According to Sydney Morning Herald, Harbhajan apparently motioned as if to scratch his armpits with both hands in the same manner fans did to taunt Andrew Symonds in India last year.
One spectator said Harbhajan also spat towards the crowd after they called him "a wanker".
"He definitely made the monkey gestures and he spat towards us. It was a bit disgraceful really, especially after what happened here in the Test match with Symonds,” the spectator told the newspaper.
"There are a lot of young people sitting here and it was inappropriate. He is a role model to a lot of people. If he wants respect he has to treat others with respect.
India's team manager Bimal Soni, however denied Harbhajan made such a gestures.
Sunday’s alleged incident continued the drama that has characterised India’s tour Down Under. The incident allegedly occurred just 10 minutes after Harbhajan dismissed nemesis Matthew Hayden, who called him an "obnoxious little weed" in a radio interview just a few days back.