Published on August 12, 2026
A tax audit goes smoothly only when the ledgers, GST returns and 26AS already tell the same story — not when Form 3CD is used to invent one.
A tax audit under section 44AB is not a second set of books. It is a report on the books that already exist, and on whether those books support the return that will be filed. Form 3CD asks specific questions — turnover, allowances, TDS, partners’ remuneration, loans, and a list of clauses that have to be answered yes or no with a figure next to them. If the figure is assembled for the first time in September, the audit is no longer an examination. It is a reconstruction.
Before an auditor can sign Form 3CD, three independent pictures of the year have to be pulled into one place: the general ledger, the GST returns, and Form 26AS / AIS. Turnover in the profit and loss account has to be reconcilable with GSTR-1 and GSTR-3B. Input tax credit on the books has to be reconcilable with GSTR-2B. TDS claimed in the computation has to appear in 26AS. When any one of those three is left open, the first clause that breaks is the one the officer will pick in a later notice.
The working paper that closes this gap is not complicated. List monthly outward supplies from the books against GSTR-1. List tax paid in GSTR-3B against the liability that the books produce. List 2B credit against credit availed. List each TDS line in the computation against 26AS. Differences that can still be corrected in an open return should be corrected there. Differences that cannot be corrected should be explained in a note that the tax-audit file can carry.
The same four items appear in almost every rushed tax audit. Unbilled revenue that was booked in March and invoiced in April sits in the books and not in GSTR-1. Credit notes issued after the relevant return was filed sit in the books and not in the GST picture. RCM liability that was never paid sits nowhere except in a working that someone kept on a laptop. TDS that the deductee never saw in 26AS was taken as a credit because the voucher looked complete. None of these is a technical mystery. Each one is a month-end that was skipped.
A fifth item shows up in trading and manufacturing units: stock. Closing inventory that cannot be tied to a physical count, a rate list, and the purchase ledger will not survive a tax-audit clause on valuation. The count does not have to be perfect. It has to exist, be dated, and be capable of being added back to the ledger.
Where a statutory audit is also due, the two reports should leave from the same approved trial balance. A company that signs financial statements in one set of numbers and Form 3CD in another has already written the first paragraph of the next income-tax notice. The notes to the financial statements, the tax computation, and the 3CD clauses on turnover, depreciation, and related parties should be capable of being read side by side without a translator.
That is also why the books should be closed before the auditor arrives, not while the auditor is in the room. Adjusting journals passed during the audit to force a reconcilation are visible in the working papers. They read as late corrections, which is what they are.
The useful list is short. Bank and cash reconciled. Debtors and creditors listed and aged. Fixed-asset register tied to the ledger and to depreciation. GST month-wise reconcilation signed. 26AS / AIS downloaded and matched. Loans and related-party balances confirmed. Stock counted. Provisions documented. Once those nine are done, Form 3CD is a reporting exercise. Until they are done, it is a writing exercise, and writing exercises do not survive scrutiny.
Balaji T S & Co treats the tax audit as the last look at a year that has already been closed, not as the first look at a year that is still open. The difference is visible in the file, and it is visible later when the return, the GST annual return, and the financial statements are placed on the same table.
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