He apparently genuinely thought the shirt suited him, so I declined it and accepted a pale blue polo shirt instead.
Literal
Seriously suits [quotative-と] thinking was [apparently-らしい] shirt [topic-は] declined, pale blue [possessive-の] polo-shirt [object-を] receive [decided-ことにした].
本気で似合うと思っていたらしい — ~らしい signals 'apparently, it seems' based on evidence. 辞退し ('declined,' formal verb) is more polite than 断る. いただくことにした ('decided to receive') uses ~ことにする for a deliberate choice + いただく (humble receiving). The sentence shows Japanese gift-negotiation culture — accepting a substitute rather than outright rejecting someone's taste.