I am trying to create a PCB that has ATmega16 using proteus. I need to connect a power switch that cut the supply or power to the whole circuit, but the ATmega16's VCC pin hidden and directly connected to VCC power rail and the same is for GND. I tried adding an new power rail and connecting it to VCC via a switch, but it throws an error saying "no power supply specified for net ", I can specify VCC as supply for rail I created but this return me to square 1 where the controller's VCC is still directly connected to power.
Create a new ATmega symbol that doesn't use a hidden power/ground. Then make an explicit connection from its power to your switch.
This solution is preferred nowadays. Hidden power is rarely used in schematics anymore, since the era of single-power-domain designs is long in the past.
Hidden power/ground came into use during the SSI TTL days. It made manual gate-swap annotations easier. It went out of favor in the 80s, as progammable logic and VLSI replaced random gate logic in most designs.