The German giants went into their second leg against Atalanta with a relatively comfortable 2-0 aggregate lead.
As the two sides went into half-time, however, they were level thanks to goals from Gianluca Scamacca and Davide Zappacosta.
Mario Pasalic made it 3-0 to the home side before winger Karim Adeyemi managed to pull one back for Dortmund.
It was looking like the game would head into extra time, but Atalanta were awarded a penalty in the 97th minute following Ramy Bensebaini’s red card challenge.
Schlotterbeck and Atalanta defender Scalvini were also shown red for their protests while on the bench.
The Dortmund defender took to Instagram to explain what happened, saying: "First of all, we as a team – and I personally – are extremely devastated.
“After what felt like ten Atalanta players jumped up at the same time and complained loudly, I stood up.
"I told them they should sit back down. That was all. Without insults, without disrespect or anything else.
"The referee couldn't explain to me why I received the red card, even after the game. I just wanted to clarify that."
Speaking to German outlet Ruhr24, Kovac weighed in on the situation, adding: "So for me that was absolutely nothing... There was no fight at all, nothing."