Everyone, today's our Christmas Party! - S1.E19

Curious about the motives of Santa, Haruhi sets Kyon to keep watch for him whilst everyone else has a Christmas Party. They encounter Taniguchi, who dressed up as Santa to return an unwanted Kappa he stole from the computer club. When Haruhi sees (bit doesn't recognize) him, her powers transform him into what she envisioned Santa to look like and chases him until he is apprehended by Yuki and Tsuruya. He escapes, but returns to normal.