Published on July 25, 2026
A tax-audit file is a set of reconciliations. If books, GST returns and 26AS are not agreed first, every clause of Form 3CD takes longer than it should.
Section 44AB requires a report on the books of account and on the particulars listed in Form 3CD. The form asks, among other things, for turnover, method of accounting, amounts inadmissible, TDS compliance, and a reconciliation with GST. None of those clauses can be completed from a trial balance that still disagrees with GSTR-1, GSTR-3B, GSTR-2B and Form 26AS / AIS. Closing the books against those four sources is therefore not extra work. It is the first part of the tax audit.
Outward supply as per the sales register should be reconcilable with GSTR-1 table-wise and with the liability declared in GSTR-3B. Differences that are only timing — an invoice reported in the next period under the amendment rules — should be listed with invoice number and period. Differences that are classification — a receipt treated as sales in the books and as a non-GST item on the portal, or the reverse — should be listed with the reason. The tax-audit turnover figure and the GST annual-return figure do not have to be identical in every case, but the file must show why they are not.
Credit notes, debit notes, and unbilled revenue at year-end are the usual reconciling items. They should be dated and tied to the invoice they adjust. A balancing figure called "GST difference" is not a reconciliation.
Credit claimed in the books and in GSTR-3B should be tested against GSTR-2B for the year. Invoices that never appeared in 2B, invoices that appeared after the time limit, and credits that fall under section 17(5) do not belong in the closing ITC receivable without a note. Reverse-charge payments should appear on both the expense side and the tax side. If they appear only as an expense, Form 3CD and the GST annual return will both ask the same question later.
Income offered under the heads of interest, contract receipts, professional receipts, and rent should be compared with 26AS and AIS before the computation of income is frozen. Amounts in AIS that are not in the books are either unrecorded income or a reporting error by the deductor. Amounts in the books that are not in AIS may still be correct, but they will not carry TDS credit. Either case is cheaper to resolve in July than after the return is filed.
On the payment side, the TDS statements for the year should match the expense ledgers that attract deduction. Short deduction, late deposit, and payments that were never deducted show up in Form 3CD. They also show up as default on TRACES. Aligning the two before the auditor reaches that clause avoids a second extraction of the same ledgers.
Bank reconciliation on every account. Sales register agreed to GSTR-1. Purchase register agreed to 2B for credit that is being carried. GST control accounts agreed to the electronic ledgers. 26AS / AIS agreed to the income ledgers. TDS payable agreed to the quarterly statements. Inventory and cut-off reviewed. Related-party and loan ledgers listed. Only then is the trial balance ready for Form 3CD workings and for the income-tax computation.
When this order is followed, the tax audit, the ITR, and the GST annual return read as three views of the same year. When it is skipped, each of those three filings invents its own turnover, and the first notice that arrives is a request to explain the difference.
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