Check your permissions on that folder remember that ow_userfiles must be 777 recursive which means everything inside it, everything, including the folder itself! 

Thanks buddy. Userfiles folder is 777 but folders that are inside it like plugins and themes are 755.

Should I make all the files and folder 777? If so how to do that in bulk?

Use something like filezilla, you can do recursive with filezilla using ftp.  Then you can do all of them 777, yes everything in the folder including the folder itself has to be 777

OK thanks buddy very much appreciate this.

One last question. I have set everything to 777 but my question is will new files added to that folder like images and avatars be 777 automatically?

P.S

The image is not in the folder so how come script is looking for it? Could be a bug!

The image is not in the folder because the system could not write to the folder, so somewhere you have someone with that image as a avatar but it wont show because its not there.  

Yes all future images should be 777 as well if you have the server configured correctly.