no need to read the input as string . read it as int using "scanf("%1d",your array[i)[j]);" ...read only a single digit at a time

Why does Test Case #2 have spaces in the input grid? Although submitting the code that works for the Test Case #1 (one without the spaces) works fine for everything else, and gives the full 30 points,

I kind-of wasted my time because my code was reading the spaces in the grid rather than the number itself.

Instead of using two arrays, compare the center matrix (formed excluding boundary values) while printing the matrix..! ;)

int n,i,j;
scanf("%d",&n);
int a[n][n];
for(i=0;i<n;i++)
{
    for(j=0;j<n;j++)
    {
        scanf("%1d",&a[i][j]);
    }
}
for(i=0;i<n;i++)
{
    for(j=0;j<n;j++)
    {
        if( (i>=1)&&(i<n-1) && (j>=1)&&(j<n-1) )
        {
         if( (a[i][j] > a[i-1][j]) && (a[i][j] > a[i][j+1])      
         && (a[i][j] > a[i+1][j]) && (a[i][j] > a[i][j-1]) )
            printf("X");
         else
            printf("%d",a[i][j]);
        }
        else
            printf("%d",a[i][j]);
    }
    printf("\n");
}

the conditions are:

1) is right or left of the current value a value that is greater or equals

2) is above or below of the current value a value that is greater or equals

3) is it in the first or last row or is it the first or last number

if so it cant be a cavity

I just created an inverse of a 2 dimensional array and checked those conditions for both matrices. Even its O(N*N) it doesnt needs a 1/10 of a second

Read your input as string and not as integers then the problem can be solved