Why is User1 unable to see a specific object while User2 can, even though both users have the same profile, identical permission sets, and are under the same role hierarchy? What might be causing this issue? How can we resolve it?

Hello @Dhanush Hegde strange if profile/permissions are equals between both users.

Are you sure it is not just a tab missing / not displayed for this user ? Have you tried getting a record url from User1 and displaying it on User2's browser to validate it is an access / OWD / sharing issue ? Eric