Is it a sin to reject (marriage proposal) because of physical appearance? I am afraid if I do reject Allah will be upset with me.

1- What makes a marriage happy is the decency and good nature of the spouse. So if you see that this person has these qualities then do consider it.

2- However, some level of attraction must exist too. If you can find some attraction in him, then I do recommend that you proceed. But if you have zero attraction towards him, and you don’t really see yourself ever being attracted to him, then I don’t recommend that you proceed. A healthy marriage does require some level of attraction.