I think I got some idea how this error happens. I have been trying to associate the same sandbox account as a publisher, which is used as the host account as well. In that case, I am not taken to the steps to create a new AdSense account, instead, I am prompted at the Google website to "Start showing Ads in www......com website". (This is because Sandbox account is already an AdSense account) After this step, I am taken back to the callback page in the host website with the status "ACCEPTED". However, I get the error when I call further APIs if the host and publisher are the same Google account.
If I create a new Google account and try to associate that with the sandbox host site, it goes through the steps to create a new AdSense account. And if I make further API calls for this publisher, it is working fine. So, it works as expected if I am working with 2 different accounts as Host and Publisher.