Explanation:

Correct Answer is (c).The original sentence is erroneous.
Reason: The possessive pronoun ‘its’ has been used in correctly in this sentence and should be replaced by “it’s” which is an abbreviation of ‘It is’. Moreover, the sentence tells us which actions are important and to be done. Hence ‘to acknowledge’ should be used in place of ‘in acknowledging’ to make the sentence grammatically correct.
Among the given choices, only option C replaces the given bold part most appropriately.
The sentence after replacement becomes:
It’s really important to acknowledge the other person’s good nature and to identify common ground and shared values.
Option C is hence the correct answer.