Hey John,
You were right! That got me thinking towards the solution of the problem.
The existing course doesn't allow me to create any more Turnitin assignments since they were created with different Turnitin environment details (Live) as opposed to what's now (Sandbox) in the Plugin settings.
If I create a new course from scratch, it allows Turnitin Assignment2 Activity creation just fine. Also adds this course in actual Turnitin Account when I login to Sandbox.
Thanks again!