Tourists were 297/6 in their first essay at stumps.
Dravid top-scored with 93 while Sachin made a strokeful 71. The duo added a solid 139 runs for the third wicket stand.
Visitors were cruising at 198/2 with Rahul Dravid and Sachin Tendulkar in complete control of the proceedings, but Aussies pegged 'em back taking four wickets for 86 runs in the final session.
With minutes left in the day's play, India was still well-placed at 278/4 before Dravid and VVS Laxman (27) threw away their wickets with atrocious strokes.
Mahendra Dhoni (8*) and Irfan Pathan (8*) ensured no further damages surviving a pressure-filled final three overs of the day.
Earlier, India made a bright start to the day, with openers Virender Sehwag (29) and Wasim Jaffer (16) adding 57 in no time.
Sehwag, yet again, failed to convert his start into big one when he edged the attempted cut to Gilchrist off Johnson. Viru, who is playing his first match of the tour, started off in a typical fashion. He cut, drove, slashed, flicked Aussie new-ball bowlers to the fence with ease. He was particulary severe on Lee dispatching him to the fence for thrice.
Jaffer, on the other hand, was his usual confident self and played some silken drives and looked set for a big one before he edged a shot of good length on off stump line from Lee to a regulation catch to Gilchrist.
India was in some sort of bother at 59/2 when Tendulkar joined Dravid at the crease. The veteren batsmen quickly settled into groove, playing shots all-round with ease. Tendulkar was more innovative on the bouncy and pacy WACA wicket. His upper-cuts were not only a treat to watch but a lesson for aspiring cricketers for he allowed the ball to come close to his body and opened the face of the bat to guide behind the wicketkeeper and slip cordan. Only a batsman of Tendulkar class can play those tricky and risky shots.
On the other end Dravid stonewalled for first hour or so before finding his touch. Dravid got a breather when Michael Clarke failed to held on a regulation catch at first slip when the batsman was on 11. Former India captain hit 14 boundaries in his 183-ball vigil.
Tendulkar was well on his way to making his 39th Test century but his stay at the crease came to an abrupt end when batting genious was adjudged out lbw to Lee by umpire Asad Rauf.
The next man Ganguly (9) came and went in whimper. The Bengal southpaw had a torrid time in his short stay at the wicket that doesn't certainly suit the god of off-side. He hit two boundaries one convincing square cut off Johnson and the other a half-hearted cut over the slip corden before slashing Johnson to the Hussey, who took a diving one handed catch to his right side at gully.
Laxman joined Dravid in the middle. The pair knitted a 64-run stand playing the slow-ball bowlers Symonds and Clarke with ease.
Dravid with his maiden century of the tour in sight played a half-hearted swipe of a good length ball outside off-stump off Symonds to give a simple catch to Ponting stationed at covers. Laxman too followed the suit, mis-timing the pull off a chest high Lee delivery, Tait held onto a simple catch at mid-off.
Lee was the pick of the Aussie bowlers with 3 for 64 in his 19 overs, while his new-ball partner Johnson claimed 2 for 62. Symonds plucked the other wicket.