Salary disallowance under section 40a(ia)

if the payee is under cover of mandatory audit, then only TDS is mandatory

section 40(a)(ia)

from 13-14 the limit is fixed to 30% of disallowance, earlier it was 100%

there are two major factors to divide the applicability, 

whether the deductor was liable to issue form 16 or form 16A

if form 16 then, there is employee / employer relations which can be established through other employment records, such as EPF/ ESIC/ Profession tax deduction and payment 

if form 16A then department would not consider any fact, unless the TDS is deducted and paid 

if you have employment records of releted persons ( to be covered under TDS form 16 then approach, 

if form 16A, then what record you can establish to claim the person as employee and salary payable? mere payment does not establish the employment and if employment is questioned then salary is out of scope.

produce the summery of challans of EPF with challans , and make it reconcile with the salary data in P/L account, that would work, 

though the expenditure may get allowed, case of non deduction of TDS and non filing of return will proceed on.

genuineness of expenses is always questioned, irrespective of any section imposed, 

if the expense is genuine and legal, and notice of disalloance is issued under some section, then reply would go to that section based only. 

if no notice is issued then only reconcilation of expenses with proof is enough.

for a safeguard, the employer may have  back dated letter(s) from employee (s) requesting the employer not to deduct TDS, as they would like to pay their tax dues and file return by themself. (15G/15H will not work in back date cases)