Two local militants were killed and three security personnel injured in an encounter in south Kashmir's Pulwama district on Friday.
As many as seven civilians were also injured in an alleged army firing near the gun battle site.
The police blamed a crowd of throwing stones at them, which led to firing.
The army however, distanced itself from the incident. Srinagar-based army's 15 Corps spokesman said the army was not present where the civilians came under fire.
"An ambulance was carrying an injured jawan, who was bleeding profusely, from the encounter site. The ambulance was being escorted by a police vehicle. There is no question of army firing," he said.
Meanwhile, the state police claimed on Friday - six months after four tourists were killed in a suspected cylinder blast in south Kashmir's Pulwama district- that the incident was actually a grenade attack by LeT militants.