Penalty burden under section 271(1)(c) shifts to the assessee after the 1964 Explanation, displacing the Anwar Ali rule.

After the Finance Act, 1964, the Explanation to section 271(1)(c) shifted the burden to the assessee where returned income was below 80% of assessed income, creating a rebuttable presumption of concealment or inaccurate particulars unless the shortfall was shown not to arise from fraud, gross neglect, or wilful neglect. The earlier rule in Anwar Ali, which placed the burden on the Revenue under the unamended law, was not applicable to this post-amendment regime. The Tribunal was therefore required to test the assessee's explanation against relevant and cogent material and make a clear finding on rebuttal of the presumption before cancelling penalty.

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Issues: Whether, for assessment year 1969-70, the Tribunal was justified in applying the rule in Anwar Ali to cancel penalty under section 271(1)(c) of the Income-tax Act, 1961, instead of applying the burden-shifting Explanation inserted by the Finance Act, 1964.

Analysis: The amended provision omitted the word "deliberately" and introduced an Explanation creating a rebuttable legal presumption that, where the returned income is less than 80% of the assessed income, the assessee is deemed to have concealed income or furnished inaccurate particulars unless it proves that the shortfall did not arise from fraud or gross or wilful neglect. The earlier rule in Anwar Ali, which placed the burden on the Revenue under the unamended law, was held inapplicable to the post-amendment regime. The Tribunal therefore had to examine whether the assessee's explanation was acceptable and whether the presumption stood rebutted by relevant and cogent material, instead of treating the burden as resting on the Revenue.

Conclusion: The Tribunal was wrong in holding that Anwar Ali governed the case; the burden lay on the assessee under the Explanation to section 271(1)(c), and the matter was remanded for a clear finding on rebuttal of the presumption.

Ratio Decidendi: After the Finance Act, 1964, the Explanation to section 271(1)(c) shifts to the assessee the burden to rebut the presumption of concealment or furnishing of inaccurate particulars, and penalty cannot be cancelled without a categorical finding that the assessee has discharged that burden by acceptable material.

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