Hi Manicured garden,
in that case why still we have both ALT OFF and XPONDER? We wouldn't need ALT OFF mode, would we?
If your transponder "ALT" readout was in error (which has caused nuisance TCAS events in the past), then ATC will ask you to turn ALT off with the phrase:
"Stop Altitude Squawk."
Transponder Requirements - AOPA