"he checked on the return of excessive distribution box and the payer without any comment accepted the form as is. And then sent out the 1099-R form with code P."

You mean, return of excess contribution.

So, what your taxpayer did is ask for this large distribution, and there is required withholding. If Fed was $40k, well, there is a required withholding of at least 10%.

And since it wasn't really returned contribution, it's likely all taxable, unless you know there is basis.