People thronged Kapran village of Shopian to participate in the funeral of Lashkar commander Ashiq Hussain Bhat.
Police later found another civilian dead in a separate auto.
The family of Gowhar, who returned home from Nagpur a year ago after finishing his masters in physical education at a university there, has a flourishing fruit business.
The bodies recovered by the police from an orchard at Saidpora in Shopian, include that of a LeT terrorist. He had joined militancy past year.
Soon after the shootout, Defence Spokesman in Srinagar Col Rajesh Kalia said three persons killed in the auto were Over Ground Workers (OGWs) of a terrorist who opened fire on Mobile Vehicle Check Post (MVCP).
"The Army retaliated in which a militant was killed and three individuals who were accompanying the said militant in the vehicle also succumbed to their injuries".
Waheed Ahmad, a resident of Shopian, said, "The army's claim that the four civilians were accomplices or had anything to do with militancy is a blatant lie".
Also, the three over ground workers/accomplices in the vehicle who were accompanying the terrorist were found to be dead.
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"Lies and propaganda being spread by the Indian Army as another civilian Gowhar Ahmed Lone found brutally killed behind his steering wheel in the mayhem let loose by them at Shopian yesterday night taking the toll of killings to 6!" In the gunfight, one terrorist was hit and fell off.
The three civilians were identified as Suhail Khaleel Wagay of Pinjoora, Muhammad Shahid Khan of Malikgund and Shahnawaz Ahmad Wagay of Trenz, all from Shopian.
A police officer said an MVCP near Pahnoo had signaled a auto to stop, but it did not. Bhat is also "linked" with the same chain of events at Pahnoo village, the spokesperson said.
The vehicles continued to move despite being signalled to stop by the troops. Own troops, in self defence, responded the same with fire. "In the retaliatory fire, one militant was killed and a weapon has been found with him", Kalia said. War like stores - including one AK-74, three magazines and 88 rounds - were also recovered from the slain terrorist. The body of the fourth person, a student, was found in another vehicle this morning.
They were stopped and taken into preventive custody, the officials said. "The vehicle veered off the street towards a stream and the second vehicle hurried off".
Police clashed with thousands of demonstrators Monday in Indian Kashmir as local residents rallied to protest the killings of six people, including four civilians, during an alleged shootout with soldiers manning a checkpoint overnight, officials said.
"The varying accounts from the Chief Minister and the security forces on the incident are unfortunate and further perpetuate the sense of disenchantment, distrust and alienation", said former chief minister Omar Abdullah.