The Assessing Officer levied a penalty under section 270A for alleged under-reporting of income after the Supreme Court overruled a Bombay High Court decision on which the assessee had relied to claim a deduction in its return. On writ petition, the Hon’ble Bombay High Court held that since the deduction was claimed in accordance with the binding High Court precedent prevailing on the date of filing the return, the explanation was prima facie bona fide and accompanied by full disclosure of material facts under section 270A(6). Furthermore, under section 270A(2), under-reporting arises only when the assessed income under section 143(3) exceeds the processed income under section 143(1)(a). Since the assessed income was prima facie not higher, the initiation of penalty proceedings appeared unsustainable, and an ad-interim stay against the penalty order was granted.