The referee pointed to the spot after Luke Young diverted a corner on to his own bar as Ashley Young jumped on the line with his hands in the air.
Seven furious Villa players surrounded Bennett while captain Gareth Barry went to talk to the linesman - and when the referee also went to speak to his official he signalled a goal-kick instead.
Flashpoint: Bennett is mobbed by Villa players but he then overturned the penalty
It meant Martin O'Neill's side hung on to go level on points with Manchester United and three ahead of Arsenal thanks to an 88th-minute Kemil Zayatte own goal.
Sky TV pictures proved Young had not touched the ball - and relieved skipper Barry praised the ref.
Barry said: 'I don't think I've ever seen a referee change a decision before - it certainly doesn't happen very often - but he deserves a lot of credit.
'I've seen the replay and the ball clearly hit the bar and not Ashley's hand so all credit to him.'
Young, whose centre a few minutes earlier had been turned beyond Boaz Myhill to give Villa their fourth consecutive away win, said: 'I didn't touch the ball with my hand and like Gareth says, the referee deserves credit.
'I don't know why I jumped with my hand up - I was just seeing the ball out to be honest - I suppose you could say I was inviting trouble but it's clear that I didn't touch it and it hit the bar.'
Late drama: Hull thought they had won a stoppage time penalty but the ball hit the crossbar and not Ashley Young's arm as initially awarded by ref Steve Bennett
Villa struggled to find a breakthrough before the late drama and boss O'Neill said: 'It's not often that I'm not best pleased with Ashley but I have told him I wouldn't want him to jump with his hands up like that again and he's said he won't. I hope that's a promise.
'You have to give us great credit for keeping going to the end yet again.
'I'm absolutely delighted that the right decision got made in the end. It's the seventh time we have won away in the League now and that's down to the quality of the people in the dressing room.
'I'm just pleased that we are ending the year with a win and that we are keeping the pressure on the sides around us.'
Hull boss Phil Brown admitted: 'The ref got it wrong when he gave the penalty. He took up a position as if he was giving it and then for some reason changed his mind.
'I don't know why he gave it from 12 yards away and then consulted somebody who was 40 yards away.
'But the bottom line is we gave a greatly improved performance and I was proud of that.'