Q. .Since she was filed under my fathers taxes as a dependent am I not allowed to put her as my dependent for 2021 tax year?
A. Yes, it's that simple. A child (or any person) can not be claimed as a dependent on two different tax returns*.
But the real question is was that the best way to do it. Probably not. That's why the replies are asking for more detail. It's possible for your father to file an amended return, allowing you to claim the child. "She had stayed with them for a couple months" does not make her a "qualifying child" dependent.
There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit and the Child Tax Credit. They are interrelated but the rules are different for each.
The support test is different for each type. The support test, for a QC, is only that the child didn't provide more than half his own support. The support test for a Qualifying Relative is that the taxpayer provided more than half the relative's support.
*There's a technical exception in the case of divorced, or separated parents, where the tax benefits can be split (but not the actual dependency). But that would not apply in a parent/grandparent situation, like yours.
