JUDGMENT 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. 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. 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 Explanation 1, a person is deemed to be an Indian citizen if either such a person or either of his/her parents or any of the grand-parents, was a citizen of India by virtue of the Constitution or the Citizenship Act, 1955 or if such person held, at any time, an Indian passport. Section 6 provides for immunities in the following terms: “6. Immunities.—(1) Notwithstanding anything contained in the Wealth-tax Act, 1957 (27 of 1957), the Gift-tax Act, 1958 (18 of 1958), the Income-tax Act, 1961 (43 of 1961), the Foreign Exchange Regulation Act, 1973 (46 of 1973) and the Foreign Contribution (Regulation) Act, 1976 (49 of 1976),- (a) no non-resident Indian or overseas corporate body who or which owns the Foreign Exchange Bonds or any person resident in India to whom a gift of such Bonds has been made by such non-resident Indian or overseas corporate body, shall be required to disclose, for any purpose whatsoever, the nature and source of the investment in such Bonds; (b) no inquiry or investigation shall be commenced against any of the persons referred to in clause (a) under any of the said Acts on the ground that such person owns such Bonds; (c) the fact that any of the persons referred to in clause (a) owns such Bonds shall not be taken into account and shall be inadmissible as evidence in any proceedings relating to any offence or the imposition of any penalty under any of the said Acts. (2) Nothing in sub-section (1) shall apply to foreign exchange which is required to be brought into India under any of the said Acts - (i) the Foreign Exchange Regulation Act, 1973 (46 of 1973); or (ii) the Income-tax Act, 1961 (43 of 1961), read with the Foreign Exchange Regulation Act, 1973 (46 of 1973), if the period within which such foreign exchange is to be brought into India has not expired or where such period has been extended, in any manner, by the Central Government on the Reserve Bank of India or any other authority, such extended period has not expired on the date of commencement of this Act.” 6. Section 7 (a) of the Act specifies that the provisions of the IT Act shall not apply to any interest accruing in relation to the FEBs. 7. In exercise of the powers conferred by Section 5 (1) (a) of the Act, the Reserve Bank notified the India Development Bonds Scheme, 1991 (Scheme) on 21 September 1991. Clause 2 (b) defined FEBs as India Development Bonds (IDBs) in the nature of promissory notes, denominated in US Dollars, issued by the State Bank of India in accordance with the Scheme. Clause 5 of the Scheme provided as follows: “5. Persons who are eligible to apply for FEBs.—(1) Non-Resident Indians (hereinafter referred to as NRIs), Overseas Corporate Bodies (hereinafter referred to as OCBs) and banks acting in fiduciary capacity on behalf of NRIs and OCBs may apply for the FEBs. (2) Applications may also be made in the name of a minor, who is an NRI, through his guardian. (3) Banks acting in fiduciary capacity on behalf of NRIs or OCBs or both may not disclose the names and addresses of NRIs or OCBs on whose behalf investment is being made, but, at no stage during the currency of FEBs, the banks shall hold these FEBs on behalf of any person other than NRIs or OCBs. Provided that the banks may be allowed to hold the FEBs on behalf of NRIs or OCBs other than those NRIs or OCBs on whose behalf of investments in FEBs were made in the first instance.” 8. Clause 10 (1) of the Scheme provided that the principal amount of the FEBs together with interest accrued shall be paid in US Dollars on the expiry of five years from the date of allotment if the holder of the FEBs is an NRI or Overseas Corporate Body (OCB) or a bank acting in a fiduciary capacity on their behalf. However, clause 10 (2) stipulated that where the holder of the FEBs becomes a resident in India or where the holder of the FEBs is a resident of India before the maturity of the FEBs or where FEBs are gifted to a person resident in India, the principal amount of the FEBs and the interest thereon would be payable in non-repatriable Indian Rupees. Under Clause 12 (1), FEBs were transferable by endorsement and delivery. Under Clause 12 (1), FEBs were transferable by endorsement and delivery. FEBs were freely transferable among NRIs, OCBs and banks acting in a fiduciary capacity on their behalf. Under Clause 12 (2), FEBs were also transferable from NRIs or OCBs or banks acting in a fiduciary capacity on their behalf to persons resident in India or to charitable trusts in India through gifts or sale against non-repatriable Indian Rupees. Under Clause 12 (3) of the Scheme, FEBs were also transferable among persons resident in India. Clause 13 of the Scheme provided as follows: “13. Immunity and exemption.—NRIs and OCBs or the bank acting in fiduciary capacity on behalf of NRIs or OCBs or both or any persons resident in India to whom a gift of FEBs has been made by such NRIs or OCBs or bank acting in fiduciary capacity on behalf of NRIs or OCBs or both shall be provided immunities and exemptions, as provided in Sections 6 and 7 of the Act.” 9. Now it is in this background that the questions which have been formulated for consideration by the Full Bench would have to be answered. 