The assessee carried on retail trade in readymade and other clothes. He made advance payments to his supplier by way of cash deposits in the supplier’s bank account in a sum of Rs. 3.40 lakhs on various dates. The AO disallowed the amount by applying the provisions of S.40A(3) of the Act. Revision application filed by the assessee is dismissed by the PCIT.  On a writ  dismissing the petition, the Court held that the deposit of cash directly in the bank account of the beneficiary supplier was not routed through any clearing house nor was the money sent through electronic mode and therefore such a transaction would not be covered by rule 6DD(c)(v) and the benefit of the provision could not be given to the assessee. The assessee could not lead any evidence to show that he had deposited the amount on the instructions of the supplier or due to any business exigency. In the absence of such evidence, the assessing authority had rightly denied the benefit of exemption to the assessee. The assessee could not also demonstrate that the order was bereft of reasons or that it was perverse or that it had failed to consider the relevant material or document. Court also held that, the term “use of electronic clearing system through bank account” in section 40A(3) would necessarily include transfer of funds by electronic mode through clearing system. Any transfer of funds through the use of electronic clearing system through a bank account would mean a transfer of funds through electronic mode of transfer, i.e., RTGS, IMPS, NEFT etc., where the funds are transferred through the bank account of one individual into the bank account of a beneficiary through electronic means. When the funds are transferred through the electronic clearing system at least two banks or two branches of the same bank have to be involved. Only then is the money transferred through the electronic clearing system between them. (AY. 2008-09)