Hi @Abhishek Goyal ,
I have created a user on Azure AD with UPN "user.upn@domain.com" and its email is "user.email@domain.com".
Is the "Email" property added in Azure AD portal? If so, it could be an expected behavior as this doesn't mean the user is already a real mailbox user. While the Microsoft Doc you shared earlier states that, "You can specify the following types of users or groups (security principals) for this parameter:
- Mailbox users
- Mail users
- Mail-enabled security groups (non-mail-enabled security groups are selectable, but they don't work)"
Could you have a look at the Microsoft 365 admin center, find this user and click the Mail tab? If the below warning prompt, please assign an Exchange Online license for this user as well so that it can has a real mailbox:
I just tried testing in my lab tenant by creating a user in Azure AD with UPN "user5@contoso.com" and Email "user5email@contoso.com", I can replicate the error you met when trying to grant user5 the full access permission to another existent user. However, after adding the Exchange Online license for user5, the same command can be ran successfully:
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