The correct option is option 4, which states that statements 1, 2, 3, and 4 are all correct about the working of the Permanent Settlement in Bengal.

Explanation:

1. The traditional Zamindars did lose their lands under the Permanent Settlement. The system was introduced by the British East India Company to permanently fix the land revenue to be paid by the Zamindars, who were the intermediaries between the British and the farmers.

2. The Zamindars` inability to pay land revenues was indeed due to the Ryots` defaulting on payment of revenue. The Ryots were the cultivators who worked on the land but were often unable to pay their share of the revenue. This became a major problem in the Permanent Settlement system.

3. The Permanent Settlement did lead to the emergence of a new group of influential farmers called Jotedars. These were intermediaries between the Zamindars and the Ryots and were able to exploit the system to their advantage.

4. The Collector did replace the Zamindars as the alternative focus of authority under the Permanent Settlement. The Collector became responsible for collecting revenue directly from the Zamindars and ensuring its payment to the British authorities.

Therefore, all the statements given in option 4 are correct explanations