Mohammed Hasseb Mohammed Hanif Khan Vs ITO (ITAT Mumbai Bench)
₹1.24-Crore Bitcoin Addition Crashes for Want of the Right Password: PCIT’s Approval Invalid Where Section 151(ii) Required PCCIT’s Sanction – ITAT Mumbai
Summary: The assessee challenged the reassessment framed for AY 2018-19, in which the AO treated bitcoin sale proceeds of ₹1,24,55,654 as unexplained investment u/s 69.
The assessee originally challenged the reopening on the grounds that the notice u/s 148 was invalid and that the reassessment represented a mere change of opinion. He also disputed the addition relating to the bitcoin transactions on merits.
Before the Tribunal, the assessee raised an additional legal ground contending that the reopening was void because the AO had not obtained approval from the competent specified authority mandated u/s 151.
Since the additional ground went to the root of the AO’s jurisdiction and did not require investigation into any fresh facts, the Tribunal admitted it.
The notice u/s 148 was issued on 13.04.2022 for AY 2018-19. By then, more than three years had elapsed from the end of the relevant assessment year. The approval for reopening was, however, obtained from the PCIT-3, Mumbai.
The assessee contended that where a notice is issued after expiry of three years, section 151(ii) requires sanction from a higher authority, namely, the PCCIT, Principal Director General, Chief Commissioner or Director General. The PCIT is the specified authority under section 151(i) for cases where three years or less have elapsed, but not for cases falling beyond that period.
Accordingly, approval by the PCIT could not satisfy the jurisdictional requirement of section 151(ii). If the sanction itself was invalid, the notice u/s 148 and every proceeding founded upon it were liable to be quashed.
The assessee relied upon the Coordinate Bench decision in ITO v. Neelesh Hashmukh Doshi HUF [187 taxmann.com 843 (Mum.-Trib.)] and the Bombay High Court judgment in Mrs. Chitra Supekar v. ITO [149 taxmann.com 26 (Bom.)].
The Tribunal noticed that the controversy was squarely covered by the Bombay High Court’s subsequent decision in Alag Property Construction (P.) Ltd. v. ACIT [179 taxmann.com 578 (Bom.)], which had considered the sanction requirement in light of the Supreme Court judgment in Union of India v. Rajeev Bansal [469 ITR 46 (SC)].
The Supreme Court in Rajeev Bansal explained that section 151 imposes an important check upon the Revenue’s power to reopen assessments. The purpose of obtaining sanction is to protect assessees from harassment arising from mechanical reopening of completed assessments.
Under the reassessment regime introduced by the Finance Act, 2021, the specified authority is directly linked to the time elapsed from the end of the relevant assessment year. Where three years or less have elapsed, approval may be granted by the PCIT, Principal Director, Commissioner or Director. Where more than three years have elapsed, sanction must come from the higher authority specified in section 151(ii).
The Supreme Court clarified that obtaining sanction from the appropriate authority is a precondition for the AO to assume jurisdiction. Non-compliance with this statutory condition affects the very jurisdiction to issue notice u/s 148.
The Supreme Court also considered the impact of TOLA. For an assessment year where the ordinary three-year period expired between 20.03.2020 and 31.03.2021, the authority specified u/s 151(i) could grant approval only up to the extended date of 30.06.2021. After that date, the higher authority contemplated u/s 151(ii) alone could validly sanction the reopening.
The Bombay High Court in Alag Property applied this principle and quashed the reassessment where an order u/s 148A(d) and notice u/s 148 issued beyond three years were approved by the PCIT instead of the authority prescribed u/s 151(ii).
The Tribunal further referred to ITO v. Mangla Gupta [183 taxmann.com 121 (SC)], where the Supreme Court dismissed the Revenue’s SLP against the Delhi High Court judgment in Twylight Infrastructure (P.) Ltd. v. ITO [463 ITR 702 (Delhi)]. The Delhi High Court had similarly held that approval from the authority specified in section 151(i) could not substitute approval from the authority prescribed in section 151(ii).
In the present case, it was undisputed that the notice dated 13.04.2022 was issued more than three years after the end of AY 2018-19. Yet, sanction was obtained from the PCIT and not from the PCCIT or another competent higher authority specified u/s 151(ii).
