The Treaty of Allahabad was signed in the year 1765. This statement is correct. The treaty was an agreement between the Mughal Emperor Shah Alam II and the East India Company.
The Mughal Emperor granted the Diwani, or the right to collect revenue, of Bengal, Bihar, and Orissa to the East India Company through a farman. This statement is also correct. The farman formalized the transfer of the Diwani rights from the Mughal Empire to the British.
Awadh, which had been under the control of the British, was restored to its Nawab as per the terms of the treaty. However, this restoration came with a condition that the Nawab had to pay Rs. 50 Lakhs as a fine. This statement is correct.
Banaras and the surrounding tracts were detached from Awadh and handed over to the Mughal Emperor Shah Alam II. This statement is incorrect. The correct statement is that Banaras and the surrounding tracts were detached from Awadh and handed over to the East India Company.
In summary, statement 4 is the one that is not correct because it mistakenly states that Banaras and the surrounding tracts were handed over to Shah Alam II. The correct answer is option