Thank you for the response above.
I am glad to know that the issue was resolved. I am summarizing the resolution here for community benefit so that it can help anyone facing similar issue.
Issue description:
The packets arriving from Azure IR service were getting dropped over Azure VPN network.
Resolution:
After taking a look at the backend logs the issue was due to on-prem device's traffic selector and was resolved after enabling the traffic from the private IP address, we were able to make the connection.
You can take a look at individual config guidelines for validated on-prem VPN devices here to help troubleshoot any config issues.
Thank you!