Hi Adish,
I have the same problem, and I find the cause of this issue, in my case, is that the web view of the "Identity API Scope Approval UI" itself would store the signed-in cookie, separately from the chrome browser and your extension, I think.
You can try to see that with developers tool (by right-clicking on the page -> Inspect Element) when you're in your "authorization" screen. If you clear that cookie and try again then everything might just work fine.
My problem, however, is that I have no idea how to programmatically clear those cookies in that approval UI orz....