Why Op Amp circuit not behaving as desired
No opinion involved- the 741 was not a 'single supply' op-amp, so the input common-mode range does not extend to the negative supply rail nor can the output swing all the way to that rail. 

Replace it with half an LM358 and much will improve, though that is not really a good way to do 4-20mA- it's preferable to have one side of the load grounded.

Edit: You did not disclose the PWM freqency, but the values shown 100R and 220pF both seem inappropriately low.