At least three flags were on display at separatist leader Shabbir Shah's rally in Anantnag.
The incident comes two days after Home Minister Rajnath Singh said that hoisting/waving of Pakistani flags on Kashmir's soil won't be tolerated.
Last week, supporters of Hurriyat chairman Mirwaiz Umer Farooq had raised Pakistani flags in Kashmir along with terror organisation Lashkar-e-Toiba's flags and pelted stones at security forces.
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