A taxpayer facing a Rs 1.24 crore addition over bitcoin sale proceeds has received relief from the Mumbai Income Tax Appellate Tribunal. The tribunal found that the Income Tax Department had not obtained approval from the authority required by law before reopening his assessment.
The case concerns Mohammed Hasseb Mohammed Hanif Khan vs Income Tax Officer, Ward 34(2)(1), Mumbai, ITA No. 4713/Mum/2026, for Assessment Year 2018–19. The ITAT Mumbai Bench F pronounced its order on September 11, 2026. The department had treated ₹1,24,55,654 from bitcoin sales as unexplained investment under Section 69 of the Income-tax Act. The taxpayer challenged the addition as well as the validity of the reassessment.
The tribunal ultimately quashed the reassessment. It held that the approval for reopening the assessment had been granted by the Principal Commissioner of Income Tax, or PCIT, instead of the higher authority required under Section 151(ii) when more than three years have elapsed from the end of the relevant assessment year.
The ruling is important for taxpayers because it explains why the correct approval authority matters when the Income Tax Department seeks to reopen an old assessment. It also shows that a reassessment can fail on a legal and procedural issue without the tribunal deciding the underlying tax dispute.
What was the dispute?
The taxpayer had challenged the reassessment for AY 2018–19. The Income Tax Department had made an addition of ₹1,24,55,654, treating the amount received from bitcoin sales as unexplained investment under Section 69.
The taxpayer argued that the reopening itself was invalid. He also raised a separate argument that the reassessment was based on a mere change of opinion. In addition, he challenged the approval obtained for issuing the reassessment notice.
The ITAT admitted the additional legal ground relating to the approval requirement because it went to the validity of the assessment proceedings.
The tribunal then examined whether the approval had been obtained from the correct authority under Section 151(ii).
Why did the approval become important?
The reassessment notice under Section 148 was issued on April 13, 2022. The taxpayer argued that it was issued more than three years after the end of the relevant assessment year.
Under the reassessment regime introduced by the Finance Act, 2021, Section 151 specifies different approving authorities depending on how much time has passed since the end of the relevant assessment year.
Section 151(i) applies when three years or less have elapsed. In such cases, approval can be granted by the Principal Commissioner of Income Tax, Principal Director, Commissioner or Director.
Section 151(ii) applies when more than three years have elapsed. In such cases, approval is required from the Principal Chief Commissioner of Income Tax, Principal Director General, Chief Commissioner or Director General.
In the bitcoin case, the approval had been granted by the Principal Commissioner of Income Tax. The taxpayer argued that this was not sufficient because the notice had been issued after the three-year period.
What does Section 151(ii) require?
Dinkar Sharma, Company Secretary and Partner, Jotwani Associates, explained that the law makes a clear distinction based on the time elapsed from the end of the relevant assessment year.
“Under the re-assessment regime introduced by the Finance Act, 2021, Section 151 draws a clear distinction based on the period elapsed from the end of the relevant assessment year.”
He said that where more than three years have elapsed, the approval must come from the Principal Chief Commissioner of Income Tax, Principal Director General of Income Tax, Chief Commissioner of Income Tax or Director General of Income Tax.
There is another important condition under Section 149. Sharma said that reopening beyond three years is permissible only where the Assessing Officer possesses books, documents or evidence revealing that income chargeable to tax, represented in the form of an asset, which has escaped assessment amounts to or is likely to amount to ₹50 lakh or more.
“Thus, after three years, both the statutory conditions for reopening and the approval requirement under Section 151(ii) have to be satisfied,” he said.
This means that the department must meet both requirements. It must have the necessary basis to reopen the assessment under the applicable law, and it must also obtain approval from the authority specified under Section 151(ii).
Why was approval from the Principal Commissioner not enough?
The issue was not whether the PCIT had considered the case properly or whether the approval was genuine. The issue was whether the PCIT was the correct authority to grant approval after the three-year period.
Sharma explained that the PCIT is one of the authorities specified under Section 151(i), which applies when three years or less have elapsed from the end of the relevant assessment year.
Once that period has expired, Section 151(ii) requires approval from a higher specified authority.
“Therefore, it was not a question of whether the PCIT had considered the case properly or whether the approval was otherwise genuine. The fundamental issue was that the statute required approval from a different authority altogether,” Sharma said.
The distinction is important because obtaining approval from some authority is not necessarily enough. The approval must come from the authority empowered by the applicable statutory provision.
Section 151(i) vs Section 151(ii): What is the difference?
