The three states are verily the Atman( soul or consciousness), because their formless substance and witness is Atman.

Formless soul or consciousness is the innermost self. Consciousness is without any attribute or activity, Consciousness is eternal, ever free, and imperishable.

Consciousness is free from all impurity; Consciousness is immovable, unlimited, holy, un-decaying, and immortal.

Ignorant is unaware of the blissful, ever-existent Consciousness, which resides in the three states and is (evidently) different from it, because he thinks ‘I’ as self thus limits the mind to the physical entity. 

Ignorant should try to know, through inquiry, analysis and reasoning, the fact that the true self is not the ‘I’ but the soul. The true Self is, which is different from the body, (not a void but) the very form of existence, and very difficult for ignorants to realize.

The soul/self is one, whereas the gross bodies are many. So this body cannot be the Self.  “waking entity or ego ” is well established as the subject of perception whereas the body/world is the object. This is learnt from the fact that when one speaks of the body/world he says, “This is mine.” So this body cannot be the self.  

It is a fact of direct experience that the Consciousness is without any change, whereas the three states are always undergoing changes. Thus, this ‘I’ cannot be the soul, the innermost self  because ‘I’ exists only in waking or dream.

Gnani have ascertained the real nature of Consciousness through deeper self-search and realizes  that  “There is nothing higher than Atman,” thus the ‘I’ cannot be Atman.  The three states are verily the Atman( soul or consciousness), because their formless substance and witness is Atman.  

The soul or consciousness, the innermost self is self-illumined”. So how can the three states which is inert (insentient) and illumined by an external agent be the soul or consciousness, the innermost self?

The Karma-theory declares that the Consciousness is different from the body and permanent, as it endures even after the fall of the body and reaps the fruits of actions done in this life. When the body is not the self how it can reap the fruits of action of last life, when it is not self in the next life. When the formless soul or consciousness, the innermost  self is unborn then how can it be reborn? Thus karma theory is based on the false entity(waking entity), and has accepted the false entity as the self.  

The three states consist of diversity and are impermanent. It is also an object of perception, is changeable, limited and non-existent by nature. Thus it cannot be the self or soul, because the soul or self is the formless substance and witness of the three states and it is apart from the three states.

The immutable Consciousness, the substratum of the three states, is thus different from these three states, and is the soul, the Self of all; it is present in everything and everywhere in these three states and yet transcends them all.