The system of distance education is observed in:

The system of distance education is predominantly observed in Allama Iqbal Open University (AIOU). AIOU was specifically founded to provide education through non-formal and distance learning methods, catering to students who cannot pursue traditional on-campus studies due to various constraints. It utilizes various media and technologies to deliver educational content.

• Option A (PITB - Punjab Information Technology Board) is incorrect as it is a government agency focused on IT, not primarily an educational institution for distance learning.
• Option C (Punjab University) and Option D (B.Z. University - Bahauddin Zakariya University) are traditional, conventional universities primarily offering on-campus education, although they might have some online courses, their core model is not distance education.

AIOU's foundational mission is centered around making education accessible through flexible, remote learning.