Here are the latest developments in the story:
The BJP has complained to the Election Commission against the AAP. Mr Kejriwal too has threatened to complain to the Election Commission.
"The entire Agarwal community has been tarnished. The Agarwals are very industrious, hardworking people of great benefit to the economy. They are peace loving," said Mr Kejriwal today, rejecting the BJP accusation that he is reading meaning where there is none.
The ad shows Kejriwal threatening to disrupt the Republic Day parade one year and asking for a VIP pass for the next year's parade and uses the term "upadravi (anarachist) gotra."
"AAP is trying to misconstrue a metaphor used in the political context," said the BJP's Piyush Goyal, insisting that the word "gotra" was not intended only to describe "AAPs disruptive politics." It was like "a sea of troubles does not mean a literal sea," Mr Goyal said.
"The BJP targeted my children in their ad, but I kept quiet, didn't react... the BJP has been launching personal attacks on me through their ads, but today they referred to the entire Agarwal Samaj as 'Upadravi', Mr Kejriwal alleged today.
Mr Goyal alleged that it is Mr Kejriwal who has in his campaigns described himself as a "baniya," and has attempted to use his "caste" to appeal to the trader community, seen as a traditional BJP votebank, and of which the Agarwals are a part.
The ruling BJP has already been struggling to address the community's misgivings over Foreign Direct Investment in retail. Mr Kejriwal positioning today's ad as an insult to the entire community will add to the BJP's jitters with the Delhi elections just five days away.
Last week, another BJP ad depicted Mr Kejriwal's children. It also showed Gandhian activist Anna Hazare in a framed photograph with a garland around it. The AAP chief had tweeted then, "Nathuram Godse killed Gandhiji on this day in 1948. BJP has killed Anna in its ad today. Shudn't BJP apologise?"
Senior BJP leader Arun Jaitley had stepped in and had the ad withdrawn. He reportedly also insisted that the BJP's new aggressive campaign for the Delhi elections must be positive.
"If the Aam Aadmi Party is born out of politics of negativism then the BJP should not do the same. We have a lot of positives. The BJP should only do positive campaigning is my advice to the party," he said to NDTV.