Pakistani authorities have removed a counterterrorism police commander in the province of Punjab and will charge five officials with murder over a shooting last week in which an innocent family was killed.

Key points: Counterterrorism forces opened fire on a car containing people they alleged were known terrorists

Counterterrorism forces opened fire on a car containing people they alleged were known terrorists A grocery store owner and his wife and daughter were also killed in the car

A grocery store owner and his wife and daughter were also killed in the car Three of his children who survived the attack disputed the official account

Counterterrorism officers said an Islamic State leader in Punjab province, Zeeshan Javed, was killed when police fired on a car he was travelling in on Saturday, in the town of Sahiwal.

He was killed along with three passengers — grocery store owner Mohammad Khalil, his wife and their 12-year-old daughter.

Police initially accused Mr Javed of using the others as human shields.

But the official account of the incident was disputed by witnesses — including Mr Khalil's son Umar and two other children who survived the attack — and was discredited by video footage widely circulated on social media.

They said police rear-ended the vehicle to stop it after a car chase. The police then removed the three small children from the vehicle before opening fire, killing everyone inside, according to the witnesses.

The children were later found abandoned at a distant petrol station.

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Video footage shot by a bystander and aired by Pakistani media appeared to support the witnesses' accounts.

No weapons were found at the scene.

The BBC reported the police breached several protocols in the moments after the shooting, as they left the scene without the crime scene secured, the wounded without first-aid, and the dead were not sent for an autopsy.

Forensic officers were also not called.

PM promises police clean-up

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Pakistan's security forces have been accused of extrajudicial killings in the past.

In one of the most notorious incidents, a police officer was accused of killing a 27-year-old aspiring fashion model from a prominent Pashtun tribe last January, sparking widespread protests and allegations of police brutality.

The officer was suspended and placed under house arrest pending trial.

The killing of the Khalil family has sparked protests in Lahore and drew condemnation from politicians including Prime Minister Imran Khan, who promised a clean-up of the Punjab police.

Punjab Law Minister Raja Basharat said the provincial government had removed the head of the Counter Terrorism Department (CTD) and three other officials who will all face disciplinary action.

"Initial report of the Joint Investigation Team for the Sahiwal encounter reveals that the CTD officials were responsible for killing Khalil and his family, who were innocent," Mr Basharat said.

But on Sunday, the Minister reported that a "large quantity of explosives" was found at Mr Javed's home and "two suicide vests, eight hand grenades, two pistols and bullets" were retrieved from his car.

The slain members of the Khalil family were given a funeral in Lahore on Sunday. ( Reuters: Mohsin Raza )

Mr Basharat said officers from the Counter-Terrorism Department intercepted the car after a tip-off and Mr Javed fired first.

Mr Khalil's brother, Jalil, said the Punjab Government had offered 20 million rupees ($200,381) compensation for the killings.

"I told the Government, 'I'm ready to give you back 25 million rupees ($250,477) in return for justice'," he said.

"We don't want money."

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ABC/wires