A division bench of Justice Pradeep Nandrajog and Justice Jayant Nath asked the AAP to file a reply by Feb 28.
Appearing for AAP, advocate Prashant Bhushan told the court that centre has given misleading statements before the court that the party has not furnished the details of its accounts. However, these details have already been given to the government, he added.
"A lot of misleading statements were made on behalf of central government that AAP has not responded to any notice," Bhushan said.
Additional Solicitor General Rajeeve Mehra objected to the arguments of Bhushan and said he was misquoted.
The government had earlier told the court that it had written twice to the party to ascertain the source of its funds but the AAP has not responded.
Advocate M.L. Sharma, who filed the PIL, said that AAP was continuing to collect money.
Earlier, the court had directed the central government to go through the details of money donated to AAP since its inception Nov 26, 2012 and to take action if anything was found in violation of the Foreign Contribution (Regulation) Act (FCRA).
The court was hearing a public interest litigation seeking a criminal case against AAP leader and Delhi Chief Minister Arvind Kejriwal and others for allegedly receiving foreign funds in violation of the law.
Petitioner Sharma also sought seizure of accounts and funds secured by AAP members.
"A direction to be issued to register a criminal case against the respondents (AAP members) under the FCRA and conduct of day-to-day trial proceedings with the supervision of the court, in the interest of justice," the plea said, naming Kejriwal, advocates Shanti Bhushan and Prashant Bhushan and Delhi Minister Manish Sisodia.
The plea said the FCRA prohibits funding from foreign countries for a political party.
However, Prashant Bhushan contended that "the petition is malafide".