My understanding is that using the present continuous with verbs of posture (sitting, standing, lying, etc.) means that you're talking about the process of getting into that posture, while the simple present indicates that they're in the posture ongoing.
So, ये कुत्ते इस गाड़ी के पास बैठ रहे हैं would mean "the dogs are [currently in the process of] sitting down near the car"—a valid sentence, but an oddly specific thing to comment on if you're trying to indicate location.
Does anyone else have this issue? Sometimes the correct word choice is simply not offered. In order to move to the next question, I have to make another choice, which is then called incorrect. . . . In this instance (and I tried to insert a photo here to prove it), "paas" (पास) was not offered, so I used "uss" (उस), which was marked wrong, but told that the word not offered was correct. And why is "uss" incorrect? This has not been an isolated incident.