Pakistani-American terrorist David Coleman Headley on Thursday continued his deposition for the third day before a court in Mumbai.

In an explosive disclosure on Thursday, Pakistani-American terrorist David Headley told the Mumbai court that there was an LeT operation to shoot police at some naka. During his deposition, he refered to a woman killed in a police encounter on Indian soil. When he was given three names, he claimed that the name of the woman was Ishrat Jahan.

The disclosure is likely to ignite a fresh row around the controversial encounter.

In an explosive disclosure on Thursday, Pakistani-American terrorist David Headley told the Mumbai court that there was an LeT operation to shoot police at some naka. During his deposition, he refered to a woman killed in a police encounter on Indian soil. When he was given three names, he claimed that the name of the woman was Ishrat Jahan. Ishrat's family, since the encounter took place in 2004, has been alleging that it was a botched up operation by the Gujarat Police.

"One woman from LeT named Ishrat Jahan was involved," Headley said.

Testifying via video-link from the US, Headley spilled the beans on the 19-year-old Mumbra girl and picked up her name when quizzed by Special Public Prosecutor Ujjwal Nikam about a "botched up operation" mentioned to him (Headley) by LeT commander Zaki-ur Rehman Lakhvi.

Headley told the court that Lakhvi had mentioned to him about a "botched-up operation" conducted in India by another LeT operative Muzammil Butt where a female member of the terror outfit was killed.

Prodded by Nikam to elaborate on the operation and the members involved in it, Headley said, "(I was told) It was a shootout with police in which a (female) suicide bomber was killed."

To which the prosecutor prompted three names of which Headley picked up Jahan before telling the court that "there is a female wing in LeT and one Abu Aiman's mother headed it."

Four persons- Ishrat Jahan, Javed Shaikh alias Pranesh Pillai, Amjadali Akbarali Rana and Zeeshan Johar were killed in an encounter with Gujarat Police on the outskirts of Ahmedabad on June 15, 2004.

The city crime branch had then said that those killed in the encounters were LeT terrorists and had landed in Gujarat to kill then Chief Minister Narendra Modi.

The CBI, which took over probe from the Gujarat High Court appointed Special Investigation Team (SIT), had filed charge sheet in August 2013 saying that the encounter was fake and executed in the joint operation by the city crime branch and Subsidiary Intelligence Bureau (SIB).

CNN-IBN got in touch with Ishrat's sister, Musarrat Jahan and asked her what she thinks of Headley's disclosure. "We are fighting a legal battle for the past 11 years. The investigation in India (all of them) have proven that the encounter was fake and I believe that my sister is innocent. Who is this Headley? Ye sab political saazish hai. Bahut bade log hai is saazish ke peeche aur Headley ka zaroor koi fayda hai, (This is all a big political conspiracy. Big political names are behind this conspiracy and Headley is definitely gaining from this so-called disclosure)," Musarrat told CNN-IBN.

According to Vrinda Grover, who is the lawyer of Ishrat Jahan's mother, told NDTV that Ishrat cannot be linked to any terror group across the world. "There's political agenda behind Headley's questioning. Ishrat has no terror links. Ujjwal Nikam's questioning is illegal," Grover told the channel.

"This man (Headley) has fabulous memory but he doesn't say Ishrat Jahan so the lawyer gives him options with her name. Absurd. The lawyer put words in Headley's mouth, and now a political issue is being made out of the entire thing. Government lawyer like Amitabh Bachchan's show gives 3 options to Headley, is this evidence? This is political angle. Lawyer then acts like he is hosting Kaun Banega Crorepati and gave Headley options. I mean, what is happening in the court? Headley said he did NOT know of any female suicide bomber from LeT. Investigation has shown Ishrat Jahan was killed. Case is on. Headley is being investigated for his involvement in 26/11 attacks, what has that got to with Ishrat's encounter," Vrinda Grover, lawyer for Ishrat Jahan's family, told ANI.

Why is the BJP so keen to prove that Ishrat is a terrorist? Did we not give Kasab a trial? : Vrinda Grover, lawyer pic.twitter.com/qlaZZkEfbJ — ANI (@ANI_news) February 11, 2016

Lawyer then acts like he is hosting "Kaun Banega Crorepati" and gave Headley options. I mean, what is happening in the Court?: Vrinda Grover — ANI (@ANI_news) February 11, 2016

Ishrat, Javed Sheikh alias Pranesh Pillai and two Pakistani nationals Amjad Ali Rana and Zeeshan Jowher were gunned down at Kotarpur in Ahmedabad on June 15, 2004.

Headley was deposing for the third day before a court in Mumbai.

