Correct Answer - Option 2 :
\(y\left( n \right) - \frac{1}{4}y\left( {n - 1} \right) = x\left( n \right)\)
Given system function,
\(H\left( z \right) = \frac{1}{{1 - \frac{1}{4}{z^{ - 1}}}}\)
\(\Rightarrow \frac{{Y\left( z \right)}}{{X\left( z \right)}} = \frac{1}{{1 - \frac{1}{4}{z^{ - 1}}}}\)
\(\Rightarrow Y\left( z \right) - \frac{1}{4}{z^{ - 1}}y\left( z \right) = \;X\left( z \right)\)
By applying inverse z-transform,
\(\Rightarrow y\left( n \right) - \frac{1}{4}y\left( {n - 1} \right) = x\left( n \right)\)