OPTION (3) IS CORRECT.
The compound (3) is o- methylacetophenone (X) which contains keto methyl group (CH3CO-). So it undergoes iodoform reaction when treated with KOH/ I2.
Again on treatment with KMnO4 both the side chains are oxdized to carboxylic acid group forming phthalic acid.
This acid can easily forms phtalic anhydride which is used to prepare phenol phthalien
