Option 1 is the correct answer.

Statement I is true because the defects of the Regulating Act and the political situation in Britain at the time led to the passing of Pitt`s India Act. The Regulating Act of 1773, which aimed to bring reforms to the East India Company`s administration in India, had various shortcomings and failed to adequately regulate the company`s affairs. Moreover, the political situation in Britain, with conflicts and power struggles, necessitated further legislation to address the issues in India.

Statement II is the correct explanation of Statement I. The Pitt`s India Act, passed in 1784, indeed granted the British Government supreme control over the company`s affairs and its administration in India. This act significantly increased the government`s oversight and authority over the East India Company, providing a more effective regulatory framework for the company`s operations in India.

Therefore, both statements are individually true, and Statement II correctly explains the reason for the enactment of the Pitt`s India Act.