Look at the C part carefully. They are saying that if set(i) has not been called for some ii, then regardless of what p[i] contains is_set(i) will return false. when we will not call set(i) means that a particular index i will contain some arbitrary value(elements of array p can only be filled when call set function on that particular index), since we are not calling set function for some I that means those I indexes of array p may have contain some arbitrary value. Now if we call is_set function on that index that means we have to execute the first line of is_set function
if (p[i] ≤ 0 or p[i] > count)
we can not make this expression false because p[i] is containing some arbitrary value and that arbitrary value will be either 0 or some positive or some negative value.
for making this expression false, we have to make p[i] > 0 true and p[i] <=0 true, but we can not do this right because it is not valid So is_Set will always return false