Following the binding jurisdictional High Court decision, the Tribunal held that the notice u/s 148 was bad in law. Consequently, the reassessment framed u/s 147 r.w.s. 143(3) was void ab initio and was quashed.
The assessee’s appeal was accordingly allowed. Since the entire reassessment was annulled for want of jurisdiction, the Tribunal did not adjudicate whether the bitcoin sale proceeds were taxable or could be treated as unexplained investment u/s 69.
Author’s Comment
The subject matter involved modern digital assets, but the reassessment failed on a traditional jurisdictional requirement: sanction from the authority named by Parliament.
Section 151 does not prescribe an empty administrative formality. The requirement of approval by a higher authority beyond three years reflects legislative concern that stale assessments should not be reopened casually. Approval by the PCIT cannot be treated as substantial compliance where the statute specifically requires the PCCIT or equivalent higher authority.
The ruling also requires a caution. It does not establish any principle concerning the taxation of bitcoin, computation of gains, cost of acquisition or application of section 69 to cryptocurrency transactions. The ₹1.24-crore addition disappeared because the reassessment itself was jurisdictionally invalid—not because the bitcoin explanation was accepted on merits.
In short, however sophisticated the crypto trail may be, the Revenue must first follow the statutory trail. A reopening without the correct sanction cannot be rescued by the strength of the proposed addition.
Cases Discussed
- ITO v. Neelesh Hashmukh Doshi HUF [187 taxmann.com 843 (Mum.-Trib.)]
- Mrs. Chitra Supekar v. ITO [149 taxmann.com 26 (Bom.)]
- Alag Property Construction (P.) Ltd. v. ACIT [179 taxmann.com 578 (Bom.)]
- Union of India v. Rajeev Bansal [469 ITR 46 (SC)]
- Union of India v. Ashish Agarwal [444 ITR 1 (SC); (2023) 1 SCC 617]
- ITO v. Mangla Gupta [183 taxmann.com 121 (SC)]
- Twylight Infrastructure (P.) Ltd. v. ITO [463 ITR 702 (Delhi)]
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, MUMBAI
This appeal is filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-NFAC, Delhi, [“Ld. CIT(A)”], dated 26.02.2026, for the assessment year 2018-19.
2. The Assessee has raised the following grounds of appeal:-
“The following grounds of appeal are without prejudice to one another:
1. On the facts and circumstances of the appellant’s case and in law the Id. CIT(A) erred in confirming the action of the Id. AO in re-opening the case of the appellant by issue of notice u/s 148 of the Act which is bad in law.
2. On the facts and circumstances of the appellant’s case and in law the ld. CIT(A) erred in confirming the action of the ld. AO in reopening the assessment u/s 147 by issue of notice u/s 148 which is a mere change of opinion and therefore the re-opening is bad in law.
3. On the facts and circumstances of the appellant’s case and in law the ld. CIT(A) erred in confirming the action of the Id. AO erred in making addition on account of sale proceeds from bitcoins amounting to Rs. 1,24,55,654/-, alleging it to be unexplained investment u/s 69 of the Act, for reasons stated in the impugned order or otherwise.”
3. The Assessee has raised the additional grounds of appeal:
“1. On the facts and circumstances of the Appellant’s case and in law the ld.AO erred in the reopening the case of the appellant without proper approval from competent authorities as mandated u/s 151 of the Income-tax Act.
2. The Appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearing.”
4. On hearing both sides, we admit the additional ground since it is purely a legal ground and going to very jurisdiction of validity of assessment order passed.
5. Coming to the merits of the additional ground, learned counsel for the assessee submitted that the assessment framed by the assessing officer is bad in law for the reason that the notice issued under section 148 of the Act was without the prior approval of the “specified authority” as provided in section 151(ii) of the Act.
6. Learned counsel for the assessee, referring to the notice issued under section 148 of the Act dated 13.04.2022 submitted that the notice was issued for reopening the assessment for assessment year 2018-19 beyond the period of three years from the end of the relevant assessment year. Therefore, as per the provisions of section 151(ii), the Assessing Officer should have obtained permission from the Principal Chief Commissioner of Income Tax, who is the “specified authority” under the said provision. However, the approval was obtained from the Principal Commissioner of Income Tax, and therefore, the notice issued under section 148 of the Act is bad in law and consequently, the reassessment framed u/s 143(3) r.w. section 147 of the Act on the basis of the invalid approval and notice under section 148 is also bad in law.
