Police said Ashik Iqbal was taken into custody on Friday night after a routine vehicle check in Hariharpara, a suburb of Murshidabad.
The SUV was stopped near Garinama, where officers recovered 108 counterfeit Rs 500 notes, two firearms and four rounds of ammunition.
Investigators are examining whether the fake currency was earmarked for the Rejinagar Assembly bypoll, scheduled for October 6, and whether Iqbal had prior involvement in circulating counterfeit notes.
Earlier this week, an independent candidate was also arrested on a 2021 election‑clash case, and AJUP chief Humayun Kabir has been issued a notice to appear before investigators on Monday over a conspiracy allegation.
The next step will be a detailed probe into the intended use of the fake notes, with police likely to release findings before the bypoll.