In order to fully get the potential of Tableau Prep you need to update your server to version 2019.3 or above (Tableau Prep intended to work with Version 2019.3 or above). In version 10.3.11 Tableau extracts were created as .tde, but starting from 10.5 Tableau extracts changed to .hyper format which is more efficient.
I believe the difference in extract formats is the reason you are getting this error.
Another thing you can do is, using Tableau Desktop v10.3, you can create an extract from your data source and publish it directly to server.
Thanks a lot Eduardo. I have 2019.3 version in our UAT Environment (being tested for PROD). I tried to create the workflow on that version and it worked completely fine. Cheers.