In my view , the action of A.O is not according to the provision of the Section 80DD of the I T ACT. Even a ruppee you spend on dependent person for his medical treatment and maintenance , you are allowed a deduction of Rs 50000.
Section 80DD states :

“Where an assessee, being an individual or a Hindu undivided family, who is a resident in India, has, during the previous year,

(a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or

(b) paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any other insurer or the Administrator or the specified company subject to the conditions specified in sub-section (2) and approved by the Board in this behalf for the maintenance of a dependant, being a person with disability,

the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of a sum of fifty thousand rupees from his gross total income in respect of the previous year:”

Thus there is no provision in the I T Act that the claim of deuction u/s80 DD shall be subject to limitation to the extent of actual payment.

Compare it with the section 80DDB which also gives reliefs to the assessee for expense on his dependents suffering from Specific diseses . In that Section deduction is subject to limitation . Read the excerpts below :

“Where an assessee who is resident in India has, during the previous year, actually paid any amount for the medical treatment of such disease or ailment as may be specified in the rules made in this behalf by the Board

(a) for himself or a dependant, in case the assessee is an individual; or

(b) for any member of a Hindu undivided family, in case the assessee is a Hindu undivided family,

the assessee shall be allowed a deduction of the amount actually paid or a sum of forty thousand rupees, whichever is less, in respect of that previous year in which such amount was actually paid“

You make an appliaction to the A.O stating that there is no such provision and that not giving relief of Rs 50000 even if you spend Rs 100 on the dependents , shall be illegal. You will definitely win your case before appellate authorities.