VAR system is horrific. Rossi's arms were likely only up where they were because the Sydney player is pushing down on his shoulders. In any case, he's clearly being fouled, so it should not have been a penalty.
This x 1000. I hate the whole concept of the VAR, but if they are going to use it, they need to take the time to at least get the fudging decision right. I don't think it even occured to the VAR to check to see if Rossi was fouled, they were just focused on seeing if it hit the hand, and getting the decision done quickly.