Angular CLI version 9 (used to create Angular 9 projects) now picks up style from schematics instead of styleext. Use the command like this:
ng config schematics.@schematics/angular:component.style scss
and the resulting angular.json shall look like this

"schematics": {
   "@schematics/angular:component": {
      "style": "scss"
    }
  }

Other possible solutions & explanations:

To create a new project with angular CLI with sass support, try this:

ng new My_New_Project --style=scss 

You can also use --style=sass & if you don't know the difference, read this short & easy article and if you still don't know, just go with scss & keep learning.

If you have an angular 5 project, use this command to update the config for your project.

ng set defaults.styleExt scss

For Latest Versions

For Angular 6 to set new style on existing project with CLI:

ng config schematics.@schematics/angular:component.styleext scss

Or Directly into angular.json:

"schematics": {
      "@schematics/angular:component": {
      "styleext": "scss"
    }
}

Update for Angular 6+

New Projects

When generating a new project with Angular CLI, specify the css pre-processor as

• Use SCSS syntax

        ng new sassy-project --style=scss
  

• Use SASS syntax

        ng new sassy-project --style=sass
  

Updating existing project

Set default style on an existing project by running

• Use SCSS syntax

        ng config schematics.@schematics/angular:component.styleext scss
  

• Use SASS syntax

        ng config schematics.@schematics/angular:component.styleext sass
  

  The above command will update your workspace file (angular.json) with

    "schematics": {
        "@schematics/angular:component": {
            "styleext": "scss"
        }
    } 
  

where styleext can be either scss or sass as per the choice.

Quoted from Officials github repo here -

To use one just install for example

npm install node-sass

and rename .css files in your project to .scss or .sass. They will be compiled automatically. The Angular2App's options argument has sassCompiler, lessCompiler, stylusCompiler and compassCompiler options that are passed directly to their respective CSS preprocessors.

See here

• https://github.com/angular/angular-cli/wiki/stories-css-preprocessors