Assessee-company rendered software development, testing and support services to its overseas AE. TPO proposed upward adjustment of Rs. 4.49 crores to assessee’s income, which was subsequently rectified to Rs. 2.02 crores. Assessment was completed by making said TP adjustment. Assessing Officer initiated penalty proceedings under section 270A alleging under-reporting of income in consequence of misreporting and levied a penalty of Rs. 1.02 crores. On writ, the Court held that since variation between returned income and assessed income arose solely from determination of arm’s length price under section 92CA and assessee had maintained prescribed documentation and disclosed international transactions under section 92D, the case fell within the exception provided under section 270A(6)(d). Therefore, transfer pricing adjustment arising from determination of arm’s length price could not be equated with concealment or misrepresentation so as to constitute misreporting of income and penalty under section 270A(8) was unsustainable. Where the assessee had maintained information and documents as prescribed under section 92D, declared international transactions under Chapter X and disclosed all material facts relating to such transactions, addition arising from determination of arm’s length price would fall within the exclusion under section 270A(6)(d).Therefore, assessee was entitled to immunity under section 270AA, and rejection of the application was not legally sustainable.(AY. 2020-21)(SJ)