10. The issues essentially turn upon the interpretation of the provisions of Sections 6 and 7 of the Act. Section 6 (1) contains a non obstante provision which operates notwithstanding anything contained, inter alia, in the IT Act. Under the immunity which is provided in clause (a) of sub-section (1) of Section 6, there is a protection against being required to disclose for any purpose whatsoever the nature and source of the investment in such bonds. This immunity from disclosure applies to: (i) an NRI who owns FEBs; (ii) an OCB, which owns FEBs; and (iii) to any person resident in India to whom a gift of such bonds has been made by such NRI or OCB. 11. Under clause (b) of sub-section (1), no inquiry or investigation could be commenced against any of the persons referred to in clause (a) on the ground that such person owns such bonds. Under clause (c), the fact that such a person referred to in clause (a) owns the bond is not to be taken into account and is inadmissible as evidence in any proceedings relating to any offence or the imposition of a penalty under specified legislation. Under clause (c), the fact that such a person referred to in clause (a) owns the bond is not to be taken into account and is inadmissible as evidence in any proceedings relating to any offence or the imposition of a penalty under specified legislation. Clause (a) of sub-section (1) of Section 6 makes it abundantly clear that the immunity which is prescribed therein applies to an NRI or OCB who or which owns FEBs and to a person resident in India and to whom a gift of the FEBs has been made by an NRI or OCB. The protection against being required to disclose the nature and source of investment is, hence, attracted to entities situated abroad, namely to NRIs and OCBs owning FEBs and to a resident in India to whom a gift of such FEBs has been made by an NRI or OCB. The immunity extends to a protection against being required to disclose for any purpose whatsoever the nature and source of the investment in such bonds. The non-resident entity is protected against being required to explain the nature and source of the investment. Similarly the resident Indian to whom a gift of such bonds has been made by the non-resident entity is not required to disclose for any purpose whatsoever the nature and source of the investment in such bonds. Section 6 (1) (b) as well as Section 6 (1) (c) both relate to the same persons who are mentioned in clause (a). Under clause (b), there is a protection against the commencement of an enquiry or investigation on the ground of the ownership of the bonds. Under clause (c), ownership of the bonds is inadmissible in evidence and is not to be taken into account in a proceeding relating to an offence or the imposition of a penalty under the legislation specified. 12. While construing the ambit of the immunity in Section 6, it is necessary to carefully analyse both the persons to whom the immunity has been granted, the transactions in respect of which the immunity operates and the extent of the immunity. The persons to whom the immunity applies are as stated above. The immunity also applies to a situation where a gift is made by a non-resident entity to a resident Indian. The nature of the immunity is as stated in clauses (a), (b) and (c) respectively. The persons to whom the immunity applies are as stated above. The immunity also applies to a situation where a gift is made by a non-resident entity to a resident Indian. The nature of the immunity is as stated in clauses (a), (b) and (c) respectively. The immunity in Section 6 does not confer a protection against an enquiry in respect of matters which do not fall under Section 6(1). Where the ambit of the investigation or enquiry is outside the purview of the provisions of Section 6 (1), no immunity would be available under that provision. For instance, where a resident Indian does not claim that there was a gift received by him from an NRI or an OCB who or which owns the FEBs, the immunity would not be attracted. Where the gift in question has not emanated from an NRI or an OCB who or which owns the FEBs, no immunity would apply on the plain language used in Section 6 (1) (a). Similarly, Clause 13 of the Scheme also makes it abundantly clear that the immunities and exemptions which have been provided in Sections 6 and 7 are attracted to NRIs or OCBs or to banks acting in a fiduciary capacity on their behalf and persons resident in India to whom a gift of bonds have been made by any such persons. 