The difference can be understood through the following table:
| Provision | When it applies | Specified authority |
| Section 151(i) | Three years or less have elapsed from the end of the relevant assessment year | Principal Commissioner, Principal Director, Commissioner or Director |
| Section 151(ii) | More than three years have elapsed from the end of the relevant assessment year | Principal Chief Commissioner, Principal Director General, Chief Commissioner or Director General |
The law requires a higher level of approval when the department seeks to reopen an assessment after three years.
Sharma said that an approval valid under Section 151(i) cannot automatically be treated as sufficient under Section 151(ii).
“The legislation deliberately requires a higher level of administrative approval once the Revenue seeks to reopen an assessment after three years,” he said.
He added that the Supreme Court has emphasised that the specified authority is directly linked to the time elapsed from the end of the relevant assessment year.
How does the Supreme Court’s Rajeev Bansal judgment apply?
The ITAT relied on the Supreme Court’s decision in Union of India v. Rajeev Bansal. The judgment explained the operation of the reassessment provisions introduced by the Finance Act, 2021.
The Supreme Court held that obtaining sanction from the appropriate specified authority is a precondition for the Assessing Officer to assume jurisdiction under Section 148.
It also clarified that where more than three years have elapsed, Section 151(ii) requires approval from the higher authorities specified in that provision.
Sharma said that the Supreme Court’s ruling was directly relevant to the bitcoin case.
“The Supreme Court’s decision is directly relevant here because it had clarified the operation of the new reassessment regime and, importantly, held that obtaining sanction from the appropriate specified authority is a precondition for the Assessing Officer to assume jurisdiction under Section 148,” he said.
The Supreme Court also explained that Section 151 is intended to act as a safeguard against mechanical reopening of completed assessments.
The ITAT applied these principles while examining the approval obtained in the taxpayer’s case.
Why is the approval requirement a jurisdictional issue?
This is the central legal point in the ruling.
A jurisdictional requirement is a condition that must be satisfied before an authority can lawfully exercise a particular power. In this case, the issue was whether the Assessing Officer had the required legal authority to issue the reassessment notice.
Section 151 places a statutory check on the Income Tax Department’s power to reopen completed assessments. It requires approval from a specified authority before the Assessing Officer can issue a notice under Section 148.
Sharma explained that the approval is not simply an internal administrative step.
“Section 151 places a statutory check on the Revenue’s power to reopen a completed assessment. The Supreme Court in Rajeev Bansal explained that the purpose of this safeguard is to protect taxpayers against arbitrary or mechanical reopening,” he said.
He added that Parliament had specified the authority that must grant approval. Therefore, when the law requires approval from a higher authority after three years, approval from a lower authority cannot simply be treated as sufficient.
In simple terms, the question is not only whether approval was obtained. It is also whether the approval was obtained from the authority empowered to grant it under the law.
What did the ITAT finally decide?
The ITAT found that the approval for reopening the taxpayer’s assessment had been granted by the Principal Commissioner of Income Tax rather than the Principal Chief Commissioner of Income Tax, as required under Section 151(ii).
The tribunal held that the notice issued under Section 148 was bad in law. It consequently quashed the reassessment framed under Sections 147 and 143(3) of the Income-tax Act.
The appeal filed by the taxpayer was allowed.
The tribunal’s decision was based on the validity of the reassessment proceedings. It did not decide whether the underlying bitcoin sale proceeds were taxable or whether the addition under Section 69 was correct on merits.
What does this mean for taxpayers?
The case highlights the importance of examining the legal basis of a reassessment notice.
Taxpayers who receive such notices should carefully check the assessment year, the date of the notice and the provisions under which the assessment is being reopened. They should also examine whether the approval was obtained from the authority required under the applicable law.
However, this ruling does not mean that every reassessment notice issued after three years is invalid. The applicable time limits, statutory conditions and approval requirements must be examined in each case.
The case also does not mean that income from bitcoin or other cryptocurrencies is exempt from tax. The relief here arose because the tribunal found a defect in the reassessment procedure.
For taxpayers, the wider lesson is that the Income Tax Department must follow the statutory safeguards while reopening completed assessments. For crypto investors, maintaining proper records of purchases, sales, transfers and other transactions remains important when dealing with tax-related queries or notices.
Disclaimer: This story is based on the order passed by the Mumbai Bench of the Income Tax Appellate Tribunal. The ruling dealt with the validity of the reassessment proceedings and the approval required under Section 151 of the Income-tax Act. It did not decide whether bitcoin gains are taxable or tax-free. Taxpayers should consult a qualified tax professional before taking any action based on this case.