It's a bit complex and involves knowledge of phonology, but I'm going to try and explain it. The word إيطالْيا comes from the Italian word Italia, pronounced /i.ˈta.lja/ with really open A's. As you may or may not have noticed, the A in Arabic is not really open, but is pronounced [æ] (like 'cat' in English). The Arabic A is open when it's before a ر, a ق, or an emphatic consonants (which include ط), and at the end . Therefore, if Italy was spelled with a ت, it would have been pronounced إيتاليا [ʔiː.ˈtæː.ljɑː], whereas إيطاليا is pronounced [ʔiː.ˈtˤɑː.ljɑː]. In regard of the vowels, the pronunciation of the second spelling is closest to the original pronunciation.