Conditions in the grave belong to the unseen. Claims about them should stay within what the religious texts actually establish. Outward appearances do not justify a confident claim about the hidden state or final outcome of a named deceased person.
Hadith 114 uses أَوْ (“or”) to present two contrasting possibilities. Its practical guidance is to prepare and improve oneself, not to pass verdicts about another person's unseen state.
One can pray for mercy for the deceased while taking care of the rights of others and one's responsibilities in worship.