Taxability of distribution fee required fresh merits review, with the matter restored for de novo adjudication.

A belated claim concerning the taxability of distribution fee was raised for the first time before the appellate authority after processing under section 143(1). The Tribunal noted earlier favourable decisions in the assessee's own case and held that the controversy required examination on merits, especially in light of the principle that only legitimate tax should be assessed and collected. For that reason, the matter was restored to the Assessing Officer for fresh adjudication after granting due opportunity of hearing.

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Issues: Whether the assessee's belatedly raised claim regarding the taxability of distribution fee and the associated request for appellate consideration on merits warranted restoration of the matter to the Assessing Officer for denovo adjudication.

Analysis: The claim was raised for the first time before the appellate authority after the return had already been processed under section 143(1) of the Income-tax Act, 1961. The Tribunal noted the earlier favourable decisions in the assessee's own case and accepted the submission that the controversy required examination on merits, particularly in the light of the principle that only legitimate tax is to be assessed and collected. In the interests of justice, the Tribunal found it appropriate to restore the matter for fresh consideration after affording due opportunity of hearing.

Conclusion: The matter was restored for denovo consideration by the Assessing Officer, and the assessee obtained relief to that extent.

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