In line 104, what does Martha mean when she says “His face looked innocent, but I knew better.”?

Martha says that Mr. Schmidt's "face looked innocent" because he thinks that she has no idea about how there were a short misunderstanding and controversy over who must get the scholarship while in reality, Martha had overheard the conversation. Moreover, she has also had to deal with a short disappointment in getting the jacket, like she rightly deserves to.

Explanation:

Marta Salinas's short story "The Scholarship Jacket," tells the story of a school girl named Martha and her achievement of getting the school's scholarship jacket, though not without any obstacles along the way. But despite the short disappointment, Martha was able to get the long-awaited jacket that she has been vying for a long time.

When Martha said "His face looked innocent, but I knew better", she was referring to Mr. Schmidt, her history teacher who she overheard having a tense conversation with her math teacher Mr. Boone over who should be given the jacket. While Mr. Boone favors Joann whose father is rich and a Board member, Mr. Schmidt wants Martha to get it and she rightly deserves it because of her perfect grades. But both teachers did not know Martha overheard their conversation.

So, when Mr. Schmidt congratulated her, Martha stated that "his face looked innocent" as if Martha doesn't know anything about the conversation or even the disappointment she was given on the path to getting the jacket. But in truth, Martha knew everything and that was why she admitted "[she] knew better."

there is no paragraph seven here.