Think of catchment response as a race between overland flow time and channel flow time.
In a small catchment, the flow path is short and dominated by the overland (sheet flow) phase, so the peak flood is very sensitive to how fast rain falls and how the surface is covered, since there is little channel storage to buffer these effects. This confirms Statement (I).
In a large catchment, the flow path is long and dominated by channel flow, and channels have storage that delays and averages incoming flow from many sub areas, damping out the sharp effects of local land use and rainfall intensity variation. This confirms Statement (II).
Both descriptions match how catchment scale changes flood response.
\[\boxed{\text{Both Statement (I) and Statement (II) are correct, option 1}}\]