S. RAVINDRA BHAT, J.

1. In these proceedings under Article 226 of the Constitution of India, the assessee has questioned orders issued by the Assessing Officer (AO) proposing to re-open completed assessments for previous years. For AY 2000-01 (which is the subject matter of W.P.(C) 422/2006) the “reasons to believe” given by the AO, under Section 148 of the Income Tax Act (“the Act”) are inter alia, as follows:

“It has been judicially held by the Supreme Court in the cases of CIT Vs. Sterling Foods, 237 ITR 579 (SC), Cambay Electric Supply Industrial Co. Ltd. Vs. CIT, 113 ITR 84 (SC), CIT Vs. Pandian Chemicals Ltd., 233 ITR 497 (SC) and by Madras High Court in the cases of CIT Vs. Sundaram Industries Ltd., 253 ITR396 (Mad.) and in the case of CIT vs. Menon Impex (P) Ltd., (2003) 259 ITR 403 (Mad.) and by Kerala High Court in the case of CIT Vs. Cochin Refineries Ltd., (1982) 135 ITR 278 (Ker) that the used of the term "derived from" in the relevant provision of the Act indicates the restricted meaning to cover only the profits and gains directly accruing from the conduct of business undertaking.

5. The interest income of Rs. 1,73,09,543/- is in the nature of "income from other sources" and it has not been derived from the industrial undertaking. The assessee has not disclosed the true particulars regarding this interest income and has claimed it as business income derived from industrial undertaking and consequently has claimed excess deduction u/s 80IB on it.

6. As per the provision of section 80IB where any deduction under chapter VI-A is to be allowed in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing deduction under that section, the amount of income of that nature as computed in accordance with the provision of this Act ( before making any deduction under this chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income.

7. The assessee incorrectly claimed chapter VI-A deductions on income which included income from other sources i.e. interest income amounting to Rs. 1,73,09,453/- instead of restricting the deduction to the extent of income from the profits and gains of business as has been prescribed in the provisions of section 80AB. This action of the assessee has resulted in under assessment of other income by Rs. 1,73,09,453/-.”

2. In W.P.(C) 2794/2008 and W.P.(C) 2795/2008 the reassessment notice issued by the respondent assessee for AY 2003-04 and 2005-06 (both of which had been settled during regular proceedings as scrutiny assessments) was issued. The notice for AY 2003-04 observed that the return was filed, disclosing an income at Rs.26,93,63,940/-; it had claimed deduction under Section 80-IB of the Act at Rs. 77,89,40,725/ The assessee manufactures mosquito repellants and has also traded, during the year in aerosols, oil spray, hand pumps, mats and coils. It had claimed deduction u/s 80-IB in respect of three units. The AO stated, in the impugned notice that:

“(a) in Para- (i) of notes of unit—wise Profit and Loss Account, the assessee had stated that trading sales have also been accounted for on the basis of actual sales to customers. The AO said that no separate particulars of trading sales were filed. Therefore, the profits derived from trading business was not eligible for deduction u/s 80-lB of the Act in respect of any unit though entire profits were taken as eligible for such deduction;

(b) The assessee’s P & L account stated that unit-wise sale was allocated in the ratio of production cost and clearance made by each unit and further, in the Notes that various expenses have been allocated on the basis of domestic sales. However, there were certain expenses claimed in consolidated Profit and Loss Account which catered to the needs of all un