The loaded AK-47 rifle had been issued to policeman Syed Anwar which went missing in Thanamandi area of Rajouri town on Sunday, a police officer said.
Anwar was posted as a Personal Security Officer (PSO) of a judicial officer.
"A case has been registered and the hunt to recover the rifle is on", the officer said.
Panic gripped the area after the incident forcing the authorities to sound an alert.
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