When resizing a virtual machine in Azure, the target size must be available on the same hardware cluster where the VM currently resides. If the desired size is unavailable, Azure prevents the resize operation.
According to the Microsoft Azure Administrator guide:
"To resize a virtual machine to a size not available on the current hardware cluster, the VM must first be deallocated. When a VM is deallocated, its current hardware association is released, allowing Azure to place it on a different cluster that supports the new size." In this scenario, VM1 is part of an availability set (AVSet1). All VMs in an availability set must reside on the same hardware cluster. Therefore, to resize VM1 successfully to a new size that isn't currently available, you must first deallocate the VM, which frees it from its existing cluster allocation.
After deallocation, you can resize it, and Azure will allocate it to a compatible cluster.