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Mumbai Tribunal Quashes Bitcoin Reassessment Over Approval Error
A taxpayer sold bitcoin and faced a tax demand involving ₹1.24 crore.
The tax department called the money an unexplained investment.
It reopened the taxpayer’s old assessment to examine the money.
Before doing that, the department needed approval from the correct senior official.
Because more than three years had passed, the law required approval from a higher authority.
The approval came from the Principal Commissioner instead.
The tribunal said this was not legally sufficient.
It cancelled the reassessment but did not decide whether bitcoin profits should be taxed.
The Mumbai Income Tax Appellate Tribunal quashed a reassessment involving ₹1,24,55,654 from bitcoin sales.
The Income Tax Department had treated the proceeds as unexplained investment under Section 69.
The reassessment notice was issued on April 13, 2022, for Assessment Year 2018–19.
The tribunal found that approval came from the Principal Commissioner instead of the higher authority required under Section 151(ii).
The ruling addressed procedural validity and did not decide whether the bitcoin proceeds were taxable.
- Who
- Mohammed Hasseb Mohammed Hanif Khan and the Income Tax Department, represented in the case by the Income Tax Officer, Ward 34(2)(1), Mumbai.
- What
- The Mumbai Income Tax Appellate Tribunal quashed a reassessment involving ₹1,24,55,654 in bitcoin sale proceeds.
- Where
- The case was decided by the Mumbai Bench of the Income Tax Appellate Tribunal.
- When
- The reassessment notice was issued on April 13, 2022, and the ITAT Mumbai Bench F issued its order on September 11, 2026, for Assessment Year 2018–19.
- Why
- The tribunal held that approval for reopening the assessment came from the Principal Commissioner, although Section 151(ii) required approval from a higher specified authority because more than three years had elapsed.
Taxpayer’s Position
Income Tax Department’s Position
Validity of reopening
Taxpayer’s Position
The taxpayer argued that the reassessment was invalid because the required approval had not been obtained from the correct authority after more than three years.
Income Tax Department’s Position
The department proceeded with the reassessment after obtaining approval from the Principal Commissioner of Income Tax.
Bitcoin proceeds
Taxpayer’s Position
The taxpayer challenged the addition of ₹1,24,55,654 as unexplained investment under Section 69.
Income Tax Department’s Position
The department treated the amount received from bitcoin sales as unexplained investment under Section 69.
Scope of the tribunal’s ruling
Taxpayer’s Position
The taxpayer received relief because the reassessment process was found legally defective.
Income Tax Department’s Position
The tribunal did not determine whether the bitcoin proceeds were taxable or whether the Section 69 addition was correct on its merits.
Key facts
- Case
- Mohammed Hasseb Mohammed Hanif Khan vs Income Tax Officer, Ward 34(2)(1), Mumbai
- Case number
- ITA No. 4713/Mum/2026
- Assessment year
- 2018–19
- Amount involved
- ₹1,24,55,654
- Department’s position
- The bitcoin sale proceeds were treated as unexplained investment under Section 69.
- Approval issue
- The approval was granted by the Principal Commissioner instead of the higher authority specified under Section 151(ii).
- Outcome
- The reassessment under Sections 147 and 143(3) was quashed.
Quotes
Dinkar Sharma
Company Secretary and Partner at Jotwani Associates
“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.”
financialexpress.com
“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.”
financialexpress.com
Sources
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