Revisionary jurisdiction under Section 263 cannot directly disallow expenditure without fresh Assessing Officer examination.

A revision under Section 263 of the Income-tax Act cannot be used to direct an outright disallowance where the matter first requires re-examination by the Assessing Officer. The dispute concerned payments for import of machinery, spares and raw materials after an assessment under Section 143(3). The appellate authority held that the Commissioner's instruction to add back the amount as disallowable expenditure exceeded the scope of revisionary jurisdiction, because the issue had to be examined afresh on the facts. It also noted the Section 195(1) tax deduction principle that withholding applies only where the sum is assessable in India. The Tribunal's order quashing the direction was upheld.

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Issues: Whether the Commissioner could, in exercise of revisionary jurisdiction under Section 263 of the Income-tax Act, 1961, unilaterally direct disallowance of the expenditure without requiring the Assessing Officer to re-examine the matter, and whether such direction was sustainable.

Analysis: The assessment had already been completed under Section 143(3), and the disputed amount represented payments for import of machinery, spares and raw materials. The appellate authority found that the Commissioner's direction to straightaway add back the amount as disallowable expenditure travelled beyond the scope of Section 263, because the issue required re-examination by the Assessing Officer. The requirement to deduct tax at source under Section 195(1) was also noticed in the context of the Supreme Court's view that such obligation arises only when the sum is assessable in India.

Conclusion: The Commissioner's unilateral direction to disallow the amount was beyond jurisdiction under Section 263, and the Tribunal's order quashing that direction was upheld.

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