Hello Haja Mohideen, instead of relying on the CLI resolving the image by name (which internally tries to find and parse metadata), explicitly provide the full Azure Resource ID of the custom image.
Create a Storage Account and Upload the VHD
STORAGE_NAME=arkvhdstore$RANDOM
LOCATION=eastus
CONTAINER_NAME=vhds
az storage account create \
--resource-group arkorg \
--name $STORAGE_NAME \
--sku Standard_LRS \
--location $LOCATION
STORAGE_KEY=$(az storage account keys list --account-name $STORAGE_NAME --query '[0].value' -o tsv)
az storage container create \
--name $CONTAINER_NAME \
--account-name $STORAGE_NAME \
--account-key $STORAGE_KEY \
--public-access off


Download and prepare a base Linux VHD (or use your own)
Create a Temporary VM, Generalize and save as image
az vm create \
--resource-group arkorg \
--name tempUbuntuVM \
--image "Canonical:0001-com-ubuntu-server-jammy:22_04-lts:latest" \
--admin-username azureuser \
--authentication-type ssh \
--generate-ssh-keys \
--os-disk-name tempUbuntuOSDisk \
--size Standard_D2s_v3 \
--location eastus
az vm deallocate --resource-group arkorg --name tempUbuntuVM
az vm generalize --resource-group arkorg --name tempUbuntuVM
az image create \
--resource-group arkorg \
--name UbuntuBaseImage \
--source tempUbuntuVM \
--os-type Linux

Export VHD from Managed Disk
OSDISK_ID=$(az vm show \
--resource-group arkorg \
--name tempUbuntuVM \
--query "storageProfile.osDisk.managedDisk.id" -o tsv)
SAS_URL=$(az disk grant-access \
--ids "$OSDISK_ID" \
--duration-in-seconds 3600 \
--access-level Read \
--query accessSas -o tsv)
az storage blob copy start \
--account-name arkvhdstore3541 \
--destination-container vhds \
--destination-blob ubuntu.vhd \
--source-uri "$SAS_URL" \
--account-key "$STORAGE_KEY

az storage blob show \
--account-name arkvhdstore3541 \
--container-name vhds \
--name ubuntu.vhd \
--query "properties.copy.status"

Register Custom Image with DevTest Lab and finally create a DevTest VM from the Custom Image. Here create the VM Using Full Image ID
IMAGE_ID=$(az lab custom-image show \
--resource-group arkorg \
--lab-name arkLab \
--name UbuntuCustomImage \
--query "id" -o tsv)
az lab vm create \
--resource-group arkorg \
--lab-name arkLab \
--name MyTestVM \
--image "$IMAGE_ID" \
--image-type custom \
--size Standard_D2s_v3 \
--admin-username azureuser \
--authentication-type ssh \
--generate-ssh-keys \
--ip-configuration public
Once your lab is up, you can push your custom image via the highlighted path. Choose details based on your image type.

Try this and let me know. Hope this resolves your query. Thanks