Three others, a Chartered Accountant Shreyas Parikh working with M/s. G.K.Choksi, and a realtor Suresh Kumar Jain and his relative Manish Jain have also been arrested.
For passing the favourable order, the Prasad allegedly demanded a bribe of around Rs 2 crore and said it should be delivered to Manish Jain, who in turn would transfer it to Suresh Kumar Jain in Visakhapatnam.
The Income Tax Commissioner took leave and went to Visakhapatnam and demanded that a part of the money should be delivered to his residence in Visakhapatnam.
Acting on a tip-off, the CBI laid a trap and caught Prasad receiving a part of the bribe amount - Rs 19.34 lakh - from Suresh Kumar Jain.
Both were arrested. The CBI said it had recovered the remaining amount of around Rs 1.50 crore from Suresh Kumar Jain.
The CBI sleuths conducted raids in Mumbai and Visakhapatnam at the offices and residences of all the accused leading to recovery of several property investment documents, details of bank accounts, three bank lockers and other incriminating papers.
The accused will be produced before a designated court later, officials said.