H4 visa interview Yellow slip handed over "I-797 Needed"

Before I start the actual question; here is a brief timeline:

  1. Applied first extension May’15 got approve Feb’16 for one year. Forgot to file for H4 extension and my wife overstayed by 169 days and then she left for India.

  2. Applied Second extension Approved in August’16. Wife went for visa interview.

My wife recently attended H4 interview at New Delhi. She carried all the necessary documents (e.g. copy of approved H1B extension ,pay stubs, etc.). VO asked for her I-797A (the one that is issued for I-94 extension). My wife tried to explain it her that she cannot get I-797A; since she was not in US at the time of extension. She also mentioned that she overstayed and left the country before 180 days. VO said " it does not matter if you in or out of USA; you should have your own I-797".

Is it true that H4 should get I-797 ? I was under the impression that she needs copy of my I-797 only. VO handed her a yellow slip stating “I-797 needed”. Please suggest how to proceed in this case?

Is it possible that the VO asked for H-1 holder’s 797? 797A is issued only when extension is applied from within US. If she was outside US, then no 797A would exist.

It is also possible that VO was trying to enforce the fact that she doesn’t have 797A when she should (as it was not applied) and penalizing her for the overstay.

What did your attorney say?