What reaction takes place here? Upon reading the given question, I realized that:

The first reaction is an aldol condensation reaction between the given compound and formaldehyde.

So the product after 1st step is: 



Now, the second part has thrown me off. The current ketone has no $\alpha$ hydrogen left. Condensation reactions are out of the question.
Cannizzaro reaction can not take place as this is a ketone (and not an aldehyde) also the medium is now acidic.
However, I saw one possibility of formation of hemi-acetals.
(I did not think about full acetals, as such a structure was not present in the given options to this question)

Which gave me the following product:



However, the answer provided seems to be not this.
The given answer is this:



Can someone give a suggestion that where I want wrong and/or how could I reach the answer and also what was wrong in my thinking as well?

This question is taken from the JEE(A)-2016 [Paper - 2]
I think a cross Cannizzaro with the Ketone and Formaldehyde takes place. The ketone give the alcohol and Formaldehyde formiate. In a second step a full acetal will be created with formaldehyd and now the Diole.
Sorry I cannot add comments here. So use answer function.