Hi Sasi,
It can't be said that it is an "error". MIKE 11 is a model, and like all models it represents a real physical system in a simplified way.
There could be a number of reasons that explain the difference between simulated and observed water level and discharge and after building the main structure of your model you must then proceed to calibrate parameters which will have a direct influence on those variables.
Per example, if your water level is lower than the observed values then maybe you should increase roughness. In turn this will also lower the discharge. However...that is just one parameter. Are there weirs or other structures that could influence those variables? You must consider that as well.
Best regards,
Ricardo Machado