Penal interest on tax demand starts only when assessment orders are served, not from the end of the assessment year.

Penal interest on a tax demand accrues only after the assessee's liability has crystallised through service of the assessment order and demand notice. The text states that tax liability arose on making of the assessment orders, and that service on 28 September 1995 was supported by the materials produced. On that basis, interest could not be charged from the end of the assessment year or from 1 April 1993, because the demand became enforceable only from the date of service. The demand was therefore sustained only to that extent, limiting penal interest to the period after service.

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Issues: Whether penal interest on the tax demand could be levied from the end of the assessment year or only from the date on which the assessment orders were served on the assessee.

Analysis: The tax liability arose only on the making of the assessment orders. The service of those orders was specifically asserted to have taken place on 28 September 1995 and that factual position was treated as substantiated by the materials produced. Penal interest could not be levied before the liability to pay tax was crystallised by the demand notice.

Conclusion: Penal interest was payable only from 28 September 1995 and not from 1 April 1993. The demand was sustained only to that extent, in favour of the assessee.

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