Ally McCoist made the Spaniard, who left Ibrox for Villa Park in an ?8m deal in the summer of 2008, one of his major signing targets of the summer.
However, injuries to the former Osasuna star held the deal up and Smith insists no move will be made during this transfer window.
Speaking to BBC Radio, the former SFA chief executive said: "The deal for Carlos was not held up because we didn't offer the money.
"Rangers have withdrawn their interest in this period. The problem is we were waiting to see what his injury situation was."
Source: Team Talk
Source: Team Talk