Hon’ble Dr. D.Y. Chandrachud, C.J.—The questions which have been referred to the Full Bench, turn on the interpretation of the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991 (the Act) and the India Development Bonds Scheme which was notified on 21 September 1991. A Division Bench of this Court, while doubting the correctness of a judgment of an earlier Division Bench in Commissioner of Income Tax v. Usha Omer, (2011) 338 ITR 448 (All), has referred the following questions by a referring order dated 4 September 2012 (in Writ Tax No. 432 of 2005) for determination by the Full Bench:

“A. Whether the immunity provided to the bond holder of India Development Bond in US dollars, under Sections 6 and 7 of the Remittance of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991 which includes that no enquiry to be made from bond holder, regarding the source, is also available to gifts, which are found to be bogus gifts, routing the unaccounted money of the bond holder, through such bonds, by purchasing the bonds for consideration in India;

B. Whether the view taken in the judgment dated 26.7.2011 in Income Tax Appeal No. 3 of 2004; Commissioner of Income Tax v. Smt. Usha Omer, (2011) 338 ITR 448, that no investigation can be allowed to be held pertaining to the India Development Bonds which were received from NRI’s/Overseas Corporate Bodies as gifts is a correct view, in law?”

2. The facts of one of the three cases, i.e. Writ Tax No 432 of 2005 would be briefly indicated as an illustration, it being an agreed position between counsel appearing for the assessee and counsel appearing for the revenue that the facts are similar in all the three cases. The Full Bench is required to determine the questions of law referred. Thereupon the proceedings will have to be listed before the appropriate Bench for resolution of the writ petitions in light of the questions so answered.

3. Proceedings for reassessment were initiated under Section 148 of the Income Tax Act, 1961 (IT Act) by a notice dated 10 February 2004. On 11 February 2005, notices were issued under Section 142 (1) and Section 143 (2) for assessment year 1997-98 on the ground that the assessee had received foreign currency found during the course of a search operation and in respect of which he was subjected to a block assessment. The department noticed that certain gifts which had been received by the assessee appeared to be bogus. The assessee responded to the notice for the reopening of the assessment by raising objections which were overruled by the Assessing Officer. Eventually, a writ petition was filed for challenging the notice under Section 147 as well as the notices issued under Sections 142 (1) and 143 (2) by the Assessing Officer.

4. The Act received the assent of the President on 18 September 1991. The long title to the Act describes it as an Act “to provide for certain immunities to persons receiving remittances in foreign exchange and to persons owning the Foreign Exchange Bonds and for certain exemptions from direct taxes in relation to such remittances and bonds and for matters connected therewith or incidental thereto”.

5. Chapter III of the Act deals with investment in foreign exchange bonds. Section 5 (a) defines the expression “Foreign Exchange Bonds” (FEBs) to mean bonds issued by the State Bank of India in accordance with such scheme as the Reserve Bank of India may specify by a notification in the official gazette, where the investment is made after the commencement of the Act but before the specified date. The expression “Non Resident Indian” (NRI) is defined in Section 5 (b) to mean “an individual, being a citizen of India or a person of Indian origin who is resident outside India. The proviso to Explanation 1 of sub-section (b) of Section 5 of the Act indicates that nationals of Pakistan or Bangladesh shall not be deemed to be of Indian origin. In