Mr Kejriwal called it the "height of political vendetta". He tweeted: "In the history of India, ALL donations to a political party have been declared illegal. All these were accounted for and shown in books of accounts."
The notice landed a day after the party marked with great fanfare the five-year anniversary of its evolution from an anti-corruption campaign to a political outfit.
Tax officials believe the party has not been able to account for around Rs 13 crore it received from its overseas supporters before the 2015 Delhi election, which it won.
AAP is also accused of not disclosing to the Election Commission details of 461 donors who contributed over Rs 6 crore to their campaign.
Officials say their investigations show that Mr Kejriwal's party did not put up on its website details of nearly Rs 37 crore in donations. Also, in documents to the Election Commission, AAP did not declare close to Rs 30 crore received from donors, officials allege.
Mr Kejriwal, 49, has alleged that the tax crackdown is part of the central government's strategy to persecute AAP - - one of its fiercest critics - and discredit its anti-corruption mission.
Earlier this year, the AAP was asked by taxmen to explain the alleged tampering of its account books and discrepancies in its report about donations received in 2014.