The correct answer is option 1, which states that tank irrigation is practised mainly in Peninsular India because of undulating relief and hard rocks that make it difficult to dig canals and wells.

Let`s analyze the other options to understand why they are incorrect:

- Option 2 states that tank irrigation is practised because rivers are rain-fed. However, this is not a valid reason as tank irrigation is not directly related to the source of water for rivers.

- Option 3 states that tank irrigation is practised because of the compact nature of population and agricultural fields. This is also not a valid reason as the population density and agricultural field arrangement do not determine the choice of irrigation method.

- Option 4 states that tank irrigation is practised because of all three reasons mentioned in options 1, 2, and 3. However, as discussed above, options 2 and 3 are not valid reasons, making option 4 incorrect.

In conclusion, the correct answer is option 1 because the undulating relief and hard rocks in Peninsular India make the traditional method of tank irrigation more suitable compared to digging canals and wells.