Rajeevs, when the client connects to the LTM, a TCP connection is established and terminated on the LTM. The LTM then established a different TCP connection to the proxy and passes the client traffic down it. The proxy does not have a direct connection between itself and the client. When the proxy attempts to send the response traffic to the client, it's routed directly back to the client, but as the client does not have an established connection between itself and the proxy (it's connection is with the LTM) it will drop all the return traffic it receives as it's not expecting traffic direct from the proxy. Additionally, the return traffic source IP is not that of the virtual server.
LTM Is not disallowing anything but the rules of TCP/IP are, and for good reason really.