7. Ld. Counsel for the assessee relied upon the decision of the Co-ordinate Bench of the ITAT in the case of ITO vs. Neelesh Hashmukh Doshi HUF as reported in (2026) 187 taxmann.com 843 (Mum-Trib.) and also upon the decision of the Hon’ble Jurisdictional High Court in the case of Mrs. Chitra Supekar vs. ITO as reported in (2023) 149 taxmann.com 26 (Bom.).
8. Heard rival contentions and perused the orders of the authorities below. Undisputedly, the assessment for A.Y. 2018-19 was reopened beyond the period of three years from the end of the relevant assessment year by issue of notice u/s 148 of the Act dated 13.04.2022. Perusal of the notice issued u/s 148 shows that the approval was granted by the Principal Commissioner of Income Tax-3, Mumbai, for reopening the assessment.
9. The Hon’ble Bombay High Court in the case of Alag Property Construction (P.) Ltd. vs ACIT, reported in (2025) 179 taxmann.com 578 (Bom.), held as under:
“6. In this factual backdrop, the Petitioner has contended that in the present case, the order passed under section 148A(d) dated 18.08.2022, was passed beyond three years from the end of the relevant A. Y. 2017- 18, and consequently, according to the provisions of section 151(ii) ([i.e. when more than three years have elapsed from the end of the relevant assessment year), the specified authority for obtaining the approval was either the Principal Chief Commissioner(PCCIT), or Principal Director General (PDGIT), or where there is no PCCIT or PDGIT, the Chief Commissioner(CCIT), or Director General (DGIT). However, in paragraph 7 of the order dated 15.07.2022 passed under section 148A(d), and also in paragraph 3 of the notice dated 23.08.2022 issued under section 148 of the Act, Respondent No.1 has stated that prior approval of Respondent No.2 i.e. the Principal Commissioner of Income Tax-6, Mumbai was obtained and the said order was passed and the said notice was issued only thereafter. This aspect remains uncontroverted by the Respondents.
7. In these facts, the limited point to be examined is whether the order dated 18/08/2022 passed under section 148A(d) and the notice dated 23.08.2022 issued under section 148 of the Act for A.Y. 2017-18, after obtaining approval of Respondent No.2 [i.e. the PCIT-6, Mumbai], was in accordance with the provisions of section 151. In this regard, the Petitioner has drawn our attention to the decision of Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC)[2024] 301 Taxman 238 (SC)[2024] 469 ITR 46 (SC). The Hon’ble Supreme Court, while dealing with the issue of approval of the specified authority in terms of Section 151 of the Act, made the following observations:
73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under section 148. The purpose behind this procedural check is to save the assessees from harassment resulting from the mechanical reopening of assessments. (Sri Krishna Pvt. Ltd. v. ITO [(1996) 221 ITR 538 (SC); (1996) 9 SCC 534.]), A table representing the prescription under the old and new regime is set out below:
| Regime | Time limits | Specified authority |
|---|---|---|
| Section 151(2) of the old regime | Before expiry of four years from the end of the relevant assessment year | Joint Commissioner |
| Section 151(1) of the old regime | After expiry of four years from the end of the relevant assessment year | Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner |
| Section 151(i) of the new regime | Three years or less than three years from the end of the relevant assessment year | Principal Commissioner or Principal Director or Commissioner or Director |
| Section 151(ii) of the new regime | More than three years have elapsed from the end of the relevant assessment year | Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General |
74. The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime:
(i) If income escaping assessment was less than rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and
(ii) If income escaping was more than rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
75. After April 1, 2021, the new regime has specified different authorities for granting sanctions under section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Union of India v. Ashish Agarwal [[2022] 138 taxmann.com 64 (SC)[2022] 286 Taxman 183 (SC)/[2022] 444 ITR 1 (SC); (2023) 1 SCC 617], after April 1, 2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of section 151 of the new regime is
(i) If income escaping assessment is less than rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and
(ii) If income escaping assessment is more than rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
76. Grant of sanction by the appropriate authority is a precondition for the Assessing Officer to assume jurisdiction under section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the Assessing Officer with the strict time limits prescribed under section 151 affects their jurisdiction to issue a notice under section 148.
