Step 1: Think of these two statements in terms of a simple water balance at the field rather than by quoting definitions.
Step 2: When water is scarce, or the soil takes a long time to let water soak all the way into the root zone, every drop that gets properly stored in the root zone matters a lot, which is exactly why storage efficiency becomes a critical number to track in those conditions. Statement (I) is simply restating this practical concern, so it holds up.
Step 3: Now imagine gradually turning up how much water is applied in a single irrigation. At first the extra water helps fill the root zone, but past a certain point any additional water has nowhere useful to go, it either sinks below the roots or runs off the field. So the ratio of useful water stored to total water applied, which is the application efficiency, keeps shrinking the more water is put in per irrigation. Statement (II) describes exactly this diminishing returns pattern, so it also holds up.
Step 4: Since both descriptions match how these efficiencies actually behave in the field, neither statement can be dismissed.\[\boxed{\text{Both Statement (I) and Statement (II) are correct}}\]