Private TV channels showed the green flag with moon and crescent hoisted at the house of one Anwarul Haque in Kharadi colony in Biharsharif, district headquarters of Nalanda.
Nalanda is the home district of Chief Minister Nitish Kumar.
After getting information from the media that a Pakistani flag has been hoisted atop a house, Sub-Divisional Officer (SDO) Sudhir Kumar and Deputy Superintendent of Police Mohammad Saifur Rahman rushed to the spot and seized the flag from family members.
SDO Sudhir Kumar said the matter is being investigated, including veracity of the flag, whether it was actually the national flag of Pakistan.
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Shabana Anwar, Haque's daughter, told PTI, "We are hoisting this flag on the occasion of Muharram for past five years".
Haque is engaged in business of supply of tent and furniture on special occasions.
Neither an FIR has been lodged nor anyone has been arrested or detained in this connection so far, the SDO said.
As the news flashed on TV channels, opposition attacked the Nitish Kumar government over the episode.
Hindustani Awam Morcha (HAM), an ally of BJP, spokesman Danish Rizwan said "efforts are on to turn Bihar into Jammu and Kashmir. The centre should intervene immediately to stop such anti-national activities in Bihar.