77. Parliament enacted Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 to ensure that the interests of the Revenue are not defeated because the Assessing Officer could not comply with the preconditions due to the difficulties that arose during the covid-19 pandemic. Section883(1) of the Taxation and other ne (Relaxation and Amendment of Certain Provisions) Act, 2020 relaxes the time limit for compliance with actions that fall for completion from March 20, 2020 to March 31, 2021. The Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 will accordingly extend the time limit for the grant of sanction by the authority specified under section 151. The test to determine whether Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 will apply to section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between March 20, 2020 and March 31, 2021, then the specified authority under section 151(i) has an extended time till June 30, 2021 to grant approval. In the case of section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between March 20, 2020 and March 31, 2021, then the specified authority under section 151(2) has time till March 31, 2021 to grant approval. The time limit for section 151 of the old regime expires on March 31, 2021 because the new regime comes into effect on April 1, 2021.
78. For example, the three-year time limit for the assessment year 2017-2018 falls for completion on March 31, 2021. It falls during the time period of March 20, 2020 and March 31, 2021, contemplated under section 3(1) of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till June 30, 2021.
79. Under the Finance Act, 2021 ((2021) 432 ITR (Stat) 52), the Assessing Officer was required to obtain prior approval or sanction of the specified authorities at four stages:
(a) Section 148A(a) – to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
(b) Section 148A(b) – to provide an opportunity of hearing to the assessee by serving upon them a show-cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act, 2022 ([2022] 442 ITR (Stat) 91) [Section 45, Finance Act, 2022.];
(c) Section 148A(d) – to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and
(d) Section 148 – to issue a reassessment notice.
80. In Union of India v. Ashish Agarwal [[2022] 138 taxmann.com 64 (SC)[2022] 286 Taxman 183 (SC)/[2022] 444 ITR 1 (SC); (2023) 1 SCC 617.], this court directed that section 148 notices which were challenged before various High Courts “shall be deemed to have been issued under section 148A of the Income-tax Act as substituted by the Finance Act, 2021(2021) 432 ITR (Stat) 52) and construed or treated to be show-cause notices in terms of section 148A(b)”.
Further, this court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a). Under section 148A(b), an Assessing Officer was required to obtain prior approval from the specified authority before issuing a show-cause notice. When this court deemed the section 148 notices under the old regime as section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under section 151 for section 148A(b) notices. It is well established that this court while exercising its jurisdiction under article 142, is not bound by the procedural requirements of law. (High Court Bar Association, Allahabad v. State of Uttar Pradesh ((2024) 6 SC 267.J)
81. This court in Union of India v. Ashish Agarwal [[2022] 138 taxmann.com 64 (SC)(2022) 286 Taxman 183 (SC)[2022] 444 ITR 1 (SC); (2023) 1 SCC 617] directed the Assessing Officers to “pass orders in terms of section 148A(d) in respect of each of the assessees concerned”. Further, it directed the Assessing Officers to issue a notice under section 148 of the new regime after following the procedure as required under section 148A”. Although this court waived off the requirement of obtaining prior approval under section 148A(a) and section 148A(b), it did not waive the requirement for section 148A (d) and section 148. Therefore, the Assessing Officer was required to obtain prior approval of the specified authority according to section 151 of the new regime before passing an order under section 148A(d) or issuing a notice under section 148. These notices ought to have been issued following the time limits specified under section 151 of the new regime read with the Taxation and other 189 (Relaxation and Amendment of Certain Provisions) Act, 2020, where applicable.
(emphasis supplied)
8. On bare reading of the above extract of the judgment of the Honble Supreme Court in the case of Rajeev Bansal (supra), we find that the Hon’ble Supreme Court had clarified as under:
(a) Under the substituted provisions of re-assessment as introduced by the Finance Act, 2021, the Assessing Officer is required to obtain prior approval or sanction of the ‘specified authority at four stages – at the first stage under Section 148A(a), at the second stage under Section 148A(b), at the third stage under Section 148A(d), and at the fourth stage under Section 148. In the case of Ashish Agarwal (supra) the Hon’ble Supreme Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b) of the Act only. Therefore, the Assessing Officer was required to obtain prior approval of the ‘specified authority’ according to Section 151 of the new regime before passing an order under Section 148A(d) or for issuing a notice under Section 148.
