The error was repeating for all request like web service, crm grid xml etc...
The solution was:
I found the CRM record details in some attribute with � within the string value. This character is against the XML document standards. so remove the value and save it...
The unanswered question is Why Microsoft left this as bug
Another possibility of the same error is : If we are not set the ReturnDynamicEntity = True for the query expression, will get error "There is an error in XML document".
Another possibility of the same error is : If we are not set the ReturnDynamicEntity = True for the query expression, will get error "There is an error in XML document".
