Can I use SQFP package instead LQFP for PCB design in Proteus 8?
You can only substitute the footprint if it matches the footprint specifications for the part that you are using. It is up to you to look in the data sheet or other supplementary information provided by the manufacturer to find the suggested footprint specifications. 

If they do not match then you use the footprint design facilities of your CAD package to create a suitable new footprint. Any CAD package worth it's salt has this capability. If yours does not then find one that does.