Soon after Headley's statement BJP sprung to action and its spokersperson Shahnawaz Hussain said that it supports what many people have been saying in Gujarat for a long time. It should be noted that the "fake encounter" of Ishrat Jahan in 2004, which was ordered by the then Gujarat government, received wide coverage by the media and faced lot of flak from human rights' activists.

The deposition of Headley could not happen on Wednesday due to a technical snag in the video conference in the US.

Making fresh disclosures on the brazen 26/11 attacks, Headley also exposed how ISI and LeT majorly funded terror operations in India and financed him from time to time and that Pakistan native Tahawwur Rana visited Mumbai before the terror strikes.

The LeT operative also said that RBI has turned down a request to open a bank account for their office in India. Giving details of his funding, he said, "Before coming to India in September 2006, he received USD 25,000 from ISI's Major Iqbal."

"I also got 40,000 in Pakistani currency from LeT operative Sajid Mir between April and June 2008," he told the court, adding that Major Iqbal used to regularly sent him money in instalments.

Also, Major Iqbal gave me counterfeit Indian currency once or twice in 2008, he said. Besides Abdul Rehman Pasha, also from ISI, gave me Rs 80,000, Headley said.

"Tahawur Rana (Headley's associate and a Pakistani native who operated a Chicago-based immigration business) used to send me money from the US in September 2006 when I came to India to do intelligence work on instructions of LeT," he told the court.

The 55-year-old, who recently turned approver in the case, also said that "it was my idea to open an office in India. It was a part of my cover (as an immigration consultant). I had discussed about this with Major Iqbal and Sajid Mir and they both agreed to it."

"I also told Rana that Major Iqbal had asked me to do intelligence work in India. Iqbal told me that if Rana was reluctant to be associated with this (Headley's India operations) then he (Headley) should appeal to his (Rana's) sense of patriotism towards Pakistan," he testified.

"But Rana was not reluctant and he agreed readily for me to go to India," Headley said.

Headley also revealed that Rana had visited Mumbai before the terror attacks.

"I advised Rana to leave India before the attacks as I was afraid that he would be in danger," he told the court.

Headley also disclosed that Rana had asked Raymond Sanders (who ran an immigrant law centre in Chicago) to submit an application to the RBI to open a bank account for their office in India.

However, RBI turned down the request, he said.

Later, in January 2009, Major Iqbal told Headley to close down his office in India, the court was told.

Earlier on Tuesday, Headley had told the court that terror outfits like LeT, Jaish-e-Mohammad and Hizbul Mujahideen were given moral, financial and military support by the Pakistani intelligence agency besides making fresh revelations including about an aborted plan to target Indian defence scientists and famous Siddhivinayak temple here.

He said he was working for ISI besides LeT (Lashkar-e-Taiba) and that he knew about ISI official Brigadier Riyaz being the handler of LeT's top commander Zaki-ur-Rehman Lakhvi, who was the mastermind of the November 26, 2008 attacks in Mumbai.

He named three officials of the Pakistan army and ISI -- Colonel Shah, Lt Colonel Hamza and Major Samir Ali - besides retired army officer Abdul Rehman Pasha who was closely working with LeT and Al-Qaeda. Headley said his assessment was that ISI and LeT were coordinating with each other.

"ISI provides financial, military and moral support to terror outfits Jaish-e-Mohammed, LeT and Hizbul Mujaideen," he said, even though he claimed that his opinion was formed on the basis of hearsay.

Headley also said that Abdur Rehman Pasha, a retired Pakistani army major, gave him Rs 18,000. "On 1 November 2006 I signed the agreement of my office in Tardeo area of Mumbai, with landlord Bora. The contents I had mentioned in the agreement of my office in Mumbai's Tardeo area, were true," Headley told the court.

"On 16 July 2008,I applied for extension of license (Mumbai office) to stay in premises and extension was granted. An application was submitted to Reserve Bank of India to open a business account in India with signatures of Raymond Sanders but RBI refused to give permission to open a business account."

Headley, who had conducted recce of the places in Mumbai which were attacked by 10 LeT terrorists on November 26, 2008, also revealed that the outfit had initially planned to attack a conference of Indian Indian defence scientists in Taj Mahal Hotel.

He said he had also conducted a recce of the famous Siddhivinayak Temple and Naval air station on directions of LeT commanders.

While spilling beans about involvement of Pakistan's army and intelligence agency in terrorism in India, he said he knew ISI official Brigadier Riyaz being the handler of LeT's top commander Zaki-ur-Rehman Lakhvi, who was the mastermind of 26/11 attacks.

Headley, who had visited Mumbai seven times to scout for targets, revealed that plans to target Mumbai had started over a year before 26/11.

With inputs from PTI