Search on iCloud in the finder yields no results.

That file is removed from www.icloud.com see the article Move items to your Mac and remove them from iCloud Drive

• On your Mac, drag items from iCloud Drive to another folder on the desktop or in the Finder sidebar, such as Recents or Downloads. 
• The items are copied to your Mac and removed from iCloud Drive on all your devices set up for iCloud. If you change your mind, you can drag items back to iCloud Drive.

The reason why that file is getting searched from finder when you select Macintosh HD as it is in the location , untitled folder .

Also the complete document with its file inside is in saved in untitled folder .

You can again select , copy and paste that personal document in in icloud drive > documents Mac keyboard shortcuts - Apple Support , the file will be searched Narrow your search results on Mac - Apple Support

Read Change Spotlight preferences on Mac - Apple Support

Open Mac system preferences > click on Apple ID icon > the box of iCloud Drive should be checked , again click on options button in front of it , the desktops and documents box should be checked Set up iCloud Drive - Apple Support

Rebuild the folder Rebuild the Spotlight index on your Mac - Apple Support

When you drag and drop the folder from downloads to iCloud Drive > documents , it will be transferred but show , so click on stop .

is iCloud Drive , desktops and documents box always checked in your Mac .

The screen shot I posted was using as Mac OS Catalina , now what is the current status is files searched in finder spotlight .

Create a new user account in users and groups , see if the issue persists otherwise you need to contact apple support , from your end erase the hard drive and reinstall Mac OS .