Kar Vivad Samadhan Scheme finality does not bar revision on unrelated issues; independently functioning equipment may qualify for higher depreciation.

Settlement of tax arrears under the Kar Vivad Samadhan Scheme, 1998 conferred finality only on matters covered by the declaration and the settlement order; it did not create blanket immunity for unrelated issues in the assessment year, so section 263 revision could still operate on issues outside the scheme's scope. Separately, independently functioning Electronic Yarn Clearer units attached to each winding head were treated as eligible equipment for 100 per cent depreciation because the technical evidence showed each unit worked on its own and the department produced no contrary proof that the system was one integrated machine.

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Issues: (i) Whether settlement of tax arrears under the Kar Vivad Samadhan Scheme, 1998 barred the Commissioner from exercising revisional jurisdiction under section 263 of the Income-tax Act, 1961; (ii) Whether the assessee was entitled to 100 per cent depreciation on the Electronic Yarn Clearer System.

Issue (i): Whether settlement of tax arrears under the Kar Vivad Samadhan Scheme, 1998 barred the Commissioner from exercising revisional jurisdiction under section 263 of the Income-tax Act, 1961.

Analysis: The Scheme granted finality only to the matters covered by the declaration and the resulting order determining tax arrears. Its language, especially the provisions corresponding to conclusive settlement and the saving clause, did not create a blanket immunity for the entire assessment year or for issues not forming part of the dispute settled under the Scheme. Revisional proceedings under section 263 deal with matters that were not properly examined in assessment and are distinct from settlement of arrears under the Scheme.

Conclusion: The bar under the Kar Vivad Samadhan Scheme did not prevent exercise of revisional power under section 263 in respect of an issue not covered by the declaration; this issue was decided against the assessee.

Issue (ii): Whether the assessee was entitled to 100 per cent depreciation on the Electronic Yarn Clearer System.

Analysis: The technical material on record showed that each Electronic Yarn Clearer unit functioned independently as an accessory attached to each winding head and that failure of one unit did not affect the others. The department did not produce any contrary technical evidence to show that all the units formed one integrated machine. On that evidence, the system was treated as independently functioning equipment eligible for the higher depreciation claimed.

Conclusion: The assessee was entitled to 100 per cent depreciation on the Electronic Yarn Clearer System; this issue was decided in favour of the assessee.

Final Conclusion: The revisional jurisdiction was upheld, but the depreciation addition was deleted, resulting in partial relief to the assessee.

Ratio Decidendi: Settlement of only the tax arrears covered by a declaration under the Kar Vivad Samadhan Scheme does not immunise unrelated issues from revision or other proceedings, and independently functioning accessories or units supported by technical evidence may qualify for higher depreciation as claimed.

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