I fixed the issue by deleting the trouble Indexed column. I have no idea why AccountNo column would index from UI but i ran a powershell and it would throw an error "Cannot get property value because "Indexed" is a write-only property.". Luckily I had a another column indexed which I used to create view with filter and threshold error went away.
This message appears when a SharePoint list gets large (>5000 items). The default list view threshold for any SharePoint list is 5000. Once this threshold is crossed the list becomes slow and many features of the list does not work.
The only work around you can do now is to increase the threshold. This can be done at web application level in central administration. See this post on increasing list view threshold.
While the damage has already been done, it is not a good approach to increase the list view threshold. SharePoint can support around 30,000,000 items in each list.But in a single view it can support only 5000 items by default. It is always to prepare and plan in advance for the large lists. See this blog on designing large lists in SharePoint.
Although Lookup column is available to indexing and filtering however it does not solve the issue with creating filter based view. I re-created a view that gives me same result instead of using AccountNo (which is lookup column and indexed). The error went away. so I think it's a bug which needs to be reported to Microsoft.