13. In the present case, the Division Bench has adverted to the decision of the Lucknow Bench in Usha Omer (supra) where it was held as follows: “... the Legislature was interested to seek the inflow of the foreign exchange to the country and for that very purpose, they have given blanket permission to NRIs to send foreign exchange under the provisions of these two Schemes framed under the Act. The Government of India as well as the Central Board of Direct Taxes clarified that identity of the NRIs/OCBs would not be required to be disclosed at all and even emphasized that it must not be disclosed. If these are the facts and the Government of India had cleared doubts in the mind of general public that the recipient of the India Development Bonds will not be expected to disclose the identity from whom the India Development Bonds were received by them under the Scheme, then the Department of Income-tax cannot be permitted to violate the said provisions. Further, the Central Board of Direct Taxes itself has also made it clear that the Assessing Officer will not be making any inquiry with regard to remittances in the India Development Bonds received by any person from NRIs. The Central Board of Direct Taxes circular is binding on the authorities working under the Act.” The observation of the Division Bench that “the recipient of the India Development Bonds will not be expected to disclose the identity from whom the India Development Bonds were received by them under the Scheme” fails to notice the scheme of Section 6 and the ambit of the immunity which is conferred particularly by clause (a) of sub-section (1). Immunity attaches where the conditions prescribed in Section 6 (1) are fulfilled, not otherwise. 14. The issue which has been raised in the facts of the present case is that, according to the Assessing Officer, the assessee had stated that he was not aware of the names and addresses of the persons from whom the gifts of FEBs were claimed as having been received by him and by other members of his family. In the course of the assessment, the Assessing Officer stated that the assessee had informed him that the bonds were received from certain Kirana traders of Kanpur who had gone to Dubai and Singapore and that one Sita Ram Makhija of Kanpur, who was residing in Dubai, had gifted the bonds to the assessee and to the members of his family. Since the documents pertaining to the bonds were seized during the course of the search, the attention of the assessee was drawn to the fact that the name of Sita Ram Makhija was not mentioned in any of the documents and that none of the bonds had been gifted by the said Sita Ram Makhija to the assessee as per the seized documents as the names of transferors, as mentioned in the transfer documents, were other than that of Sita Ram Makhija. According to the Assessing Officer, the assessee stated that Sita Ram Makhija had arranged the gifts of the bonds to the assessee and his family members in consideration of the assistance which was rendered by the assessee to him at a certain point of time. 15. We may clarify that we are not expressing any view on merits having due regard to the ambit of the reference. 15. We may clarify that we are not expressing any view on merits having due regard to the ambit of the reference. In the referring order, the Division Bench has expressed the view, prima facie, that IDBs seized in the search operations were not valid gifts but this was a case of money laundering in which the person had arranged for the bonds and purchased them from his undisclosed income. We are not called upon to express any findings of fact on this issue. 16. On the questions of law referred, we are of the view that the immunity provided by the legislature must fulfill the requirements of Section 6 (1). Under clause (a) of sub-section (1) of Section 6 of the Act, the immunity would extend only against the disclosure of the nature and source of the investment in the bonds. The immunity would be available to an NRI or OCB who or which owns the bonds on the one hand and, on the other hand, to a resident of India to whom a gift of such bonds have been made by an NRI or OCB. Where this requirement of Section 6 (1) (a) is not fulfilled, the immunity will not be attracted. 17. Consequently, we answer the reference by holding with reference to Question-A that the immunity which is provided in Section 6 (1) (a) of the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991 extends to a Non Resident Indian or Overseas Corporate Body who or which owns the Foreign Exchange Bonds and to a person resident in India to whom a gift of such bonds has been made by such an NRI or OCB. The immunity would not be applicable where the gift is found not to meet the requirements spelt out in clause (a) of sub-section (1) of Section 6. The immunity in clause (a) is against a disclosure of the nature and source of the investment in such bonds; in clause (b) against enquiry or investigation on the ground that such person owns such bonds and in clause (c) against the reception in evidence of the fact that any of the persons mentioned in clause (a) owns such bonds, in any proceedings relating to an offence or the imposition of any penalty under the Acts in question. In regard to Question-B, we clarify that the judgment of the Division Bench at Lucknow in Usha Omer (supra) would have to be read down so as to confer an immunity only on compliance with the conditions of Section 6 and to the extent legislated, as explained in answer to Question-A above. 18. The reference is, accordingly, answered in the aforesaid terms. The writ petitions shall now be placed before the regular Bench for disposal in the week commencing 23 February 2015. —————