emacs /path/to/src.tex -> C-c C-f -> ok
buffer *tex-shell* pwd -> /path/to
emacs /path/to -> C-x d -> src.tex -> C-c C-f -> src.tex not found
(many other variations lead to similar failure)
buffer *tex-shell* pwd -> /tmp
Problem traced to function tex-send-tex-command(...).
It does *not* change directory to location of src.tex
Remove or comment out this conditional stanza
(unless (or (equal dir (let ((buf (tex-shell-buf-no-error)))
(and buf (with-current-buffer buf
default-directory))))
(not dir))
(let (shell-dirtrack-verbose)
(tex-send-command tex-shell-cd-command dir)))
Replace with
(let (shell-dirtrack-verbose) (tex-send-command tex-shell-cd-command dir))
solves this error. Proper solution requires unless... to be repaired.