For Assumption question, it best to use the Negation theory. Check the answer by putting NOT in solutions and things will work out
Premise gives that its a closed society , smuggling happened, and suspect govt know about it. How can he assume the same. If only there is something that closed society provides information to govt what is happening. if govt. knows what happens in their country.

Option E is best for this as it directly answers.

(A) If a government knows about a particular weapons-smuggling incident, it must have intended to use the weapons for its own purposes.

(B) If a government claims that it knew nothing about a particular weapons-smuggling incident, it must have known everything about it.

(C) If a government does not permit weapons to enter a country, it is a closed society.

(D) If a country is a closed society, its government has a large contingent of armed guards patrolling its borders.

(E) If a country is a closed society, its government has knowledge about everything that occurs in the country. : Correct

We need to find what assumption coheres with the conclusion given and makes it logically correct.
Closed system: A closed society is one in which an individual's role and function can theoretically never be changed, as in the traditional Hindu caste system. An open society, on the other hand, allows the individual to change his role and to benefit from corresponding changes in status.
Premise: Weapons were smuggled in country Y.
Conclusion: Country Y's government must have known about the weapons being smuggled.

OPTION A - INCORRECT
Well, it is not quite logical to just assume without any concrete evidence from the argument, that because the government knows about it, then it intends to use it.

OPTION B - INCORRECT
The claim that ''the government know about it'' is just an assumption. The government made no statement to whether they knew about the weapons smuggling or not.

OPTION C - INCORRECT
This does not correspond with the meaning of a closed society.

OPTION D - INCORRECT
Well, this has nothing to do with the conclusion presented in the argument.

OPTION E - CORRECT
Due to the unchanging system of the closed society, it is very much possible and logical to assume that the government has knowledge about everything that occurs in the country which includes the smuggling of weapons.