(b) Under the new regime, if income escaping assessment is more than Rupees 50 lakhs, a reassessment notice could be issued after the expiry of three years from the end of the relevant previous year only after obtaining the prior approval of the Principal Chief Commissioner or the Principal Director General or the Chief Commissioner or the Director General.
(C) Section 151(ii) of the new regime prescribes an approval of a higher authority, if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the assessing officer with the strict time limits prescribed under section 151 vitiates their jurisdiction to issue a notice under section 148.
(d) Grant of sanction by the specified authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice.
9. In the present case, the period of three years from the end of the A.Y. 2017-18 fell for completion on 31″ March 2021. As the expiry date fell during the time period of 20th March 2020 and 31st March 2021, under Section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (for short “TOLA”), the authority specified under Section 151(i) of the new regime could have granted sanction only till 30th June 2021.
10. On perusal of the order dated 18.08.2022, passed under Section 148A(d) of the Act we find that the aforesaid order was passed after taking approval from Principal Commissioner of Income Tax (Respondent No.2). Since the aforesaid order was passed, as well as the notice under section 148 was issued, after the expiry of three years from the end of A.Y. 2017-18, as per the substituted provisions of re-assessment, the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner) was required to grant approval. Accordingly, we conclude that in the present case, approval has been obtained from the authority specified under Section 151(i) of the new regime instead of the authority specified under Section 151(ii) of the new regime.
11. The Hon’ble Supreme Court in the above case has drawn an illustration in para 78 of its order in the context of A.Y. 2017-18 (which is also the relevant Assessment year in the present Writ Petition) wherein it is categorically held that the authority specified under section 151(l) can accord sanction only upto 30.06.2021. This illustration makes it absolutely clear that when the period of three years from end of relevant Assessment Year expired between 20.03.2020 and 31.03.2021, the extension by virtue of TOLA was upto 30.06.2021 and not beyond. Thus, it can be said that the period of three years from the end of the relevant Assessment Year (in the present case A.Y. 2017-18) expired on 30.06.2021, whereas Respondent No.1, despite passing order under section 148A(d) on 18.08.2022, and issuing notice under section 148 on 23.08.2022 [in respect of Assessment Year 2017-18], has obtained approval of Respondent No.2 who is not the authority as prescribed under section
12. Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(ii) vitiates the jurisdiction of Respondent No.1 to issue a notice under Section 148 of the Act.
13. We are clearly of the view that the present matter stands covered by the decision of Hon’ble Supreme Court in the case of Rajeev Bansal (supra) and we are bound by it. Accordingly, we hold that the order dated 8.8.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated and 23.08.2022 are bad in law, and hence, are required to be quashed and set aside
14. We accordingly set aside the impugned order dated 18.08.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated 23.08.2022, and all other proceedings/orders emanating therefrom.”
10. We further observed that the Hon’ble Supreme Court in the case of ITO vs. Mangla Gupta, (2026) 183 taxmann.com 121 dismissed SLP filed by the Revenue affirming the decision of the Hon’ble Delhi High Court in the case of Twylight Infrastructure (P.) Ltd. vs. ITO, (2024) 463 ITR 702 (Delhi), wherein the Hon’ble High Court held that where the Revenue issued a notice u/s 148/148A(d) to the assessee after the lapse of three years from the end of the relevant assessment year after obtaining prior approval from the PCIT, since approval was sought from the “specified authority” in clause (i) of section 151, as against clause (ii) of section 151, the notice and order were to be quashed on the ground that there was no approval of the “specified authority” as indicated in section 151(ii) of the Act.
11. The above decision of the Hon’ble Jurisdictional High Court squarely applies to the assessee’s case. Following the said decision, we hold that, since the approval for reopening of the assessment had been granted beyond a period of three years from the end of the relevant assessment year by the Principal Commissioner of Income Tax and not by the Principal Chief Commissioner of Income Tax as mandated under the provisions of section 151(ii) of the Act, such notice u/s 148 is bad in law. Consequently, the reassessment framed is void ab initio. Accordingly, the reassessment framed for A.Y. 2018-19 u/s 147 r.w.s. 143(3) of the Act is quashed.
12. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 11/09/2026
