151 has to be determined with reference to the time when the reassessment notice is issued. The tribunal further noted that obtaining approval from the appropriate specified authority is a precondition for the Assessing Officer to assume jurisdiction under Section 148.
The Mumbai tribunal also considered a Bombay High Court ruling involving a similar issue concerning approval granted by the Principal Commissioner when Section 151(ii) required approval from a higher authority. Applying these legal principles, the ITAT held that the Section 148 notice in the present case was not legally valid because the required approval had not been obtained from the prescribed authority.
On this basis, the tribunal held that the reassessment framed under Section 147 read with Section 143(3) was void ab initio and quashed the proceedings. The taxpayer’s appeal was consequently allowed. The tribunal, however, did not decide the merits of the tax treatment of the ₹1,24,55,654 linked to the bitcoin transactions. In other words, the ITAT did not rule on whether the amount was actually taxable or whether the addition under Section 69 was otherwise justified. The decision was based on the validity of the reassessment proceedings and the statutory approval required for reopening the assessment.
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