Juhi Saxena Thanks for posting your question in Microsoft Q&A. I assume both Function app and VNET are in the same region (regional VNET integration), otherwise you cannot associate with the subnet.
Have you already reviewed doc: Subnets and Regional Virtual network integration and validated the conditions? To summarize, you need to use unused/dedicated subnet with a minimum size of /24 and /26 for Windows and Linux plans respectively (/28 or larger in ARM VNET). If the subnet is already associated with any other apps in the same or different plan, then it cannot be used.
Update:
We found the subnet was associated with another app service plan that was deleted which caused the issue. Our product team has applied the mitigation in the backend to resolve the issue.