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By Fayen Wong

SYDNEY, July 28 (Reuters) - An Indian doctor freed from jail after Australia dropped terrorism charges against him will be leaving Australia on Saturday after receiving the go-ahead from immigration officials, his lawyer said.

Mohamed Haneef was released from prison on Friday after Australian authorities abandoned the case against him, saying there was a lack of evidence to prove his connection with a failed car bomb plot in Britain.

Immigration Minister Kevin Andrews said Haneef, 27, would be allowed to leave Australia, but the government would not reinstate his work visa.

"We're stunned," Haneef's lawyer Stephen Keim told Reuters. "We can't understand how a man, who has been locked up in prison for nearly a month on groundless reasons, could continue to have his good name be smeared with this decision."

Keim said Haneef would be leaving for India later on Saturday.

But his return home would not end the fight to clear his name, Keim said, adding that the legal team had submitted a court application to appeal against the immigration office's decision to revoke Haneef's work visa.

"With the visa cancelled, it could have serious downstream effects on his work and travel. It is of paramount interest for Haneef to have an unblemished record," he said.

Haneef had been charged with recklessly supporting terrorism by providing a relative in Britain -- his second cousin Sabeel Ahmed -- with his mobile phone SIM card.

Police in Britain have charged three people over the car bomb attacks, including Sabeel, who is accused of failing to disclose information that could have prevented an attack.

Another of Haneef's second cousins, Kafeel Ahmed, remains in hospital after being badly burned when a jeep was driven into an airport terminal in Glasgow and set ablaze.

Prosecutors had told an Australian court that Haneef's SIM card was found in the burning jeep in Glasgow, although prosecution lawyers agreed on Friday the SIM card was in fact found with Sabeel, as Haneef had told them all along.

Haneef said he left his SIM card with Sabeel in Liverpool in mid-2006, when Haneef left Britain to work in Australia.

The case has drawn sharp criticisms against the Australian Federal Police (AFP) for prosecuting the doctor despite the lack of strong evidence.

But AFP Commissioner Mick Keelty on Friday defended his department's handling of the case, and said the investigation in Australia was ongoing.

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