Prior notice and natural justice govern penal interest demands; taxpayer may reply before any further enforcement.

A demand for penal interest made without a prior show cause notice was found inconsistent with natural justice, as the record did not show that the petitioner had been put on notice before the levy. Rather than quashing the demand outright, the petitioner was permitted to treat the demand notice as a show cause notice and submit a reply. The respondent was directed to consider that reply on merits and pass orders in accordance with law, leaving the demand open to further consideration after hearing.

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Issues: Whether the demand for penal interest could be sustained when no prior show cause notice was issued and the petitioner was not put on notice before the demand was made.

Analysis: The demand notice was challenged on the ground that penal interest was sought to be levied without any prior notice. The record did not disclose that the petitioner had been given an opportunity before the demand, and the absence of such notice was treated as inconsistent with the principles of natural justice. Instead of quashing the demand outright, the petitioner was granted liberty to submit a reply by treating the demand notice itself as a show cause notice, and the respondent was directed to consider the reply on merits and pass orders in accordance with law.

Conclusion: The demand was not finally sustained at this stage, and the petitioner was given an opportunity to respond before further action was taken.

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