Concept:
Raga Bhupali is an Audav-Audav raga and is generally placed under Kalyan thaat.
However, Bhupali does not use Madhyam at all.
Step 1: Check Assertion (A).
Bhupali belongs to Kalyan thaat.
So, Assertion (A) is correct.
Step 2: Check Reason (R).
The reason says that Tivra Madhyam is used in Bhupali.
This is incorrect.
The swaras of Bhupali are:
\[
S,\ R,\ G,\ P,\ D
\]
Madhyam is absent in Bhupali.
Step 3: Final conclusion.
Assertion is correct, but Reason is incorrect.
Hence:
\[
\boxed{\text{(C)}}
\]