Ollie Watkins, who had earlier missed a penalty, thought he had levelled the scores at 2-2 when he converted Matt Targett’s cross.
But after a lengthy delay the strike was ruled out after VAR Stuart Attwell adjudged Watkins’ shirt sleeve to be millimetres offside.
That condemned Villa to a 2-1 defeat and left Smith, who felt the striker was being fouled by West Ham defender Angelo Ogbonna in any case, less than impressed.
“It was just wrong. That is the easiest way to describe it,” he said.
“Offside is offside, I have no problem with that rule. But they have given offside for a part of the body that can’t put the ball in the back of the net.
“The only reason the arm is where it is, is because he is being fouled by someone who had his arms round his neck.
“If it is not a goal then it is a penalty. It was more of a penalty than the one we did get.
“They have got it wrong and are probably spending so much time looking at the offside they don’t look at the foul.
“There needs to be more clarity. Offside should be an easy one but we are looking at different parts of the body and they don’t even look at the penalty.
“My problem with VAR is referees making subjective decisions. That should not happen.”
Other than the late controversy, Villa were made to par for poor defending and finishing as they returned from the London Stadium empty handed despite dominating the game.
Obgonna and Jarrod Bowen netted for the Hammers at the start of each half and though Jack Grealish scored in between, both Trezeguet and Watkins - who crashed a 74th minute spot-kick against the bar - missed big chances.
In a sometimes hot-tempered affair, John Terry was booked along with a member of West Ham’s backroom staff while Smith also got into a first-half row.
“One of their lads was getting into Jack Grealish all game,” said Smith. “He had a go at me in the first half. I say to my staff not to talk about opposition players.
“He had a go at Jack in the first half and I am not having that. I made my point.
“I spoke to both David Moyes and Alan Irvine afterwards and they said it shouldn’t have happened. The matter is closed now.”