Lee weighed in over longstanding debate involving Indian skipper Kohli and Australia's Smith.
The former Australian pacer thinks his countryman has what it takes to become as good as Don Bradman by the end of his international career.
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Lee picked Smith over Indian captain Kohli during an Instagram live session with former Zimbabwe speedster-turned-commentator, Pommie Mbangwa.
"Look, it is so hard to pick, there are so many qualities in both that I enjoy, from the bowling of point I am trying to look are there any flaws in both batsmen, both of these batsmen are genuine," said Lee, who played 76 Tests and 221 ODIs for Australia.
"Kohli is technically sound, he hits through the V, he used to knick off earlier in his career, but it is hard to do that now, he is a great leader of his side, I think he would love to win the IPL."
Smith faced a backlash after being banned by Cricket Australia (CA) for a year following his involvement in the contentious 2018 ball-tampering incident in South Africa.
On comeback, however, the right-hand batsman didn't let anything affect him, as he dominated the Ashes in UK, sign of a great batsman to have thrived in adversity.
"Steve Smith has been through a lot in the last couple of years, he has seen a rise with the way he played in the last 12 months, he is so fidgety, sometimes you are like just relax mate," said Lee.
"At the moment I would choose Smith over Kohli because of what he has been through and what he has to overcome, they are two great players, I think Smith can be as good as Don Bradman, there have been talks of him becoming just like Bradman looking at the numbers"
Smith is currently the No.1 Test batsman in the world, followed by Kohli at the second slot.
In white-ball cricket, though, there is absolutely no doubt in anyone's mind that the mighty Indian is far ahead in that race.
(Inputs from ANI)